On average, the fall in investment activity has been just over 70%, but the decline in North America has been much greater, while the smaller regions (Africa, Middle East and South America) have seen property investment activity increase.
When only cross-regional investment activity is examined, an even steeper decline in activity is evident. Total investment turnover where the buyer was from a different region to where the property is located, fell from €134.8 billion in the year and a half at the peak of the market to €22.4 billion in 2009 and H1 2010; a decline of 83%.
A prominent feature of the current cross-regional investment landscape is the degree to which it is concentrated in a small number of major cities. This was evident during the boom period, but has become even more pronounced during the recent recovery in commercial property markets. Of the €22.4 billion of cross-regional investment activity recorded over the last 18 months, over €6 billion has been invested in London. This cross-region concentration also made London the world’s most international market, with buyers of 27 different nationalities completing acquisitions in London over that period.
Although at much lower levels, other major world cities – such as Paris, New York and Sydney – also feature among the top destinations for cross-regional investment. In fact, the top 10 targets for cross-regional capital account for 55% of all activity. This represents a significant increase in the concentration of activity in the largest markets. At the peak of the market in 2006 and H1 2007, the top 10 cities attracted less than 40% of cross-regional investment. This change represents a flight away from any form of risk.
Jonathan Hull, Head of EMEA Capital Markets, CB Richard Ellis, said: “As the market becomes more stable over the coming months, we expect that the major cross-regional investors will broaden their horizons and that London will become less dominant as a destination for international capital. To an extent, this has already been seen in 2010, with acquisitions by the Korean National Pension Service of the Sony Center in Berlin and a share in the O’Parisnor shopping centre in Paris. A broader cross-section of locations for cross-regional investors would have implications for the German market, as during the boom, Frankfurt, Munich and Hamburg also featured in the top 10 destinations for cross-regional capital.”
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