Global property investment has risen to $1.35 tln in the past year despite 12 months of uncertainty across the globe, according to annual research released at Expo Real by Cushman & Wakefield.
The 'Winning in Growth Cities' report is an annual survey of global commercial real estate investment activity and 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. New York once again topped the ranking of cities from a total investment perspective. The top 25 included four European cities – London, Paris, Berlin and Amsterdam – down from six last year.
'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,' said report author David Hutchings.
'The greater appeal of the US 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,' Hutchings added.
EMEA region
While London lost out as a centre 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 UK and German markets such as Liverpool, Newcastle, Birmingham, Nuremburg and Stuttgart.
Investment strategy
Looking ahead, the scale of changes underway in the macro environment – from a slowdown in China, to Brexit, to the US elections – has meant many investors are struggling to decide where they should look for value, the report states.
Brexit has the potential to change the global city hierarchy as other cities vie to take advantage of any uncertainty among London occupiers and investors. However, any gains are likely to be thinly spread and no single city will win out. Indeed, losing out to New York as the world's biggest magnet for foreign capital could be a short-term reverse for London, with relative pricing already starting to look more attractive as yields elsewhere are forced lower.
In the medium term the net impact on London could be limited if the city succeeds again in innovating and embracing change – it could even increase its leading international role if it develops a yet more global face to the world.
On a global scale, the report also 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, the report suggests.
