JLL’s latest Real Estate Investment Intensity Index
LONDON, March 4 2016 – The latest JLL Investment Intensity Index, which measures the volume of direct commercial real estate investment in a city relative to the city’s economic size, reveals the increasing attractiveness of ‘New World Cities’ to investors.
The world’s most globalised metropolitan economies continue to account for a significant portion of global transactions, with the top 10 cities for transaction volumes accounting for nearly 30 percent of global investment over the last three years. However, over the past 10 years a core set of 32 New World Cities has steadily increased its share of global real estate investment volumes, rising from 10 percent in 2006 to account for over 20 percent in 2015.
Jeremy Kelly, director, Global Research Programmes at JLL said: “With pricing at near record levels in many gateway cities, New World Cities can offer better value for investors and are establishing themselves as consistent and liquid markets which are open and transparent. A broad range of investors now recognise the inherent strengths of New World Cities as dynamic clusters of business activity that offer scalable real estate investment opportunities.”
Whilst some ‘Emerging World Cities’ such as Shanghai and Beijing continue to attract significant amounts of global capital, direct commercial real estate investment into emerging markets overall fell by one third in 2015 to 5.5 percent of total global volumes of US$704 billion, impacted by factors such as China’s slowdown, lower commodity prices and the volatility of emerging market currencies. Emerging World Cities like Mexico City, Sao Paulo, Johannesburg and Moscow registered a significant fall in volumes in 2015 compared to the 2012 to 2014 period.
Meanwhile, ‘New World Cities’ account for 16 of the Top 20 in JLL’s Investment Intensity Index. They are typically small to medium-sized cities with transparent, open real estate markets and favourable infrastructure and liveability platforms. They are building dynamic economies and real estate markets through innovation and demonstrate an ability to transform and adapt to a constantly changing socio-economic landscape.
European New World Cities perform particularly strongly, led by innovation-rich, sustainable cities with a high quality of life such as Munich, Copenhagen and Stockholm, while many U.S. and Australasian New World Cities with strong research systems and technology credentials are also among the top tier; for example, Sydney, Auckland, Melbourne and Brisbane, and Silicon Valley, San Francisco and Austin.
Kelly added: “This is not a ‘flash in the pan’ trend; the increased investor interest in these adaptable, transparent, mid-sized markets is now a structural, rather than cyclical, feature of the real estate investment market. As the world re-calibrates in the wake of a Chinese slowdown and other economic uncertainties, we expect these cities to continue to punch above their weight as real estate investment destinations.”
JLL’s Investment Intensity Index covers over 300 cities around the world, and compares the volume of direct real estate investment in a city over a three-year period relative to the city’s current economic size. The Index provides a measure of real estate market liquidity, as well as a useful barometer of a city’s overall ‘health’, highlighting cities that are punching above their weight in terms of attracting real estate investment. To download the report visit http://www.jll.com/research/172/jll-III-q4-2015
