Being based in London, the Global Research team has been close to the uncertainties caused by the build up to the UK’s referendum on European Union membership and the surprise vote to leave the European Union on the 23rd June. The vote and result have provoked much discussion here about the economic consequences and the possible impact on the real estate markets. JLL’s Global Market Perspective Q3 2016 unpicks the performance of the world’s leading real estate markets in this period of uncertainty. Here, we look how investors are responding and on which cities they are focusing.
Investors cautious amid uncertainties
Global real estate investment totalled US$292 billion in the first half of 2016, down 10% on a year ago. Volumes for the whole of 2016 are forecast to be 10-15% lower than those seen last year, as investors take more cautious approaches. The forecast 2016 total of US$600 billion would still, however, be above the levels seen in any year between 2010 and 2014, and would represent one of the most active years since JLL started recording transactions.
The ‘Brexit’ issue
‘Brexit’-related issues have clearly dominated conversation this quarter. Investment into London took a significant hit in the lead up to the vote, with the city recording its lowest first half for investment since 2011. Volumes for this period were down 39% on H1 2015 at US$13.2 billion. This is just over half of the levels seen in New York (US$24.4 billion), London’s traditional rival for the top spot, even despite a 6% drop year-on-year. So far this year, New York has seen US$10 billion more in transactions than any other city, with London the closest.
U.S. markets dominate global top 20
Los Angeles is hot on the heels of London, and is the only other city to receive more than US$10 billion of investment over the first half of the year. With volumes of US$11.3 billion, this represented a 38% increase over H1 2015.
A total of 11 U.S. cities feature in the global top twenty, demonstrating their strong appeal and robust growth prospects. Dallas, Denver and Philadelphia are strong performers among the U.S.’s secondary cities. Meanwhile, Chicago, Boston and Washington remain among the top investment destinations.
Mixed performance in Asia Pacific
Tokyo has seen investment drop to US$6.8 billion in H1 2016, following a particularly strong first half of 2015 which saw more than US$10 billion of deals transacted. Despite this, it is still among the top five most active cities in this period, just behind Paris.
Seoul, on the other hand, experienced a two-thirds increase on the same period last year, boosting volumes to US$5.6 billion. Singapore’s performance was boosted by the sale of the Asia Square Tower 1 during Q2 – at a cost of almost US$2.5 billion. This one deal represented almost 50% of Singapore’s total investment in the first half of 2016.
Find out more by visiting our dedicated Global Market Perspective website and exploring sector-by-sector global analysis, using the interactive visualisation tools and downloading the full report.