NYC Still World’s Largest CRE Market; Cross-Border Investors Keenest on London

Cushman & Wakefield has released its annual 'Winning in Growth Cities' report, and while there’s much of the same--New York City wins the top title again--there are some surprises.
David Hutchings Cushman  Wakefield

David Hutchings, Cushman & Wakefield

Cushman & Wakefield has released its annual ‘Winning in Growth Cities’ report, and while there’s much of the same–New York City wins the top title again–there are some surprises.

It was a busy 12 months in the year ending with the second quarter of 2014. Global capital flow in commercial real estate increased 17.2 percent to $788 billion. And most of the activity occurred in the likeliest of places.

“The top tier of cities globally is well established and as a result there are few surprises in the mix most years,” C&W’s David Hutchings, partner and head of EMEA Investment Strategy, told Commercial Property Executive.

Alas, it was expected that New York would rank as the world’s largest real estate investment market, as it has for the three previous years. Investment volumes in the city increased 10.9 percent to $55.4 billion, accounting for 7 percent of global market share. London, with a notable 40.5 percent increase in investment, was not too far behind with $47.3 billion, and Tokyo followed with $35.3 billion. The rest of the top-five was held down by two other U.S. cities; Los Angeles and San Francisco saw investments of $33.1 billion and $23.8 billion, respectively.

But the list of leading cities for investment wasn’t all about the usual suspects. Shanghai, Beijing, Miami and Stockholm moved up to the top 20, and Dubai skyrocketed from 186th position to join the top 50 in the 39th spot. And the City of Light turned heads.

“The very strong increase seen in Paris–up 37 percent year on year –was perhaps a little surprising given the weaker showing of France economically, but this just underlines that cities count more than countries sometimes, particularly when the city is a large and global icon like Paris,” Hutchings said.

While New York, London, Tokyo and the like are firmly ensconced at the top of the investment heap, looking further down the list, change is afoot.

“Some of the world’s biggest emerging corporate markets–such as Sao Paolo, Istanbul, Shenzhen and Mumbai–don’t yet feature in the top 50 for property investment, but that will change, as more modern stock is developed and as market reforms continue to establish their credentials as open and accessible investment destinations,” added Hutchings.

As other areas of the report indicate, sometimes the grass really is greener on the other side. Investors took an even greater interest outside their own home countries, with cross-border investment increasing 38.8 percent. London is the global favorite, securing 14.1 percent of the market share, compared to New York’s 4.9 percent share.  The Americas was most active in cross-border investment, shelling out $75.3 billion on non-domestic assets, but Asian capital seeking cross-border opportunities is on the rise, having jumped 56 percent.

New York and London are at the head of the class in many categories assessed in the report. When it comes to property sectors, New York is at the very top for retail, office and multi-family investment, while London’s hospitality market is most coveted. However, these cities fall short in the logistics category, where Shanghai reigns supreme.

Still, investors have their favorite–for now. “Globally the most demanded sector is offices, accounting or nearly half of all investment last year, and that is with good reason because it is perhaps the easiest commodity to understand across borders; what makes a good office in New York will be similar to what makes a good office in Shanghai or Berlin,” Hutchings added. “That is not to say, however, that other sectors should be overlooked, and we do in fact expect over time that retail, logistics and multi-family will increase their share of the global market.”