In the world of commercial real estate investment, popular global economic hubs like New York and San Francisco typically attract the lion’s share of global investment capital. In fact, the top 10 largest cities attracted 30 percent of the global investment capital over the past three years. However, a new preference among investors is putting more attention on “New World Cities,” such as Austin. Recently released data by professional services firm JLL lists Austin as number 17 out of 300 worldwide cities in their “Investment Intensity Index.” Austin’s surprising performance in the commercial real estate investment sector is drawing new attention to the smaller investment hub that is outperforming in the investment arena.
JLL releases its Investment Intensity Index to show how well a commercial real estate investment market is performing by comparing the volume of direct real estate investment in a city relative to the city’s current economic size. The analysis covers a three-year period and shows a measure of real estate market liquidity, as well as a useful barometer of a city’s overall “health.” Out of the 300 worldwide cities that were analyzed, it not only shows which is attracting investment capital greater than its relative size, but also reveals that investors are benefiting from investing in smaller markets than the more popular large cities. Per JLL, these “New World Cities” are described as being small to medium-sized cities with open real estate markets, favorable infrastructure and livability platforms, and dynamic economies.
Commercial Property Executive, a news resource for the commercial real estate sector, published an article with a statement from Jeremy Kelly, director of Global Research Programmes at JLL. “With pricing at near-record levels in many gateway cities, New World Cities can offer better value for investors and are establishing themselves as consistent and liquid markets,”, said Kelly in a prepared statement. “A broad range of investors now recognize the inherent strengths of New World Cities as dynamic clusters of business activity that offer scalable real estate investment opportunities.”
Austin’s improved performance, as well as other New World Cities, defies what has occurred in some emerging markets that were negatively affected by the economic turmoil in China. In 2015, investment capital in New World cities like Austin made up over 20 percent of the share of global CRE investment. In 2006, the share of global CRE investment in emerging cities was just 10 percent. According to the data report, the increase is being driven by “improving market fundamentals, active technology sectors and attributes relating to transparency, liveability and sustainability.” Strong local technology sectors also provide much of the pull for Silicon Valley, Boston, San Francisco and Austin, the report said.
While the new Investment Intensity Index gives a great outlook for Austin commercial real estate this year, the news also gives long-term investors an opportunity. “This is not a ‘flash in the pan’ trend,” Kelly concluded. “[T]he increased investor interest in these adaptable, transparent, mid-sized markets is now a structural, rather than cyclical, feature of the real estate investment market. As the world re-calibrates in the wake of a Chinese slowdown and other economic uncertainties, we expect these cities to continue to punch above their weight as real estate investment destinations.”
Contact David Brodsky Properties to find out how we can help you with your Austin commercial real estate investment.