The annual survey report from Cushman & Wakefield shows that top 25 gateway cities in terms of real estate investment saw market share rise from 51% to 53% and New York stays at the top with North America the fastest growing target for foreign capital.
The current forecast is for global volumes to rise 17% over the year to the middle of 2016, reaching a new record high of $1.1 trillion and led again by growth in North America and Europe.
However, the report also reveals that below the strong global performance, the market is far from uniform with results varying across regions and apparently established capital flows starting to change. Risk tolerances which have steadily loosened as the global economic recovery has taken hold over the past two years have reverted to type in the face of increased uncertainty in parts of the world.
The report says that this has resulted in a stronger flow back towards the most liquid and accessible markets. The report shows that top 25 gateway cities in terms of real estate investment saw their market share rise from 51% to 53%.
New York increased its market share, driven by foreign buying in particular. London was again the second largest market overall but top for foreign buyers, while Tokyo, Los Angeles and San Francisco made up the rest of the top five, unchanged on last year.
‘Despite the strong overall growth and the major gateway cities remaining largely unmoved, change is more evident at regional levels,’ said report author David Hutchings, head of EMEA Investment Strategy at Cushman & Wakefield.
‘Europe is still a magnet for capital from all regions but North America has actually been the fastest growing target for foreign capital, a fact reflected in the dominance of US cities in this year’s report,’ he explained.
He pointed out that 14 of the top 25 cities are in the United States while Germany, the second most popular country by number, has just three cities making the list. Investment into these US cities grew by 32% compared to just 7% growth for non-US cities in the top 25.
‘“Outward investment by US players is also dominating global capital flows, accounting for 42% of all foreign investment between regions in the past year and growing by 25%. Asian investment globally comes in at number two, with a 25% market share, as investors’ search for greater global diversification has, if anything, been accelerated by fears of a regional slowdown but has also become more focused with the US a notable winner,’ Hutchings added.
The report also identifies the winning cities for 2016 and states that, while major geopolitical factors remain in play, local market conditions should be of greater note with a number of cities set to deliver steady rental growth thanks to constrained pipelines and firming demand.
Core gateway markets such as London, Berlin, Paris, Sydney, Tokyo, Shanghai, Seoul, New York, Boston and San Francisco offer potential, the report says, albeit with more risk taking needed to boost returns.
Among tier two markets, cities in Germany, the UK, USA and Japan will be a focus along with cities such as Madrid, Milan, Brussels, Austin and Raleigh-Durham, or looking for higher risk in markets such as Manila, Bengaluru, Mexico or Central & Eastern Europe, the report adds.
Looking ahead, while increased global uncertainty will continue to affect investors, corporate confidence is still generally high, according to Carlo Barel di Sant’Albano, chief executive officer of Global Capital Markets at Cushman & Wakefield .
‘Allied to the changes in demand being wrought by new living and working practices, this underpins a fundamentally robust outlook for good quality real estate. Our current forecast is for global volumes to rise 17% over the year to mid-2016, reaching a new record high of $1.1 trillion, excluding development, led again by growth in Europe and North America,’ he said.
