London is the world's most 'liquid' real estate market

By Paul Norman - Thursday, October 19, 2017 14:19

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Tokyo, New York, Los Angeles Paris and London are the world’s largest commercial real estate investment markets, with the global stock of investable assets standing at $27.5trn, according to CBRE.

CBRE examined the relationship between city market size and capital flows into real estate for 122 cities around the world.

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.

Key findings are:

• Tokyo is the world’s largest single market with a total value of investable real estate of $711bn, followed by New York ($657bn) and Los Angeles ($482bn).

• Paris ($342bn) and London ($334bn) are the biggest European markets.

• The top 10 cities accounted for approximately $4trn - 15% of global investable real estate stock.

• The largest five cities in Europe (Paris, London, Madrid, Milan and Munich) represent $1trn of investable real estate

• London is the world’s most liquid market with a global liquidity ratio of 8.6%.

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%, 7.1% and 7.0% of stock traded on a yearly basis.

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. In Europe this trend applied to regional UK cities such as Edinburgh, Sheffield and Cardiff, as well as Oslo, Düsseldorf and Tallinn.

“Liquidity is an important consideration for global investors. As such overseas investors represented 94% of all London office transactions in Q3 2017 attracted by the transparent and liquid real estate market in the capital. It is these credentials that provide a significant competitive advantage and are key indicators of successful cities that can compete on the global stage,” said Chris Brett, Head of International Capital Markets, CBRE.

“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.

pnorman@costar.co.uk

 

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