Global property investment on rise; NYC ranked #1, finds report

by Brianna Crandall — October 12, 2016 — Global property investment has risen to $1.35 trillion in the past year despite 12 months of uncertainty across the globe, according to annual research just out from Cushman & Wakefield. The results have implications for strategic facilities management along with city and corporate planning.

The Winning in Growth Cities report is an annual survey of global commercial real estate investment activity that lists the cities most successful at attracting capital. During the 12 months to June 2016, the largest gateway cities increased their share of the market, with the top 25 drawing in 53.3% of all global spending, up from 52.7% in the previous year.

C&W photo of New York City

New York City tops the ranking for total investment volumes. Photo courtesy of Cushman & Wakefield.

New York once again topped the ranking of cities from a total investment perspective. The United States also had the best of the growth, increasing its hold on the list with 15 of the top 25 cities. Another North American city, Toronto in Canada, also made the top grouping, with four European cities, a fall from six last year, and Asia-Pacific holding at five cities.

Meanwhile, targets for foreign investment have shifted, with cross border flows growing faster in America and Asia than Europe, and the ranking of cities also changing. The most notable shift has been London losing its global crown to New York, with volumes in the U.K.’s capital falling from US$39 billion to $25 billion.

C&W graph of top cities for property investment

Cushman & Wakefield’s graph of top cities for global investors. Click to enlarge.

A range of other gateway markets are also down, including Tokyo, Washington and Frankfurt, due to a combination of limited supply and local competition. Ten of the top 25 cities by foreign investment were in the EMEA (Europe, the Middle East and Africa) region, nine in North America, and six in Asia-Pacific.

David Hutchings, head of EMEA Investment Strategy, Cushman & Wakefield, and author of the report, commented: “Despite the volatile environment, more investors are turning to the stable cash flow and inflation-hedging merits of real estate, particularly given that the fundamentals of the market on the occupier side are holding up well.

“The greater appeal of the U.S. clearly comes out through the data, with its cities dominating in all sectors, and New York top for overall investment and for cross-border buyers. However, EMEA’s enduring attractiveness is reflected in having the most cities attracting foreign investment.”

North American region

The report shows that Los Angeles and San Francisco both moved up the list of top cities for investment. Furthermore, the region is home to 24 of the fastest growing 50 larger cities with a volume over $1 billion (excluding development). Philadelphia was a particular winner, seeing volumes rising 50.5%, and Toronto, Denver, San Diego and Phoenix all showed very strong increases.

EMEA region

While London lost out as a center for global investors due to Brexit concerns and high pricing before the EU referendum, it nonetheless remained the region’s leading city for investment. Paris, Berlin and Amsterdam make up the rest of EMEA’s contingent in the top 25 cities list.

In terms of growth, Tier 1 cities such as Paris, Amsterdam, Copenhagen and Milan all feature in the top growth list. However, Tier 2 cities also feature heavily, led by Rome and Helsinki, together with regional U.K. and German markets such as Liverpool, Newcastle, Birmingham, Nuremburg and Stuttgart.

Asia-Pacific region

Tokyo slipped down from second to third in the list of top cities for investment, with Shanghai, Hong Kong, Sydney and Melbourne the other four APAC cities. Singapore joins these five cities in the top list for global investors. Elsewhere, there was some noticeable growth in emerging markets, with Chonqing and Shenzhen in China posting year-on-year investment gains of 866% and 243% respectively.

Investment strategy

On a global scale, the report highlights that for cities to stay top of the rankings in the future, they will need to invest more to create efficient, sustainable, safer and healthier places to live, work and visit. In broad terms, cities need to be connected, mixed-use, walkable and transit rich. Increasingly, they also need smart design in buildings and infrastructure as well as a strong focus on their target audience of talent and businesses, particularly for second tier cities.

David Hutchings concluded, “In such a competitive environment, cities must do more to attract workers, not just rely on workers flowing their way. This means creating a brand value that young people identify with, focusing on health and security more than at present, keeping pace with technological change, and making a contribution to lifestyles.”

Winning in Growth Cities 2016/2017 is available to download from the Cushman & Wakefield Web site upon brief registration.