CRE Attracts Record $1.8T in Global Investment

Despite its continued strength, New York City drops out of the top five cities for global deals, while Hong Kong rises, according to a new Cushman & Wakefield report.
David Hutchings, head of investment strategy, Cushman & Wakefield
David Hutchings, head of investment strategy, Cushman & Wakefield

Despite headwinds both real and potential—the slowing of the economic cycle, interest rates, inflation and geopolitical uncertainty over such factors as trade wars and Brexit—global investment in CRE rose 18 percent over the 12 months ending in June, to a record high of $1.8 trillion, according to a new report from Cushman & Wakefield.

The top cities for investment are New York, Los Angeles, London, Paris and Hong Kong, with San Francisco, Washington, Tokyo, Dallas and Chicago, in that order, filling out the top 10, states the latest in the annual Winning in Growth Cities Report series. Despite a few shifts, the list of cities making up the top 25 has changed “very little,” the report says, “with their market share representing 49 percent of total volumes, down from 50 percent at the same point last year.”

The report paints North America as strong but rather static, noting that transaction volume here increased only 0.6 percent year-over-year. Although New York remains a top target for capital, investment there was actually down 3.4 percent over the period in question.

That 18 percent surge in CRE investment owes itself to Asia. Asian buyers were behind 45 percent of all cross-border investment, and investment in Asian properties totaled 52 percent of such activity.

Inflation is proving to be less of a threat than feared as we continue to enjoy steady economic growth,” report co-author David Hutchings, head of investment strategy, EMEA Capital Markets, at Cushman & Wakefield, said in a prepared statement.However, price signals will be enough to keep central banks in a tightening mood in most areas, and the slow but sure rise in interest rates, and reduction of quantitative easing driven liquidity, will therefore continue.”

What may be new in the year ahead,” Hutchings added, “is the potential for supply to increase as some switch strategy and take profits, others get caught by rising borrowing costs and a need to raise capital, and more seek out partners to jointly invest and develop.

Cities and sectors

Though New York is tops for transactions, it’s not in the global top five for international investment, where the city is hampered by “high pricing and the strong dollar” and “a highly competitive and strongly priced market,” states the report, which also used data from Real Capital Analytics.

The top 10 cities for cross-border investment are London (in the top spot), Hong Kong, Paris, Amsterdam, Madrid, New York, Berlin, Shanghai, Tokyo and Los Angeles. Based on volumes that jumped 50 percent year-over-year, Toronto became the first Canadian city to enter the top 25 in five years.

Though investment in retail assets is highly selective, “There is a widespread preference for logistics,” in both mature and emerging markets, from Brazil to India and China.

Data centers remain a niche market, but the sector nonetheless saw investment growth of 266.2 percent globally, and an astonishing 3,348.7 percent in Asia/Pacific, in the year ending the second quarter.

The full report is available here.

Image courtesy of Cushman & Wakefield