A recent investigation by CBRE has found that the global stock of investable commercial real estate assets to be worth $27.5tn.
The report also found that Tokyo, New York and Los Angeles are the world’s largest commercial real estate investment markets.
According to World Property Journal, CBRE examined the relationship between city market size and capital flows into real estate for 122 cities around the world and 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.
Among that key global findings are: Tokyo is the world’s largest single market with a total value of investable real estate of $711bn, followed by New York at $657bn and Los Angeles at $482bn.
Others are Paris are $342bn and London, $334bn as the biggest European markets while the top 10 cities accounted for approximately $4.0tn or 15 per cent of global investable real estate stock.
According to the study, New York, Los Angeles, San Francisco, Chicago, Houston as the largest five cities in the Americas represent $2tn of investable real estate; a figure that can be attributed to the free market nature of its economy and cities.
“Asia Pacific’s five largest cities of Tokyo, Seoul, Osaka, Sydney, Melbourne amount to $1.5tn, although it is worth noting that data was not available for all cities in the region, including China. The relatively lower total of $1tn in Europe’s five largest cities of Paris, London, Madrid, Milan, and Munich is attributed to the influence of national boundaries, land use planning, and regional support programmes,” the report read in part.
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 US 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 $10bn, London, New York and Dallas mark the top three most liquid markets, with respectively 8.6 per cent, 7.1 per cent and 7.0 per cent of stock traded on a yearly basis. San Francisco, Los Angeles, Washington, D.C., and Paris closely followed, all trading above 4.8 per cent.
“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,” said Chris Ludeman, global president, Capital Markets, CBRE.
Originally published in Punch