European markets enjoyed a stellar 2017, attracting the largest share of global real estate investment volumes for the first time since 2010.
The strength of the region is reflected in JLL’s latest Investment Intensity Index rankings which saw European cities account for seven of the world’s top 10 markets, and 12 of the top 30.
Europe’s ‘New World Cities’ in particular featured prominently, with the Nordic markets of Oslo (1st), Copenhagen (18th) and Stockholm (28th), and Germany’s Munich (4th), Frankfurt (6th) and Berlin (13th) leading the way.
The Investment Intensity Index compares the volume of direct commercial real estate investment in a city over a three-year period relative to its current economic size. The resulting rankings provide a measure of market liquidity and a barometer of a city’s overall economic health.
In addition, European cities dominate global cross-border capital flows. They now occupy 11 of the top 12 spots for cross-border investment intensity, up from 10 the year before. London, Edinburgh, Frankfurt and Berlin top the list.
The region as a whole saw a 29 percent increase in cross-border activity during 2017, which is a “testament to Europe’s openness and continued attractiveness to investors,” according to Jeremy Kelly, Global Cities Research Director at JLL.
Europe in a good place
European markets more generally, are also benefiting from their status as some of the world’s most transparent, stable and open markets. After years in the economic doldrums, the region’s return to sustained growth, which began last year, has further helped boost interest and investment.
“As well as featuring in the Investment Intensity Index, several of the top-ranking European cities are among the world’s largest overall CRE investment markets, and some have experienced strong investor demand over the last year, including London, Berlin and Frankfurt,” says Kelly.
London, for instance, saw a 45 percent increase in volumes in 2017, a significant rebound from its post-referendum lows in 2016. It also topped the global rankings for total and cross-border investment activity in 2017.
However, this pales beside Amsterdam and Berlin, where investment activity last year increased by 93 percent and 100 percent respectively, he says.
Europe’s New World Cities show their appeal
The allure of the New World Cities, which tend to be medium-sized and well-managed, lies in their strong future-proofing potential in terms of innovation and technology, sustainability and quality of life.
These characteristics are especially marked among Europe’s Index-topping cities, which all possess a critical mass of high-quality, specialized jobs, businesses and higher education institutions, along with strong infrastructure platforms.
Investors are increasingly looking to identify cities that are best-placed to gain from trends in technological transformation, and so generate long-term value preservation and growth, says Kelly.
“The attractiveness of Europe’s New World Cities lies in their exceptional levels of high-tech and knowledge-intensive employment, concentrations of innovative, globally successful firms, and high quality of life. These attributes should enable them to retain their appeal to companies, talent and investors going forwards,” he says.
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