Global Cities Compared: America's Return

U.S. cities saw strong recovery throughout 2011. In particular, the total returns on real estate in Chicago (13.8 percent) and Los Angeles (17 percent) for the year ending in September 2011 were close to double those recorded in the previous 12 months. But other cities worldwide also saw improvement, with London (12.7 percent) and Dublin (minus 5.3 percent) in fact the only two cities to experience weakening returns compared to their performance in 2010. Concerns over the Eurozone crisis and a slowing of foreign capital being invested into the United Kingdom have in part subdued returns in London. Tokyo, a victim of struggling fundamentals in several property sectors, rebounded modestly, with a 2 percent total return.

The benefits of diversification to multinational investors are significant, with spreads of the local currency returns within these key markets (excluding Dublin) exceeding 1,600 basis points. Commercial real estate prices are adjusting rapidly to the changing economic landscape — and when this data set is refreshed again next quarter, we are likely to see new trends emerge in the performance of these key markets.

— Max Arkey is senior manager of business development for IPD U.S.

(market standing investment total returns, year to 3Q 2011 vs. year to 3Q 2010)

Source: IPD Global Cities. IPD's new global cities data set tracks the performance of more than 60 real estate markets around the world.