by Brianna Crandall — March 9, 2012—Jones Lang LaSalle, the global financial and professional services firm specializing in real estate, recently released two reports illuminating worldwide trends in commercial real estate investment. The company’s Year End 2011 Global Capital Flows report shows there was $410.6 billion of direct commercial investment in 2011, a 28 percent increase over 2010, and its A New World of Cities report reveals that more than half of all global real estate investment resides in 30 cities.
Highlights from the Year End 2011 Global Capital Flows report include:
- The level of cross-border purchasing activity rose from 27 percent in 2010 to 31 percent in 2011.
- Cross-border purchases remain stable, accounting for 30 percent of total volumes in the fourth quarter (Q4) of 2011.
- London finishes 2011 as most active city globally, with New York, Paris, Tokyo and Singapore rounding out the top five.
- Transactional volumes in 2012 expected to match that of 2011, but downside risks remain prevalent.
- The United States maintained its number one spot as the single largest source of real estate capital with more than $25 billion worth of purchases in Q4; this was down 17 percent on Q3. Led by France, the majority of the main European markets all increased except for the U.K.
- The office sector continues to be the favorite with investors, although retail is continuing the inroads it has made in recent years, reaching almost 30 percent of total transactions in 2011, the highest yet recorded. Industrial and hotels have also taken market share away from the office sector over the last two years. Mixed-use sites lost the most in 2011, with transactional volumes down 35 percent from 2010.
- Cross-border purchases remain stable, accounting for 30 percent of total volumes in the fourth quarter (Q4) of 2011.
“Despite the financial crisis over the past two years, commercial real estate remains a core asset class for many investors,” said David Green-Morgan, Global Capital Markets Research Director at Jones Lang LaSalle. “The year 2011 finished with a bang, and it was the activity in the European markets that grabbed the headlines in the final quarter of the year, against most people’s expectations.”
Jones Lang LaSalle’s A New World of Cities report finds that:
- More than half of all global real estate investment is concentrated in 30 cities around the world.
- A quarter of the total investment is in five top-tier cities: London, Tokyo, New York, Hong Kong and Paris. However, by the turn of the decade, newer destinations such as Beijing, Shanghai, Moscow and Sao Paulo will become serious contenders for real estate dollars.
- The top 10 cities include five from Asia, up from two in 2004, with China increasing its weight through 2020.
- Three North American cities feature in the top 10 currently—New York, Washington DC and Toronto—and the six fastest-growing cities are expected to be in the United States.
- By 2020, the top 30 cities will become the top 50 as digital communications enable corporations to locate outside traditional hubs.
- A quarter of the total investment is in five top-tier cities: London, Tokyo, New York, Hong Kong and Paris. However, by the turn of the decade, newer destinations such as Beijing, Shanghai, Moscow and Sao Paulo will become serious contenders for real estate dollars.
“We are already seeing a shift in where real estate investors are sending their capital,” said Peter Roberts, CEO, Americas, Jones Lang LaSalle. “The top 30 cities for real estate investment will become the top 50 as investors diversify their portfolios and corporate occupiers expand their geographic footprints to include emerging cities. Advances in digital communications contribute to this expansion because companies will no longer have to physically cluster in some of the world’s largest cities. In the BRIC countries, Grade A office stock is projected to grow by 10 percent per year over the next decade. Of these, China has the greatest opportunities with the world’s 10 fastest growing new cities in terms of GDP—Chongqing, Tianjin and Chengdu topping the list.”
