- November 1, 2016: Vol. 8, No 10

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So many tiers: While Tier 1 cities receive the most attention, select Tier 2 and Tier 3 cities hold appeal

by Mard Naman

Most institutional investors stick to Tier 1 cities in developing Asia Pacific countries. After all, these are generally the largest and most liquid, mature and transparent cities in their countries. But more investors are going beyond the first tier, searching for diversification and higher returns in Tier 2 and Tier 3 cities. It raises a question: What determines a city’s tier?

The tier system is not based solely on population or economic size. Rather, cities are allocated a tier based on a model that combines multiple economic and property factors to create a composite score for each city, according to Dr Megan Walters, head of research – Asia Pacific for JLL.

Economic factors include economic size, economic growth, population, wealth, infrastructure, investment, education and business environment. Property factors include office, retail, logistics and residential stock; real estate investment; developer activity; corporate presence; retailer presence; and the n

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