Moscow overtakes London as city with best occupier demand prospects

Moscow has ousted London from first place in the rankings of Europe's most attractive cities for real estate investment this year after climbing from 10th to 2nd place the previous year, according to a new report from LaSalle Investment Management. The latest rise demonstrates the importance of size and economic growth to a city's investment potential, LaSalle said, but added that a negative business environment score will continue to deter foreign businesses and investors.

In its latest annual European Regional Economic Growth Index (E-REGI), set out to identify prospects for occupier demand, LaSalle IM reveals that medium-term demand for European real estate will remain highest in large city regions, as well as cities that boast strong fundamentals and high levels of wealth such as London, Paris and Munich.

However, economic strains are taking their toll on Western Europe. London has slipped to second place in 2011 due to a reversal of last year's gains in GDP and employment growth as well as renewed global financial concerns, which have indirectly impacted the UK's capital. However, the city's wealth and business environment scores still far exceed those of Moscow, which leads the E-REGI rankings on the basis of its growth potential.

'The polarisation in Europe is the strongest since before the adoption of the single euro currency,' said Simon Marrison, European CEO, LaSalle Investment Management. 'The competitive economies of the Nordics, Germany and emerging eastern European markets are forecast to fare relatively well over the next few years, while the highly-indebted southern European and certain emerging markets are likely to lag.'

Munich has retained its 2010 position of 3rd place and remains ahead of Paris due to its marginally higher growth and business environment score, despite having a slightly lower level of wealth. Germany is also the country with the highest number of city regions in the top 20 (five), highlighting its relative economic strength, as well as the accelerating polarisation between strong and weak European economies.

Turkey sits alongside Russia as a sizeable emerging economy, which is reflected in Istanbul's surge from 25th to 5th place in the E-REGI rankings.