London is no longer the number one destination for foreign real estate capital with New York knocking the UK capital off the top spot, according to a report released by advisory services firm Cushman & Wakefield at the Expo Real conference in Munich on Tuesday.
Citing pre-Brexit concerns about high pricing and the continuing fallout from the British vote to leave the European Union, London real estate volumes fell to $25 billion in the year ending June 30, compared with $39 billion over the same period a year earlier.
The firm's annual “Winning in Growth Cities” report revealed that London slipped to third place in attracting foreign capital, behind New York and Los Angeles which claimed top and second spots respectively. Cushman & Wakefield noted that London's pain from Brexit may translate to gains for other gateway cities, though benefits will likely be spread across multiple metropolitan areas.
The decline in overseas transactions in London followed the wider trend which saw the global market volume drop for the first time in seven years, with a 5.7 percent decrease to $919.7 billion. Cushman & Wakefield attributed this drop to investors reacting “to tight supply and high pricing on the one hand but also greater volatility and a seemingly unending flow of uncertainty on the other.”
Limited supply and local competition also constrained other gateway markets that saw decreases in cross border capital flows, including Tokyo, Washington and Frankfurt.
Despite the shifts, Carlo Barel di Sant'Albano, Cushman & Wakefield's chief executive of global capital markets, is optimistic about the year to come.
“Looking ahead, we remain positive about investors' interest in allocating capital to real estate. Although volatility has declined over the past 12 months, overall risks are still evident,” he said in a statement Tuesday. “While global uncertainty will continue to make investors more cautious, this is counterbalanced by the fact that corporate confidence has held up.”
No countries dominated any property sector by investment volume, with the exception of China in the development category. For development site investment, the top 10 cities were all in mainland China, with Beijing and Shanghai taking the highest spots. Those 10 cities had more than $177.7 billion invested in the year ending June 30.
By capital flow measurements, the Americas took the highest ranking again for the biggest source of cross-border capital, with $86.7 billion invested non-domestically. The top five global investors were the US, at $51 billion; China, at $16.8 billion; Singapore, at $16.3 billion; Canada, at $14.7 billion; and Qatar, at $10.3 billion.