• Global property investment up to US$1.35tn amid year of uncertainty

    12 October 2016

    (4 October 2016, Hong Kong) Global property investment has risen to US$1.35tn in the past year despite 12 months of uncertainty across the globe, according to annual research out today from Cushman & Wakefield.

    The ‘Winning in Growth Cities’ report is an annual survey of global commercial real estate investment activity which 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 US also had the best of the growth, increasing its hold on the list with 15 of the top 25 cities. Also on the list are four European cities, four Asia-Pacific cities, and Toronto in North America.

    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 UK’s capital falling from US$39bn to US$25bn. 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 EMEA, nine in North America and six in Asia-Pacific.

    David Hutchings, Head of EMEA Investment Strategy, Cushman & Wakefield, and author of the report, said: “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.

    FIGURE 1: Top cities for investment (excludes development)

    (Source: Cushman & Wakefield and RCA)

    chart

    In the 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 Chongqing and Shenzhen in China posting year-on-year investment gains of 866% and 243% respectively.

    Hong Kong is one of top 10 cities in office investment from Q3 2015 to Q2 2016, recording more than US$7.6 billion in considerations, with an annual growth of 23.2%. According to our survey, Hong Kong is one of the most secure business environments in the world, as the city benefits from strong transparency and legal framework which have made it attractive to many Mainland Chinese companies listing and using Hong Kong as a springboard to the rest of the world. In the short-term Hong Kong is likely to maintain a lead over Shanghai but this could be weakened over the longer term as transparency improves in Mainland China.

    For development sites investment, the top 10 cities are all in Mainland China, with Beijing and Shanghai taking the top two spots, followed by second-tier cities such as Nanjing, Hangzhou and Chongqing. The 10 cities contributed to more than US$177.7 billion from Q3 2015 to Q2 2016. Other than China, no countries have a single dominance in any property sector.

    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.

    Carlo Barel di Sant’Albano, CEO, Global Capital Markets, Cushman & Wakefield, said: “Looking ahead, we remain positive about investors’ interest in allocating capital to real estate. Although volatility has declined over the past 12 months overall risks are still evident. While global uncertainty will continue to make investors more cautious, this is counterbalanced by the fact that corporate confidence has held up.”

    David Hutchings added: “However, in keeping up with the occupier demand, 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.”

     

     

     

     

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