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The latest report published by commercial real estate consultants, Cushman and Wakefield (C&W) shows that investors are maintaining their interest in what are considered the world’s “top cities.” $34.7 billion (an increase of 18.9 % on last year) was pumped into New York, landing it top of global rankings for the second year in a row.
The “Winning in Growth Cities” study, which was presented at the Expo Real 2012 trade fair in Munich recently, focussed in particular on investment volume in the second quarter of 2011, compared to the second quarter of 2012. The backdrop of low interest rates worldwide and an unpredictable economic and political environment is encouraging investors to stay put in the world’s most important cities.
The world’s top 25 cities have increased their share of the market from 46% in 2009 to the present 56%. While investment in top locations has increased by 6% in the last year, investment worldwide has only risen by 0.8%, signalling a continued interest in establishsed, relatively secure core markets, which offer high liquidity. The study authors conclude that while the 25 top locations will continue to appeal to commercial investors, a number of new cities are set to edge their way up the list.
Glenn Rufrano, CEO of Cushman & Wakefield has described the principle at play as one of “Safety First” but predicts that when growth returns, investors will turn their attention to cities in growth areas which are likely to attract business.
North America, representing 15 of the 25 top locations, continues to dominate the global rankings, boasting higher yields, more liquidity and greater transparency on the marktets. Six of the the top 25 investment hubs are in Asia and a further five Asian cities have been identified as important areas of future growth. Four European cities make it into the top 25 cities for investment; London (2nd place), Paris (4th place), Stockolm (18th place) and Berlin (22nd place). 21 of the 25 cities also made the list last year. Sydney, Seattle, Phoenix and Denver are new entries while San Diego, Hamburg, Melbourne and Beijing have been bumped down.
The greatest investment was in office buildings, which made up 43% of sales. The remainder was in retail outlets (20.8 %), residences (18.1 %), industrial property (10.3 %) and hotels (7.2%).
In the period under review, foreign investors spent about $150 billion on US property, representing an increase of 4.3 % compared to the same period last year. For the second year in a row, the top location for investors from abroad was London. Market players invested about $ 19.6 billion there. Paris and New York, in which $10.2 billion and $7.4 billion was invested respectively, came in second and third place. Berlin, in which $2.4 billion was invested, also made it into the top ten.
The C&W report highlights a number of factors affecting growth. These include level of education, innovation and living standards. Inga Schwarz, head of research at C&W Germany, identifies the size of a city and its accessibility as further influences on the ascent to so-called “Global city” status. She also points out however that in an increasingly digital world, new parameters such as education, culture, connectivity and environmental sustainability will play a key role.
German cities are considered to have high potential in these areas. Frankfurt is ranked ninth most important business and financial centre and Munich comes in at number 20. Five German cities; Munich, Frankfurt, Hamburg, Berlin and Stuttgart are ranked among the top 20 cities for innovation potential. German cities also make the cut for environmentally-friendly transport: Berlin is in 1st place, Hamburg in 4th and Munich in 9th. In terms of quality of life, Munich and Düsseldorf come in 4th and 5th, after Vienna, Zürich and Auckland.
The study authors underscore the importance of German cities in relation to the top 25 worldwide. Martin Braun, head of C & W’s Capital Markets Group maintains that economic and politically stable markets with high liquidity will attract a growing number of investors to Germany. “In particular we expect to see continued high demand in core areas of business,” he says.