London, New York top list of global CRE investment in 2018: report

Global commercial real estate investment topped $730 billion last year in the top 30 cities, as investors around the world poured in a record amount. The news wasn’t all good, as investment was expected to fall this year.

London maintained its position in the top spot from 2017, according to a newly-released JLL report, which ranks 30 cities with the largest investment worldwide. New York overtook Los Angeles for the second spot in 2018 — L.A. dropped to sixth on the list. Chicago jumped from 15th to 9th. Miami has not been on the list since 2016, when it clocked in at No. 22.

In 2019, global CRE investment is expected to fall 5 to 10 percent, according to JLL, “as investors look to hold their real estate exposure and become more selective in the search for assets with strong income growth,” the report said.

The $730 billion in 2018 was a 4 percent increase from the previous year and the best annual performance in a decade, according to JLL. That was aided by foreign buyers, who accounted for 31 percent of activity in 2018. Investors poured money into the market, in part as a safer option than other asset classes that are more volatile, the report showed. The data shows that real estate investors and institutional investors are continuing to put their money into the world’s biggest cities as opposed to chasing yields in new emerging markets. But some investors interested in higher yields are also looking to secondary U.S. markets such as Atlanta.

New York had a strong showing, with total CRE investment of $31.4 billion, a 50 percent rise from the previous year. Meanwhile, in L.A., the total fell to $18 billion, a 27 percent drop.

Chicago’s CRE investment totaled $13.1 billion, an increase of 61 percent. The uptick in investment was due in part to several office deals, including Sterling Bay’s $680 million purchase of Prudential Plaza, a massive two-building complex.

In 2016, Miami made the cut with $6.1 billion in CRE investment, but has not cracked the top 30 since. The decline could be due in part to a drop in South American currency valuations, which has made buying properties in South Florida more expensive for those investors.

Twelve cities have appeared in the top 30 ranking every year for the past decade and account for 30 percent of all real estate investment, JLL said. They are: London, New York, Paris, Seoul, Hong Kong, Tokyo, Shanghai, Washington DC, Sydney, Singapore, Toronto and Munich.