New York still largest real estate investment market

LONDON: New York remains the largest global real estate investment market for the second consecutive year, according to a report published by Cushman & Wakefield.

The report "Winning in Growth Cities 2012" identifies the winning cities in today's international real estate investment markets and looks at the largest and fastest growing cities in investment terms, differences in pricing as well as demand and activity between sectors.

The markets monitored over a span of 12 months to the second quarter of 2012 (2Q12) identify the top destinations for investment in property; the fastest growing property investment markets; top destinations for retail investment, office investment, industrial investment, investment in development sites, multi-family residential investment, hotel investment and cross-border investment.

According to the report, New York has the largest global investment market for the second year running as volume increases 18.9% to US$34.7 billion (RM105.8 billion). Investors are drawn to commercial property in core global cities by low global interest rates and ongoing risks. New York is also the most prominent multi-family investment market.

London is in second place with a growth of 3.8% to US$29.3 billion. However, London still has the largest global office and hotel investment markets and heads the list of top destinations for cross-border investment.

Tokyo, Paris, Los Angeles and Hong Kong are at the first six spots in the top 25 list of cities for global property investments.

Los Angeles is the top market for industrial investment. Shanghai leads the list of top development site investment destinations while Hong Kong is the top market for retail.

The top 25 cities for global real estate investment strengthened their lead in the past year against a backdrop of volatile sentiment and activity in the global property market. They increased their market share from 46% in 2009 to 56% in 2Q12. While this dominant group will continue to be favoured by investors for its risk averse characteristics, it will in the future face rising competition from a host of other cities, said the report.

According to Cushman & Wakefield president and CEO Glenn Rufrano, true global cities have gone from strength to strength in the past year, and the investment hierarchy is now well defined.

"The top targets are really ‘safety first' choices and will be challenged when the recovery comes," he said. "In our opinion, the hierarchy will in fact expand as cities mature, as higher quality property is developed in emerging locations and crucially, and as occupiers lead the way into new markets."

Based on investments by property sectors, the office market attracted the most capital, accounting for 43% followed by retail (20.8%), residential (18.1%), industrial (10.3%) and hotel (7.2%).

By region, North American cities dominate in all sectors except for development sites, all of which are in Asia. Boosted by higher yields and higher yield premiums, liquidity and transparency, North America dominates the top rankings with 15 of the top 25 targets and 17 in the fastest growing spots last year.

Asia is the second strongest region in the top 25 cities with six current targets and five high growth markets. There was little change in the top 25 ranking with 21 of the top cities the same as last year. Sydney, Seattle, Phoenix and Denver moved up at the expense of San Diego, Hamburg, Melbourne and Beijing.

Asia-Pacific markets continue to attract significant volumes of global capital. Singapore, along with Tokyo, Shanghai, Sydney, Seoul and Hong Kong maintained their places in the top 25 global rankings this year.

Singapore managed to be among five global property markets, including top destinations for industrial investment (14), top destinations for investment in development sites (7), top destinations for multi-family residential investment (15), top destinations for hotel investment (25), and top destinations for cross-border investment (11).

John Stinson, Cushman & Wakefield managing director for capital markets, Asia-Pacific, said: "With lingering concerns over the sovereign debt crisis in other regions, we are witnessing higher allocations both to real estate and to the Asia-Pacific region in all sectors. Moving towards 2013, these higher allocations will deepen capital pools in core cities but also strengthen volumes seeking opportunities in growth cities."

Stinson advises to watch the Southeast Asian major market cities as investors follow the increasing trend of occupiers favouring these markets.

This article first appeared in The Edge Financial Daily, on Nov 2, 2012.