Gateway cities in the United States and Europe are attracting direct investment in real estate even as that spending drops globally, according to brokerage JLL.
Los Angeles, Dallas, New York, London and Atlanta, in that order, ranked as the top five cities for global investment in commercial properties for the three years through year-end 2023, JLL said in its new Global Real Estate Perspective. Paris ranked sixth and Phoenix seventh, the report found. JLL plans to discuss cross-border investment during a panel in France this week at Mipim, the world's biggest annual real estate gathering.
More than $96 billion of commercial property transactions valued at $5 million or more, not including land and entity-level deals, took place in Los Angeles, according to JLL. Commercial property deals totaled nearly $91.2 billion in Dallas, $80.7 billion in New York and $77.9 billion in London in that time, according to JLL.
"The cities have emerged as top global markets for direct investments due to factors such as thriving industries, strategic locations, favorable business environments, and economic growth, attracting significant investments," JLL said in an email to CoStar News. Overall commercial property deals last year totaled $594 billion, a 44% drop from 2022, in what JLL called the lowest direct investment, including cross-border transactions, in more than 10 years.
Deal amounts fell partly because elevated interest rates and capital costs across the globe led to a gap between what sellers asked for properties and what buyers were willing to pay, JLL said. Moreover, capital raising for closed-end funds that make real estate purchases decreased to $142 billion, a 28% drop compared to 2022, JLL said.
2024 has shown some momentum in certain property sectors as market conditions have stabilized, JLL said. While "pricing and liquidity for office assets are under pressure, amid weak global sentiment from investors and lenders," sentiment toward logistics, residential and select alternative growth sectors remains positive despite volumes declining globally, according to the report. "The living sector was the most active throughout the year and will be a beneficiary of sector diversification globally," JLL said.