Which cities attract the most real estate investment relative to their size?

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04/06/2016 Leave a comment

JLL’s Investment Intensity Index 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. Covering over 300 cities around the world, the latest JLL Investment Intensity Index reveals the increasing attractiveness of ‘New World Cities’: transparent, innovation-oriented cities which are accounting for a growing share of global commercial real estate investment.

Real estate investment activity at near-record levels
Despite recent economic and geopolitical headwinds, global real estate investment remains at near-record
levels. Total direct real estate investment volumes in 2015 reached US$704 billion, only 7% below the all-time
high in 2007 (US$758 billion), with the strength of the U.S. dollar in 2015 understating the true level of market
activity; at fixed exchange rates, full-year 2015 volumes would have been a record US$765 billion. While global
volatility may contribute to a more cautious start to 2016, further growth to US$720-730 billion is expected over
the year as institutional investors continue to allocate significant capital to real estate.
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As we approach the peak transaction levels of the previous cycle, investor demand for prime assets in the
world’s most globalised metropolitan economies continues to be strong, with the top 10 cities for transaction
volumes accounting for nearly 30% of global investment over the last three-year period. However, investors are
increasingly targeting the next tier of cities in open and transparent markets.

While some ‘Emerging World Cities’ such as Shanghai and Beijing continue to attract substantial amounts of
global capital, direct commercial real estate investment into emerging markets overall fell by one-third in 2015
to 5.5% of total global volumes, impacted by factors such as China’s slowdown, lower commodity prices and
the volatility of emerging market currencies. Instead, investors are showing considerable interest in ‘New World
Cities’, small to medium-sized cities that are garnering significant attention on the back of transparent, open
markets and favourable infrastructure and liveability platforms, many of which are achieving global reach through
specialisation and innovation.

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