NEWS RELEASE Cushman & Wakefield
At one time, when speaking about commercial real estate investment, the focus tended to be on local, regional or national investors. Certainly there were instances during which an out-of-country investor might come into the United States (US) to buy an office portfolio, but such actions were rare.
This has changed, however. We’re seeing more foreign investment capital flowing into the United States, eager to snap up portfolios and buildings because of higher yields and more favorable cap rates. Cushman & Wakefield (C&W) has been on top of this trend – in its third annual “Winning in Growth Cities” report, the organization provides information on commercial real estate investment by property sector by city ranging from yields and investment volumes, to market activity patterns, to sources of international capital, to drivers of each city’s success.
Overall, the report notes that the global property market performed well within the past year – volumes overall as of June 2013 were up 16.7% to approximately $649 billion. In its top 25 cities for commercial real estate investment, C&W named New York as the top city, followed by London and Los Angeles.
Another interesting point was that “the biggest gainers were Austin, Milan, Las Vegas, Montreal and Tampa,” with North America boasting 15 of the top 25 fastest-growing major markets. In the US, in addition to New York and Los Angeles mentioned above, the other US cities making the top 25 for commercial real estate investment were (in order of rank):
San Francisco
Washington, DC
Houston
Chicago
Dallas
Seattle
Atlanta
Boston
Miami
Denver
Phoenix
Furthermore, from an investment standpoint, the office sector garnered the most attention; 44.8% of all investment in the top 25 cities was in office product. Next was multifamily, which reported 26.1% of commercial property investments as of June 2013.
This report does not mean, however, that builders and buyers of apartments and other multifamily real estate should immediately jump into these cities. Most sophisticated investors and owners understand that there is a great deal more to targeting a specific site than its investment potential.
For example, in a recent article, we pointed out that Washington DC is starting to experience a glut in apartment developments due to a large increase in construction. The product that’s out there is being absorbed with occupancy at about 95.0% in September 2013, about the same as a year ago; but annual effective rent growth declined by 1.40% in order to maintain the market’s occupancy. Now is not an opportune time to build and/or invest in our nation’s capital with unit deliveries increasing from 9,352 units this year to over 15,600 units next year.
