According to JLL’s most recent research, gateway cities remain heavily important in large, global commercial real estate, with London remaining the largest commercial real estate investment market in the world.
Over the past decade, twelve cities have appeared in the top 30 ranking every year and account for 30 per cent of all real estate investment and, despite Brexit concerns, London topped the list for the second year in a row. The research revealed that there was a total volume of $733 billion in 2018, an increase of 4 per cent from the previous year and the highest in 10 years. The data further illustrated that investors are favouring markets they are familiar with and already offering high levels of transparency. Cross-border purchases accounted for 31 per cent of activity in 2018, close to the 10-year average, demonstrating how investors still have an appetite to buy outside their own markets.
In 2018, investors had to deal with increasing populism, protectionism and political uncertainty yet real estate as an asset class remained popular, increasing 4 per cent on the already resilient levels in 2017.
One surprise highlighted within the research was that Asian cities are beginning to dominate the top ranks. Tokyo, Singapore and Hong Kong have all traditionally been among the top group, however, Shanghai and Seoul are now breaking the top five. As the level of transparency increases in these markets, it is expected that we will see more investors moving into the Asian markets.
Additionally, the research noted that the institutional real estate universe will continue to expand, predominantly led by factors such as lower volatility, diversification benefits, long-term income and an attractive pricing premium to core sectors.
In gateway cities, the office sector tends to account for a higher proportion of investment volumes—68 per cent in 2018, compared to 51 per cent in global volumes. JLL projects that investment activity momentum will be maintained into 2019, as real estate remains attractive in comparison to other asset classes.