CHICAGO-A Jones Lang LaSalle study being released this afternoon at the World Economic Forum in Switzerland says that the top 30 cities, which now account for half of all commercial real estate investment in the world, will see dilution by a decade from now. The top 10, however, will likely remain mostly the same, though Chinese megacities could push some names off the list.
The study is part of the locally based company’s “World Winning Cities” research program launched in 2002 to understand trends in urbanization and asses impacts on global real estate markets. One of the first things learned, says Jeremy Kelly, the author of the recent “New World of Cities” study, is that the top markets don’t normally change much over time. “The top 10 stay pretty consistent,” he tells GlobeSt.com, and says even the other 20 haven’t given much ground.
The top 10 cities in terms of direct commercial real estate investment from first quarter 2010 to third quarter 2011 were, in order, London, Tokyo, New York City, Hong Kong, Paris, Singapore, Washington, DC, Seoul, Toronto and Shanghai, Kelly says. Regardless of the European debt crisis, London, which doesn’t belong to the Eurozone countries, saw $43 billion of investment in the time period, $11 billion more than Tokyo and $16 billion more than New York City.
“Many European investors are rebalancing their portfolios by investing in London,” Kelly says. “Virtually every international country is looking to invest in the city.”
However, over the next decade, investors are expected to spread out investment, Kelly says, as globalization picks up pace. By 2020, he says, the top 30 is more likely to be the top 50 as cities such as Mexico City, Delhi and Istabul attract more investment.
More Chinese cities, with only Shanghai and Beijing (12) on the list now, are expected to break into the top 30, including Chongqing, Tianjin and Chengdu. The world’s 10 fastest growing large cities are all in China, Kelly says.
However, more US cities are also expected to join the top 30 list. Currently along with New York City and Washington, DC, only Los Angeles (11), Chicago (14), Boston (18) and Miami (28) are in the top 30 for investment. Eleven US cities are expected to feature among the world’s largest cities by GDP by 2020, according to the report.
“The US cities are large markets featuring transparency and liquidity not seen in other markets,” Kelly says. Houston and Dallas have seen impressive GDP growth, he says, and Austin and Raleigh-Durham will be popular due to growth in technology.
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