Toronto remains among the 30 best cities favored by commercial real estate investors, a position it has held for all the years in the last decade.
However, the city has slipped off the list from 14th place in 2017 to 19th place in 2018 as the cities in Asia Pacific increase in popularity.
Despite the Brexit, commercial real estate investors continue to favor London as their main city, with New York making a valiant attempt to recover the peak.
Global rankings show that investors prefer the cities with which they are familiar, that have a well-established investment market and high levels of transparency.
The largest cities of entry in the world count to a large extent, especially those with high concentrations of capital, companies and talent.
In another part of North America, New York, which was # 1 in 2016, retreated in 2017 and Los Angeles became the most important city in North America.
But while London occupied the pole position in 2018, LA has been usurped by cities like Paris, Tokyo and Hong Kong, with New York in second place.
“In a year in which investors have had to deal with rising populism, protectionism and political uncertainty, the appeal of real estate as a class of assets has continued to rise,” said Richard Bloxam, Global Market Director Capitals of JLL.
He added that investors remain focused on the cities of entry, despite the adjusted prices and that many are looking for alternative or emerging locations, as well as various types of real estate within these cities, instead of exploring other less familiar cities.
Total volumes in 2018 were $ 733 billion, 4% more than in 2017, the best annual performance in a decade.
Cross-border purchases accounted for 31% of activity in 2018, close to the 10-year average, suggesting that investors still have an appetite to buy outside of their own markets.
“A notable trend is that half of these established entry cities are in Asia Pacific. Increasing transparency in these markets is encouraging more investment, moving these cities further up the ranking in 2019 and beyond, “said Bloxham.
What is expected for 2019?
During the next year, JLL anticipates a withdrawal of some investors due to caution and selectivity.
That could mean a 5-10% reduction in 2018 volumes, although real estate continues to be an attractive investment compared to other asset classes with solid fundamentals.
Yields are now at historic lows in most markets around the world. A sharp correction is unlikely, as there is still a significant amount of capital seeking to invest in real estate, and the fundamentals of the corporate occupation market in many markets are positive.
Among other key factors in the JLL forecast:
- The universe of institutional real estate will continue to expand, driven by factors such as low volatility, diversification benefits, long-term revenues and an attractive price premium for the core sectors. Asset classes, such as student housing, housing for the elderly and multifamily, continued to attract more institutional money in 2018 and this is likely to continue in 2019.
- Currently, the industrial sector accounts for 17% of all investments, compared to 10% in 2009. In contrast, the retail sector has seen less activity as investors adjust their investment approach to reflect the changing behavior of the industry. consumers. In the cities of entry, the office sector tends to represent a greater proportion of investment volumes: 68% in 2018, compared to 51% in global volumes.
- The top 30 will continue to be dominated by the cities of entry in 2019. However, in the limits, investors will consider a growing range of cities in their strategies. Reflecting the risk appetite of real estate investors, secondary cities in established transparent markets, such as Osaka and Atlanta, are likely to attract more attention, rather than moving to entirely new countries.
Thinking about buying an investment property? Contact me and I will help you find the best opportunity with the highest return of capital.