New York City remains the 'Top Dog' in the global property investment marketplace, with London and Tokyo coming in second and third, respectively.

 

Low global interest rates and ongoing risk are luring investors to commercial property markets in core global cities, according to Cushman & Wakefield's annual Winning in Growth Cities report, which was released today at the EXPO REAL trade fair in Munich. New York attracted the most investment last year. houses

In fact, the top 25 global cities have reinforced their position in the last year, raising their market share to 56% from 46% in 2009. While investors will continue to favor this majority group because of their risk-averse tendencies, the survey predicts that they will face greater competition from a variety of different cities in the future.

The following are some of the highlights from Cushman & Wakefield's report:

For the second year in a row, New York is the world's largest investment market, with volumes up 18.9% to US$34.7 billion in the year to Q2 2012.

London came in second with a 3.8 percent increase in investment volumes to US$ 29.3 billion (18 percent less than New York)

The top six are Tokyo, Paris, Los Angeles, and Hong Kong. Los Angeles was the most popular city for industrial investment, followed by Shanghai for development sites, and Hong Kong for retail.

"True global cities have gone from strength to strength in the past year, and the investment hierarchy is now firmly established," says Glenn Rufrano, President and Global CEO of Cushman & Wakefield. The top targets, on the other hand, are truly "safety first" choices that will be tested as the economy recovers. The hierarchy will, in our opinion, expand as cities mature, higher-quality property is developed in emerging markets, and, most importantly, as occupiers lead the way into new markets." With investors seeking future growth potential as well as better stability and liquidity, the top 25 cities have grown in importance, with volumes rising.

North America dominates the top ranks, with 15 of the top 25 targets and 17 of the fastest rising in the last year, thanks to increased yields and yield premiums, liquidity, and transparency. With six current objectives and five high-growth markets, Asia is the second most powerful area in the top 25. The top 25 cities remained largely unchanged from last year, with Sydney, Seattle, Phoenix, and Denver rising to the top at the expense of San Diego, Hamburg, Melbourne, and Beijing, the latter of which fell out owing to a slowdown in land sales but is expected to recover.

The office market drew the greatest investor money, accounting for 43 percent of total investment, followed by retail (20.8 percent), residential (18.1 percent), industrial (10.3 percent), and the hotel sector (7.2 percent ).

In the 12 months leading up to Q2 2012, global cross-border capital flows totaled US$150 billion, up 4.3 percent over the same period in 2011. For the second year in a row, London topped the table for foreign investment, with US$19.6 billion, followed by Paris and New York. The top two Asia Pacific cities for foreign investment are Tokyo and Hong Kong, which are ranked fourth and fifth, respectively.

The Success Factors

The Winning in Growth report also identifies today's winning cities in terms of commercial real estate investment and pricing and demand disparities. The Cities report also examines the key drivers of city performance, such as talent pool, innovation, and quality of life. "The core components for success in a global city have always centred around scale and access," says David Hutchings, Head of European Research at Cushman & Wakefield. "But in today's digital and risk-aware world, a range of other characteristics are gaining in relevance." Education, culture, connection, and environmental sustainability will all be important in the future, but a city's reputation for ease of doing business, innovation, and quality of life will also be important."

The importance of New York was again reinforced across a range of metrics studied in the study, with the city ranking in the top 25 in every aspect except quality of life. London, on the other hand, is not far behind, with more top five finishes than New York. Paris, Tokyo, and Shanghai rounded out the top five, but only New York and London fared highly for both scale and softer criteria like innovation and education, which provide the foundation for future growth.

"Competition among cities to attract investors money will only rise in the years to come as the possible universe of cities grows," according to Hutchings. Investors will spread out in the short term as they seek income and growth, but in the medium term, they should focus on where occupiers are going, not just on size and liquidity, but also on factors like innovation, skill clusters, and sustainability, which highlight cities like Amsterdam, Munich, Melbourne, Singapore, Toronto, and Seattle."

Regional Activity Around the World

"When looking at this year versus last, it feels like "déjà vu all over again," said Greg Vorwaller, Global Head of Capital Markets at Cushman & Wakefield, "as the continued economic and geopolitical uncertainties have resulted in investors behavior biased to the safety of core properties in the very prime markets." Opportunities will abound for those prepared to prudently move up the risk spectrum, both in terms of acquisitions of quality assets in emerging or secondary cities, as well as recapitalizations of undercapitalized prime assets, as confidence is restored and recovery is felt, even at modest levels, for those not faint of heart."

"Nervousness amongst investors induced by the sovereign debt crisis has focused most activity on the largest and most liquid markets, and London has been the major beneficiary," Michael Rhydderch, Head of EMEA Capital Markets, Cushman & Wakefield, added. However, it is evident that, in the future, the main German cities will be especially appealing, both in terms of their defensive features and the relative strength of their occupational markets. Despite the sector's complexity, Berlin will continue to grow its share of the investment market."

Head of Asia Pacific Capital Markets, John Stinson "Asia Pacific markets continue to attract considerable volumes of global capital, and we see a high concentration of large Asian cities in the Top 25 this year."

With lingering concerns about other areas' sovereign debt crises, we're seeing stronger allocations to real estate and the Asia Pacific area across the board. As we get closer to 2013, these increased allocations will help to deepen capital pools in core cities while also bolstering volumes looking for opportunities in growing cities. Keep an eye on the major market cities in Southeast Asia, as investors follow the growing trend of occupiers favoring these areas."