& Wakefield's 'Winning in Growth Cities' report shows Asian investors
behind 18% increase in capital deployed
- Hong Kong
rises up rankings to make global fifth for international investment, behind
global top New York, Los Angeles, London and Paris
strengthened its position as the city attracting most overseas investment,
growing 22% year-on-year, followed by Hong Kong.
KONG, CHINA - Media
OutReach - 11 October 2018 - Despite geopolitical uncertainty and a slowing in the economic cycle,
investment in the global property market has seen a significant rise of 18%
year-on-year to a new record high of $1.8tn (2017: $1.5tn), according to the
research from Cushman & Wakefield.
'Winning in Growth Cities' is
an annual report which examines global commercial real estate investment
activity, assessing cities by their success at attracting capital.
The 18% increase in
commercial real estate investment is being led by Asia, both as a source of
capital and as an investment destination, with investment in Asia accounting for
52% of all activity and Asian buyers responsible for 45% of all cross-border
Carlo Barel di Sant'Albano, Head of Global Capital Markets at Cushman
& Wakefield, said: "There is no
shortage of capital targeting real estate across myriad geographies and risk
profiles. Indeed, we are seeing many investors increasing their allocations to
real estate and they are evolving their strategies to allow for variable supply
and risk tolerances. These are the key factors determining whether volumes rise
further still; given the current environment, volumes could exceed current
levels by up to 2% next year. This is likely to be led by global buying, but
investors need to keep a close eye on structural shifts in the occupational
market as both an opportunity and a challenge."
David Hutchings, Head of Investment Strategy, EMEA Capital Markets at
Cushman & Wakefield and author of
the report, commented: "There are clear, and many would say growing, risks
in the macro environment, but there is little to suggest the cycle is set to
end or that a recession is looming. Inflation is proving to be less of a threat
than feared as we continue to enjoy steady economic growth. However, price
signals will be enough to keep central banks in a tightening mood in most areas
and the slow but sure rise in interest rates, and reduction of quantitative
easing driven liquidity, will therefore continue.
"What may be new in the
year ahead is the potential for supply to increase as some switch strategy and
take profits, others get caught by rising borrowing costs and a need to raise
capital, and more seek out partners to jointly invest and develop."
Francis Li, International Director and Head of Capital Markets, Greater
China at Cushman & Wakefield, added: "China
meanwhile is likely to feature more on global buy lists going forward,
following moves by President Xi to ease entry requirements for foreign
investors. Tier 1 Mainland cities and Hong Kong will be the key focuses, but a
greater share of investment will target decentralized and emerging CBD
locations due to a shortage of opportunities and high prices in the CBDs, as
well as new supply and transport improvements in these new areas."
James Shepherd, Managing Director of Research, Greater China at Cushman
& Wakefield, commented: "The
prevailing tight lending situation in China will lead to a softening in new
commercial development, but will also produce more opportunities for foreign
participation in the form of JVs and debt. Government initiatives are expected
to continue to support growth, including the Greater Bay Area, Belt & Road
Initiative and wider urban renewal schemes. China's tier 2 and 3 cities,
particularly those linked to the Belt & Road Initiative such as Chengdu and
Chongqing, will continue to record strong growth in logistics investment."
At a city level, New York
remains out in front as the largest real estate city market in the world,
followed by Los Angeles and London, with Paris rising strongly to take fourth
spot ahead of Hong Kong. Among international buyers, London remains
unassailable, with New York slipping from second to sixth place thanks to high
pricing, the strong dollar and keenly competitive local demand.
Among the top 10 cities for
overall investment, six are in the US, with Europe and Asia with two
representatives each. Despite political uncertainty surrounding the nature of
the UK's exit from the European Union, London has retained its position as the
primary European market, owing in particular to a number of high-profile office
The strongest Asian market is
Hong Kong, up 68% compared to 2017, moving up three places to become the first
city from the region to make the global top 5 for three years. Investment in
Asian cities is predominantly the preserve of domestic capital, although
regional investors have increased their market share over the year.
Toronto is the first Canadian city to enter the top 25 in five years, as
heightened interest increased volumes by 50% year-on-year. Beyond these big
movers the make-up of the top 25 has changed very little, with their market
share representing 49% of total volumes, down from 50% at the same point last
At a regional level,
total transaction growth in North America is lacklustre, increasing by just
0.6% year-on-year. Elsewhere volumes have improved at their strongest rate in
three years. Totals in the Asia Pacific region are up 32% on the year, while
European transaction growth has increased by more than 16%.
For the first time on
record, New York has been relegated from the top 5 targets for cross-border
investment. This is partly being driven by geopolitical tensions causing a
pull-back in investment from some players but is still more a product of a
highly competitive and strongly priced market. Despite there being no North American
representation within the core 5 targets, six of the region's cities retained a
presence in the top 25 overall, the same as 2017.
For the ninth time in
10 years, London is the top city for attracting international real estate
investment. Having increased transaction volumes into London by 47% over the
year to $10.9bn, Asian investors are the strongest source of cross-border
capital into the city, with offices the overwhelming target for these deals, as
the sector attracts a 94% market share of APAC flows into London.
Europe accounts for
four of the top 5 spots for international capital, with Paris and Amsterdam
retaining third and fourth place for the second year and Madrid making the top
five for the first time since 2009. The only German city in the top 10 is
Berlin, marking a change from the country's dominance in 2017 when three cities
appeared, the most it has ever had. However, German cities continue to see very
buoyant levels of demand and maintained a healthy representation in the top 25
city targets for cross-border investors.
Hong Kong moves up 14
places to second place, the result of capital controls encouraging mainland
Chinese investors to concentrate their allocations closer to home, resulting in
continental investment in the city rising by 259% year-on-year.
Asian cities account
for three of the top 10 in 2018 compared to none the year before, as Shanghai
and Tokyo improved as targets for cross-border capital. By comparison, while
eight APAC cities made the top 25 in 2017, this is down to five this time, as
strong domestic demand and stock shortages have impacted the market.
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