LONDON New York beat London to the top spot for global commercial real estate investment in the year to September 30, research showed, but both cities are facing rising bearishness from investors worried by the prospect of economic headwinds.
Property consultancy Cushman & Wakefield said investment volumes in New York totalled $29.7 billion (19.2 billion pounds) in the period, while in London they hit $27.2 billion. Investors have preferred the mature U.S., European and Asian cities for their defensive qualities as the global economy teeters back from recession.
The list of top five cities for property investment was rounded out by Tokyo, Paris and Hong Kong, with the U.S.-heavy next five including Los Angeles, Washington DC, San Francisco, Singapore, and Chicago, C&W said.
"The next 6 months is likely to see increased levels of capital looking at the top ranked cities as investors continue their flight-to-quality and look for safe opportunities in core, regulated markets," C&W said.
C&W expected the next 12-18 months to see investor interest spreading up the risk curve.
However, even in top-ranked cities, investors' are focussed mostly on the best quality assets, while a heavy veil of caution hangs over those regarded as secondary, which means they are outside of the main business hubs and are harder to tenant.
On October 3, a survey by U.S. law firm DLA Piper showed 70 percent of U.S. commercial property investors were bearish on that sector's outlook for the next 12 months.
In London, the post-recession rebound in property prices has faded away, while office and retail sector developer confidence has been undermined by ongoing global economic woes, which has also sapped confidence among potential tenants.
"With investors likely to stay risk-averse, many are expected to remain focussed on the top-ranked cities in the year ahead and pricing for the best space is likely to increase further in all regions, with investors and occupiers facing a shortage of quality space in the best locations," C&W said.
The British economy is forecast to grow 1.1 percent in 2011 and by 1.5 percent in 2012, while the U.S. economy is seen up 1.6 percent in 2011 and 2.1 percent in 2012.
"The opportunities for the less risk-averse will therefore be split between creating modern space in top cities or finding the next tier of cities and city locations to benefit from supply shortages in the core," the property consultancy said.
Offices investment was topped by London, New York, Paris, Tokyo and Washington DC, while investment in retail property was centred on Hong Kong, Rhine-Ruhr in Germany, New York, Manchester and London.
The following table shows investment volumes by city for the year to end-September 2011.
City Volume Yr-Yr Pct Change
New York $29.7 million 165.5 pct
London $27.2 million 2.4 pct
Tokyo $18.1 million -12.6 pct
Paris $17.7 million 41.1 pct
Hong Kong $16.4 million 34.3 pct
(Reporting by Andrew Macdonald; Editing by Hans-Juergen Peters)