Despite Brexit concerns, London topped the global city league tables for commercial real estate investment last year, while Los Angeles moved into second place, beating out New York, according to adviser JLL. Paris came in fourth; Berlin and Frankfurt both moved up but were still well outside the top group.
In a survey released at the World Economic Forum in Davos, Switzerland, JLL said 2017 investment in London rose 35% last year to $33bn, while Los Angeles attracted $23bn and New York moved into third place with $21bn. Overall transaction volumes in the global real estate market came close to $700bn for the full-year, exceeding the robust levels of 2016 despite geopolitical uncertainty.
"It may come as a surprise that the London commercial real estate market has stood firm in the first full year after the UK’s decision to leave the European Union," said Richard Bloxam, JLL Global Head of Capital Markets in the release. He added that this year, a number of key decisions on the UK's exit from the EU should bring some clarity on the post-Brexit future.
In 2017, the global CRE investment landscape continued to be dominated by the Big Seven cities - London, New York, Tokyo, Paris, Singapore, Hong Kong and Seoul - and all seven were featured among the global Top 10, JLL said.
Looking ahead, it sees overall global CRE investment poised to continue its strong performance, with the weight of capital still significant and investors actively looking for new ways to deploy funds. However investment volumes are likely to fall 5-10% despite this, due to the challenges of finding available assets, and continuing investor discipline. "This evolution in capital markets will accelerate the drive for investors to consider new strategies, with a greater focus on entity-level deals, recapitalisations, refinancing, and broader debt strategies, as well as a wider investment universe of real estate sectors and cities," JLL said.
It expects the following elements to characterise this year and beyond:
- The gap will continue to close between the leading cities attracting around a quarter of the world’s investment flows over the past three years, and the next tier such as Amsterdam, Los Angeles, San Francisco, Shanghai, Sydney and Toronto.
- Established locations which are hubs for science and technology industries like Berlin, Boston and Seattle will continue to strengthen their status as investment destinations.
- With value increasingly difficult to find at this stage in the extended investment cycle, we could see more ‘Lifestyle’ cities enter the Top 30 such as Vancouver, Brisbane and Oslo.
- Despite a widening investment universe and strong growth prospects, many ‘Emerging’ cities like Mexico City, Moscow, Manila and Mumbai need to further improve their real estate transparency to increase their attractiveness to investors.
Over 300 global indices and benchmarks assess the relative performance of cities in the JLL index. These included finance and business activity, investment profile, demographic diversity, innovation, infrastructure, global reach, quality of life, culture, governance and institutional framework. Other factors include core analysis of city size, GDP per capita, growth rates, industrial structure, position within the national and continental ‘system’ of cities.