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The world’s largest commercial real estate investment markets are Tokyo, New York and Los Angeles. With the global stock of investable assets standing at $27.5 trillion, according to the latest research from CBRE. CBRE examined the relationship between city market size and capital flows into real estate for 122 cities around the world. The research found that there is a high correlation between the size of a city’s real estate stock and the volume of investment into that city. Key findings:
The research identified ‘outlier’ cities that do not follow the general trend and attracted either more real estate investment than the market size would suggest or vice versa. Markets that attracted more investment, include relatively smaller U.S. cities such as Tampa, Richmond, Austin and Charleston, while in Europe this trend applied to regional UK cities such as Edinburgh, Sheffield and Cardiff, as well as Oslo, Düsseldorf and Tallinn.
CBRE also investigated the ratio between the market size and the real estate investment inflow to establish the market’s liquidity. From cities with an average turnover of at least $10 billion, London, New York and Dallas mark the top three most liquid markets, with respectively 8.6 percent, 7.1 percent and 7 percent of stock traded on a yearly basis. San Francisco, Los Angeles, Washington, D.C., and Paris closely followed, all trading above 4.8 percent. “The amount of stock available in each market is relevant to investors pursuing a global diversification strategy–a true market neutral portfolio needs to be weighted by city size. Most investors are not pursuing full global diversification, but many have a more tightly defined strategy such as ‘core real estate in global gateway cities’. It is important for these investors to know the relative size of the key investment markets to ensure portfolio balance,” says Chris Ludeman, global president of capital markets with CBRE. The CBRE report: ‘How much real estate? A global city analysis’ contains additional analysis and an explanation of methodology. To download a copy click here.