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Investment Intensity Index, March 2017

‘New World Cities’ Reshaping

the Global Investment Landscape

JLL Research

Investment Intensity Index


2

Investment Intensity Index 2017

JLL’s Investment

Intensity Index

A considerable weight of capital continues to seek real

estate exposure. As competition for product intensifies

and new cities appear on the radar of international

investors, JLL’s latest Investment Intensity Index reveals

subtle changes in the geography of investment.

JLL’s Investment Intensity Index compares the volume

of direct commercial real estate investment in a city

over a three-year period relative to the city’s current

economic size. 1 The Index provides a measure of real

estate market liquidity, as well as a useful barometer

of a city’s overall health, highlighting cities that are

punching above their weight in terms of attracting real

estate investment.

Covering 150 cities around the world, this latest edition

identifies the 30 cities which head the rankings for real

estate investment relative to their economic size. We

also reveal the top cities for cross-border investment

intensity, identify the leading ‘Emerging World Cities’

and provide a breakdown of which cities are attracting

the most intensive investment activity in the offices,

retail, hotels and logistics sectors.

1

Direct commercial real estate investment volumes (over the

2014-2016 period), excluding land, residential and development

transactions, in a city’s metropolitan area as a proportion of city GDP.

JLL’s Investment Intensity Index covers 150 major established and

emerging business hubs across the world.


3

Investment Intensity Index 2017

Key highlights

The rise of ‘New World Cities’

Mid-sized cities which typically specialise in high-tech and high-value activities are seeing steady growth

in investment and dominate the top ranks of this year’s Investment Intensity Index. The contribution of

the ‘New World Cities’ group to global investment volumes has risen from 12% in 2006 to 23% in 2016.

High capital flows into European cities

Positive qualities relating to transparency, sustainability and stability, combined with strengths in

technology, infrastructure and liveability, are supporting strong investor demand in European cities,

which account for 12 of the Top 30 cities for overall investment intensity and 10 of the Top 12 for

cross-border investment intensity.

Resilience of ‘Established World Cities’

Investor appetite remains robust for assets in the world’s most globalised metropolitan economies.

As well as leading the rankings for absolute investment volumes, New York, London, Paris and Tokyo

also feature in the Top 30 for investment intensity.

‘Emerging World Cities’ struggling to compete for investor attention

With a few notable exceptions such as Shanghai and Beijing, major cities in the world’s fastest

growing emerging economies are still struggling to make their mark as real estate investment

destinations that match their rising economic weight. There are no ‘Emerging World Cities’ in the

Top 30 for investment intensity.


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Investment Intensity Index 2017

Investment Intensity Index

Global Top 30

1. Oslo

2. London

3. Munich

4. Edinburgh

5. Silicon Valley

6. Frankfurt

7. Dublin

8. Sydney

9. New York

10. Copenhagen

11. Paris

12. San Francisco

13. Stockholm

14. Boston

15. Las Vegas

16. Melbourne

17. Geneva

18. Raleigh-Durham

19. Amsterdam

20. Los Angeles

21. Seattle

22. Washington DC

23. Austin

24. Berlin

25. Toronto

26. Denver

27. Phoenix

28. Hong Kong

29. San Diego

30. Tokyo

Defining a typology of cities

Building on research originally undertaken in 2015 2 ,

the JLL Investment Intensity Index pursues a ‘typology

approach’ by reviewing investment trends in three

broad categories of city:

• ‘New World Cities’ are small to medium-sized cities

(typically 1-5 million population) that have robust

infrastructure and attractive liveability platforms

and deliberately focus on a limited number of global

specialisms.

• ‘Established World Cities’ are the world’s most

highly globalised and competitive economies with

the deepest and most settled concentrations of

companies, capital and talent.

• ‘Emerging World Cities’ are the business and

political capitals of large or medium-sized

emerging economies that function as gateways for

international firms, trade and investment.

2

Globalisation and Competition: The New World of Cities, JLL, 2015

Established World Cities

New World Cities

Source: JLL, February 2017


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Investment Intensity Index 2017

‘New World Cities’ reshaping the investment landscape

JLL’s latest Investment Intensity Index highlights the further rise of ‘New World Cities’ as destinations for

real estate capital. Mid-sized cities, which typically excel in high-tech and high-value sectors supported by

robust infrastructure, a favourable quality of life and transparent business practices, are drawing increasing

interest from investors and account for 21 of the Investment Intensity Index Top 30 cities. Many are achieving

global reach through specialisation and display an ability to adapt to constantly changing economic and

technological demands:

• The Nordic cities feature strongly. Oslo tops the global rankings, while neighbouring Scandinavian

capitals Copenhagen (10 th ) and Stockholm (13 th ) also appear in the Top 30.

• Other favoured ‘New World Cities’ in Europe include Munich (3 rd ), Edinburgh (4 th ), Frankfurt (6 th ),

Dublin (7 th ), Geneva (17 th ), Amsterdam (19 th ) and Berlin (24 th ).

• ‘New World Cities’ also dominate the top rankings in the United States, epitomised by Silicon Valley

(5 th ), San Francisco (12 th ) and Boston (14 th ), and also including Las Vegas (15 th ), Raleigh-Durham (18 th ),

Seattle (21 st ), Austin (23 rd ), Denver (26 th ), Phoenix (27 th ) and San Diego (29 th ).

• Meanwhile, Australia’s archetypal ‘New World City’ Melbourne sits in 16 th position.

An increasingly important part of the global investment market

Over the past decade, a core set of 40 ‘New World Cities’ has increased its share of global real estate

investment volumes, growing from 12% in 2006 to account for 23% of global volumes in 2016, overtaking

the share of global investment into the ‘Big 6’ markets of New York, London, Paris, Tokyo, Hong Kong

and Singapore.

‘New World Cities’ are also increasingly attractive to cross-border investors and now represent over

one-fifth of global cross-border transactional activity, up from 14% 10 years ago and equal to that

registered in the ‘Big 6’.

‘New World Cities’ overtake ‘Big 6’

Direct commercial real estate investment, 2006-2016

Total investment

30%

New World Cities

25%

20%

15%

10%

5%

0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Cross-border investment

40%

35%

30%

25%

20%

New World Cities

15%

10%

5%

0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New World Cities Big 6 Emerging World Cities

Source: JLL, February 2017


6

Investment Intensity Index 2017

‘New World Cities’ dominate

Global Top 30

Raleigh-Durham

Austin

New York

Boston

Washington DC

Toronto

Hong Kong

Tokyo

Silicon Valley

San Francisco

Las Vegas

Los Angeles

Seattle

Denver

Phoenix

San Diego

Oslo

London

Munich

Edinburgh

Frankfurt

Dublin

Copenhagen

Paris

Stockholm

Geneva

Amsterdam

Berlin

Sydney

Melbourne

Established World Cities

New World Cities

Source: JLL, February 2017


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Investment Intensity Index 2017

European cities maintain strong presence

European cities with high levels of transparency and sustainability together with robust technology,

infrastructure and liveability credentials feature prominently, accounting for 12 of the Top 30 cities and

10 of the Top 12 cities for cross-border investment intensity.

• Oslo leads the global rankings again as a small but highly sought-after market, but the city fails to

make the premier group of cities for cross-border investment intensity with its market dominated

by domestic players.

• London sits in second position globally and heads the rankings for cross-border investment intensity,

testament to its continuing attractiveness following the Brexit vote. Edinburgh (4 th ) is also placed

among the top tier, and is second only to London in cross-border investment intensity.

• With Germany coming close in 2016 to surpassing the UK as the world’s second largest investment

market, Munich (3 rd ), Frankfurt (6 th ) and Berlin (24 th ) performed particularly well.

• Meanwhile, Paris (11 th ) also continues to be among the world’s foremost destinations.

Cross-border capital targeting European cities

Global Top 12 - Cross-border investment intensity

London

Edinburgh

Frankfurt

Munich

Dublin

Amsterdam

Sydney

Paris

Prague

San Francisco

Warsaw

Berlin

Americas

EMEA

Asia Pacific

0% 5% 10% 15%

Cross-Border Transaction Volumes / GDP

Source: JLL, February 2017


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Investment Intensity Index 2017

U.S. technology hubs attract high levels of investment intensity

Technology and innovation are boosting the attractiveness of ‘New World Cities’ in the U.S., with Silicon

Valley, San Francisco, Boston, Seattle, Austin, Denver, Raleigh-Durham, Phoenix and San Diego

all appearing in the Top 30. Nonetheless, the large U.S. gateway markets of New York, Washington DC

and Los Angeles have maintained their dominance in absolute volumes and also make the top list in

investment intensity.

Robust investor appetite for Australia’s Tier 1 cities

Australia’s largest cities continue to register healthy investor interest, with Sydney and Melbourne both

among the Top 30. High levels of transparency and sustainability are combining with buoyant economies

to support investor interest and strong value growth in Australian cities, with Sydney and Melbourne

expected to experience among the world’s highest office rental and capital value growth in 2017.

‘Established World Cities’ top the rankings for absolute investment volumes

While ‘New World Cities’ account for the majority of markets in the Top 30, several ‘Established World

Cities’ also make the list, including London (2 nd ), Sydney (8 th ), New York (9 th ), Paris (11 th ), Los Angeles

(20 th ), Washington DC (22 nd ), Toronto (25 th ), Hong Kong (28 th ) and Tokyo (30 th ).

Investor appetite for prime assets in the world’s most globalised markets continues to be strong, and

‘Established World Cities’ head the rankings for absolute investment volumes, with 8 cities among the

Top 10 markets.

Asian cities under-represented in the Top 30

With only Hong Kong (28 th ) and Tokyo (30 th ) in the Top 30, Asian cities are under-represented in the top

ranks. This reflects a myriad of factors – local investors still dominate in most markets, core assets are

tightly-held by landlords and institutional investment is still at a relatively early stage in some markets.

While cities like Shanghai, Bangalore and Manila 3 are racing ahead in their speed of development as real

estate markets, they still have substantial room to grow when it comes to attracting investment.

3

JLL City Momentum Index, 2017


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Investment Intensity Index 2017

The world’s top real estate investment destinations

Top 30 - Direct Commercial Real Estate Investment, 2014-2016, Absolute Volumes (US$)

1

New York

11

San Francisco

21

Munich

2

London

12

Seoul

22

Melbourne

3

Paris

13

Silicon Valley

23

Phoenix

4

Tokyo

14

Sydney

24

Frankfurt

5

Los Angeles

15

Seattle

25

Miami

6

Washington DC

16

Singapore

26

San Diego

7

Chicago

17

Dallas

27

Berlin

8

Shanghai

18

Toronto

28

Stockholm

9

Boston

19

Atlanta

29

Denver

10

Hong Kong

20

Beijing

30

Philadelphia

Source: JLL, February 2017

Americas

EMEA

Asia Pacific

Total investment versus investment intensity

London, New York and Paris combine significant absolute investment volumes

with high intensity

Cities with greatest

total investment

volumes

Tokyo

Los Angeles

London

New York

Paris

Cities with greatest

investment volumes and

high investment intensity

Seoul

Washington DC

Chicago

Shanghai

Hong Kong

Singapore

Dallas

Seattle

Boston

San Francisco

Silicon Valley

Sydney

Investment Volumes

Beijing

Philadelphia

Miami

Toronto

Atlanta

Phoenix

Berlin

San Diego

Denver

Austin

Amsterdam

Raleigh-Durham

Oslo

Munich

Frankfurt

Edinburgh

Dublin

Melbourne

Stockholm

Edinburgh

Las Vegas

Copenhagen

Geneva

Investment Intensity

Cities with high levels

of investment intensity

Includes cities in the Top 30 for absolute investment volumes and Top 30 for investment intensity

Source: JLL, February 2017


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Investment Intensity Index 2017

Investment in ‘Emerging World Cities’ struggling to match rising economic weight

While there are now more cities than ever on investors’ radars, there are still no ‘Emerging World Cities’

in the Investment Intensity Index Top 30, with investors continuing to focus overwhelmingly on mature

cities in transparent markets. Despite being among the world’s most rapidly globalising cities and acting

as gateways for international firms, trade and investment into major emerging economies, combined

‘Emerging World Cities’ still account for only 6% of global volumes.

• Only Shanghai and Beijing have built up a critical mass of investment activity, sitting consistently in the

Top 30 for absolute volumes. However, both cities fall short in terms of investment intensity compared

with ‘Established World Cities’, serving to highlight the further growth potential of China’s two Alpha Cities.

• Top ranking ‘Emerging World Cities’ in investment intensity comprise transitional markets that have

attained a reasonable level of transparency such as Warsaw, Prague, Budapest and Taipei, while Seoul,

a hybrid city, saw investment volumes double in 2016. Both Warsaw and Prague have achieved a Top

12 position in cross-border investment intensity.

• Cities that are transitioning to higher-value activities – for instance Shenzhen, Guangzhou and Nanjing

in China, together with Bucharest and Dubai – are beginning to witness higher levels of investment

compared to historical levels, although these are still low both in absolute terms and in intensity levels.

• A number of emerging megacities – like Moscow, Sao Paulo, Kuala Lumpur, Mexico City and Bangkok

– are also generating higher investor interest than most other ‘Emerging World Cities’, but transactional

activity remains limited in relation to their economic size.

• Several ‘Emerging World Cities’ are still failing to punch their weight as destinations for direct real estate

investment due to issues ranging from transparency, infrastructure challenges, market restrictions and

ownership styles to economic and political volatility. These include Johannesburg, Istanbul, Manila

and Jakarta as well as the Indian cities of Mumbai, Delhi and Bangalore, where investors frequently

look to development and debt lending to gain real estate exposure.

‘Emerging World Cities’:

investment volumes versus investment intensity

Cities with higher transparency are leading

High

Investment Volumes

Moscow

Sao Paulo

Kuala Lumpur

Mexico City

Bangkok

Mumbai

Johannesburg

Istanbul

Manila

Shenzhen

Guangzhou

Nanjing

Bucharest

Dubai

Delhi

Bangalore

Jakarta

Seoul

Beijing

Budapest

Taipei

Shanghai

Prague

Warsaw

Low

Investment Intensity

High

Source: JLL, February 2017


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Investment Intensity Index 2017

New possibilities opening up in ‘Emerging World Cities’

A number of ‘Emerging World Cities’, such as Shanghai, Mexico City, Sao Paulo and Dubai, are positioned

to draw increased investment activity in the coming years as the quality of stock and transparency

improve.

An examination of foreign direct investment (FDI) activity into construction of commercial real estate

points to future stock growth, with cities such as Ho Chi Minh City, Kuala Lumpur and Riyadh attracting

the greatest amount of investment into construction, ahead of ‘Established World Cities’ like London, New

York and Paris. In terms of FDI intensity (FDI investment as a proportion of city GDP), they are joined by

Casablanca, Warsaw, Bucharest and Prague among the Top 10.

Growing real estate allocations from institutional investors and new sources of capital targeting the sector

will expand the competition for stock. Investors will look increasingly to ‘Emerging World Cities’ to satisfy

their requirements, with an estimated 60% of the global office development pipeline to 2020 in emerging

markets. While offering huge opportunities, ‘Emerging World Cities’ will need to boost transparency,

improve regulatory oversight and build robust financial platforms, otherwise investors will continue to

gravitate to the highly transparent mature cities.

‘Emerging World Cities’ attracting most FDI in

commercial real estate construction

Total Construction FDI Volumes

Construction FDI Intensity

1

Ho Chi Minh City

1

Ho Chi Minh City

Americas

2

Kuala Lumpur

2

Casablanca

EMEA

3

Riyadh

3

Kuala Lumpur

Asia Pacific

4

London

4

Riyadh

5

New York

5

Manchester

6

Paris

6

Warsaw

7

Seoul

7

Raleigh-Durham

8

Hong Kong

8

Bucharest

9

Singapore

9

Prague

10

Sydney

10

Melbourne

Source: FDiMarkets, JLL, February 2017


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Investment Intensity Index 2017

Investment intensity index by sector

Global Top 20

Offices Retail Hotels Logistics

1. London

2. Oslo

3. Munich

4. Frankfurt

5. Paris

6. Geneva

7. Boston

8. Silicon Valley

9. Sydney

10. Copenhagen

11. New York

12. Washington DC

13. Melbourne

14. Amsterdam

15. Edinburgh

16. Tokyo

17. San Francisco

18. Seattle

19. Stockholm

20. Warsaw

1. Las Vegas

2. Edinburgh

3. Copenhagen

4. Oslo

5. Auckland

6. Dublin

7. Toronto

8. Raleigh-Durham

9. Montreal

10. Phoenix

11. Brisbane

12. Los Angeles

13. Adelaide

14. Zurich

15. Miami

16. Hong Kong

17. Prague

18. Austin

19. Salt Lake City

20. Sydney

1. Edinburgh

2. London

3. Oslo

4. Munich

5. Amsterdam

6. Miami

7. Hong Kong

8. New York

9. Dubai

10. Frankfurt

11. Vancouver

12. Berlin

13. San Francisco

14. Manchester

15. Dublin

16. Tampa

17. Vienna

18. Hamburg

19. Toronto

20. Copenhagen

1. Sydney

2. Toronto

3. Brisbane

4. Hong Kong

5. Auckland

6. Adelaide

7. Singapore

8. Fukuoka

9. Montreal

10. Amsterdam

11. Taipei

12. Munich

13. Columbus

14. Salt Lake City

15. Perth

16. Prague

17. Frankfurt

18. Phoenix

19. Los Angeles

20. Stockholm

Americas

EMEA

Asia Pacific

Source: JLL, February 2017


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Investment Intensity Index 2017

An analysis of the Investment Intensity Index for each of the main commercial property sectors reveals that

many ‘New World Cities’ are successfully attracting investment consistently across multiple sectors, with

17 featuring in the Top 20 of at least two sectors and three European cities – Copenhagen, Edinburgh and

Oslo – featuring in the Top 20 of three sectors.

The sector analysis also identifies several cities where investment activity is heavily tilted towards a single

property sector:

Offices

• Cities which have high Office Investment Intensity are concentrated in high-order business

centres (such as London, Paris, Frankfurt, New York and Tokyo), niche financial centres (like

Geneva and Edinburgh), tech hubs (including Boston, Silicon Valley, San Francisco, Seattle,

Munich and Stockholm) and seats of government (e.g. Washington DC and Berlin).

Retail

Investment Intensity in the retail sector is skewed by a few large shopping mall transactions.

For example, Las Vegas leads the current Retail Investment Intensity rankings as a

consequence of three major mall transactions each exceeding US$1 billion during 2016.

• While many ‘Emerging World Cities’ have among the world’s greatest concentrations of

international retailers (as scored by JLL’s Destination Retail 2016), the Retail Investment

Intensity Top 20 ranking is heavily dominated by cities with high levels of per capita

disposable income.

• Despite the region accounting for only 16% of global retail investment, a number of Asia

Pacific cities feature in the Top 20 including Hong Kong as well as the Australasian markets

of Auckland, Brisbane, Adelaide and Sydney.

Hotels

• The Hotels Investment Intensity Top 20 highlights the attraction of the world’s most

connected gateway cities such as London, Miami, Hong Kong, New York and Dubai. The

Top 20 also embraces a number of the world’s most important international conference cities

like Amsterdam, Berlin and Vienna. UK regional cities are represented by Edinburgh and

Manchester.

Logistics

• Australasian cities feature prominently in the Logistics Investment Intensity Index, with Sydney

leading the rankings and Brisbane, Auckland, Adelaide and Perth all among the Top 20.

Asian markets are represented by Hong Kong, Singapore, Taipei and Fukuoka (Japan).

• Testament to the depth and liquidity of the logistics market in the United States – which has

accounted for over half of global logistics investment over the last three years – the Top 20

features several U.S. cities including Columbus, Salt Lake City, Phoenix and Los Angeles.

Meanwhile over the border, Canada’s largest cities – Toronto and Montreal – sit in the Top 10.

• Despite the high proportion of portfolio deals in Europe that are not registered by a specific

city – 38% of all logistics deals in Europe over the last three years were platform or portfolio

transactions covering more than one city, against 9% in Asia Pacific and 13% in the Americas

– several cities from the region make the Top 20, including Amsterdam, Munich, Prague,

Frankfurt and Stockholm.


Contacts

JLL Regional Headquarters

Chicago

200 East Randolph Drive

Chicago IL 60601

USA

+1 312 782 5800

London

30 Warwick Street

London W1B 5NH

United Kingdom

+44 20 7493 4933

Singapore

9 Raffles Place

#39-00 Republic Plaza

Singapore 048619

+65 6220 3888

Authors

Rosemary Feenan

rosemary.feenan@eu.jll.com

Jeremy Kelly

jeremy.kelly@eu.jll.com

Matthew McAuley

matthew.mcauley@eu.jll.com

To learn more about cities and real estate, visit our website

www.jll.com/cities-research

COPYRIGHT © JONES LANG LASALLE IP, INC. 2017.

This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently

unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in

the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forwardlooking

involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements.

Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely

on the views expressed in this report

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