Top Tier Global Hub Cities Continue to Lead Rankings, Second Tier Global Gateway Cities Gain Ground Due to Climate Resilience, BREXIT, and COVID-19 volatility
Chicago, London, Hong Kong, Dec. 14, 2020 – Heitman LLC’s Real Estate Securities Group (“HRES”), today announced the results of its annual real estate market rankings for its Global Prime Real Estate Securities Strategies (“Prime”). This year’s metro rankings were topped by London, New York, and Paris.
The Prime strategy was launched in 2014 to provide investors access to a liquid real estate securities portfolio consisting of shares of public companies that own top-tier properties in the world’s dominant cities. The annual composition of the rankings are part of the screening process that HRES uses to identify cities and investee companies and REITs for potential inclusion in the firm’s Prime strategies.
“Although the composition of this year’s rankings remains relatively unchanged, with Taipei marking the only new entrant, we did see some interesting movement in each city’s relative scores. For instance, although London and New York retained the top two spots, our proprietary total scores for those markets actually fell, as opposed to cities like Seoul and Melbourne, two of the cities with the largest cumulative score increases,” said John White, Heitman Senior Managing Director, Listed Real Estate Securities. “Both Seoul and Melbourne have benefitted from inbound real estate investment capital as global investors are attracted to their diverse and stable economies whereas London and New York suffered somewhat in their attractiveness as a business friendly destination.
“As economic volatility continues to occur as a result of COVID-19, the implications from BREXIT bear out, and climate risk factors become more acutely felt, we expect certain markets’ scores, particularly smaller and second tier cities in Europe and Australasia to continue to climb, while others will depend largely on their responses to these issues.”
Melbourne was the single largest gainer this year moving up three spots in the rankings, while Amsterdam, Singapore, and Berlin all fell multiple spots. Among the ranking of prime markets, the most significant updates include:
- Outside of Paris (ranked 3) and Los Angeles (7), this year’s top 10 Prime cities’ cumulative scores all fell. The uncertainties around the global pandemic and the commensurate stay-at-home and lockdown orders in certain cities have been factored into metrics. Locales more heavily reliant on office use and tourism may continue to experience increased score depreciation relative to their peers if the virus is not contained or a vaccine rollout is delayed.
- In Asia-Pacific, Taipei entered the rankings at 30 as a result of its rising environmental sustainability measures and growing attractiveness as a residential destination. Singapore was the region’s largest faller moving from 3 to 5 in the rankings year-over-year. Peaking global trade and high levels of housing unaffordability drove much of this adjustment.
- While two (London, Paris) of the top three cities in this year’s rankings are in the European region, Amsterdam (10) and Berlin (20) were two of the largest fallers declining three and two spots respectively. Additionally, Dublin was replaced in the rankings by Taipei (30). When Dublin entered the Prime rankings, there were strong expectations that the city would be an immediate beneficiary as London-based businesses moved some operations in preparation for BREXIT. Both Amsterdam and Berlin were touted as being indirect beneficiaries as well. As negotiations have continued, these expectations have waned.
- In North America, Chicago (14), Boston (17), Los Angeles (7), and San Francisco’s (11) cumulative scores increased while their rankings remained static or included positive movement. Similar to other regions, we saw a gain of these secondary global cities against their dominant ranked market as their business attraction metrics improved. New York (ranked 2) and Los Angeles (ranked 7) remain in the top 10 of global prime markets due to their size and diverse economies.
Heitman Real Estate Securities Group’s Annual Global Prime Securities Strategies Market Rankings are as follows:
HRES’s annual real estate market rankings are compiled through a proprietary review process utilizing approximately 150 published surveys and indices to rank the attractiveness of the world’s leading real estate markets. A select number of the surveys incorporated into Heitman’s analysis reflect a broad cross section of economic, trade, property, human capital, and cultural and political characteristics.
The principal value and investment return of an investment, such as Prime, will fluctuate so the principal value invested may be more or less than the initial investment at any time.