March 28, 2017

Political uncertainty has not dampened investor enthusiasm for European cities, which remain attractive destinations for real estate investors, particularly for those outside the region looking at office and hotels assets.

The latest Investment Intensity Index (III) from JLL shows European cities account for 12 of the top 30 cities for overall investment intensity and 10 of the top 12 for cross-border investment intensity.

The report compares the volume of direct commercial real estate investment in a city over a three-year period relative to its current economic size, providing a measure of market liquidity and a barometer of a city’s overall economic health. Covering 150 cities around the world, this latest edition identifies the top 30 ranked cities.

European cities are valued for their transparency, sustainability and stability, combined with strengths in technology, infrastructure and liveability. Oslo, London, Munich and Edinburgh claim four of the top 5 places.

Scotland’s capital, Edinburgh, ranked fourth in the overall index, is second only to London in cross-border investment intensity. The share of international investment in Edinburgh’s office market increased significantly in 2016, with over 90 percent of purchases accounted for by overseas investors, compared to just 50 percent in 2014.

“As a mature and transparent market with low levels of development, Edinburgh is not at risk of oversupply, which can depress growth,” says Alasdair Humphery, Lead Director for JLL in Scotland.

“While the Capital’s commercial property market has been built on strong financial and professional services foundations, its recent growth in the tech sector, in particular, has provided it with a springboard to move forward as a ‘New World City’, offering much more value and variety to investors worldwide.”

JLL’s Director of Global Research, Jeremy Kelly, says the report highlights the rise of these ‘New World Cities’ – mid-sized cities which excel in high-tech, high-value sectors supported by robust infrastructure, a high quality of life and transparent business practices – within the global rankings.

‘New World Cities’ account for 21 of the top 30 in the III, and Europe is strongly represented.

Along with Oslo, Munich and Edinburgh, other European New World Cities in the top 30 include Frankfurt (6th), Dublin (7th), Copenhagen (10th), Stockholm (13th), Geneva (17th), Amsterdam (19th) and Berlin (24th).

“Although impending elections in several countries and Brexit negotiations have introduced some political uncertainty this year, the economic recovery across Europe is continuing and real estate demand remains strong,” Kelly says.

“European markets continue to attract strong investor interest and many European New World City markets are well-placed to maintain competitiveness and performance.”

Many of these European markets have achieved global reach through specialisation and adaptability to changing economic and technological demands, and there is no reason to believe this will change.

“With growing allocations from institutional investors and new sources of capital emerging, the amount of money targeting real estate continues to increase.”

“As other markets raise their levels of transparency and develop more assets to invest in, they are likely to attract larger amounts of capital. However, European cities will not lose their attractiveness to investors. With high-quality infrastructure, high-value economies and established, transparent markets, European cities will remain in-demand destinations for real estate investors.”

This would appear to be particularly true for the office and hotel sectors, in which European markets appear over-represented.

Europe’s office market strength lies in its diversity of offering with high-order business centres such as London, Paris and Frankfurt; niche financial centres including Luxembourg, Geneva and Edinburgh; tech hubs like Munich and Stockholm; and seats of government like Berlin.

In the Hotels sector, the top 20 ranks highlight the attractiveness of major gateway cities such as London. In addition, many of the world’s most important international conference markets like Amsterdam, Berlin and Vienna are located in Europe, while high quality-of-life cities in the region also feature prominently, including Munich, Hamburg and Copenhagen.

Click here to read the full investment intensity report


Jeremy Kelly

Global Research Director, JLL

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