NEW York retains its title as the world’s largest real estate investment market for the fourth consecutive year, followed by London and Tokyo, Cushman & Wakefield, the world’s largest privately held commercial real estate services firm, said in its “Winning in Growth Cities” report.

Investment rose 11 percent in New York to US$55.4 billion in the year to the second quarter of 2014 while the global real estate investment market gained 17.2 percent year on year to close at US$788 billion during the same period, according to the annual report.

Second-placed London narrowed its gap on New York with a 40.5 percent annual surge to US$47.3 billion of investment. Tokyo sealed US$35.5 billion in investment for a 30.4 percent year-on-year rise.

“Competition, growth and change will bring forth more new global winners,” said Carlo Barel di Sant’ Albano, Cushman & Wakefield’s International CEO. “While gateway cities remain a primary focus for investors, interest in a broader spread of locations is increasingly apparent due to improved confidence and finance availability, as well as a lack of supply in core cities.”

The top 10 cities for global investment changed little from the previous year, with the exception of Dallas moving into ninth at the expense of Houston (11th). Shanghai (16th), Beijing (19th), Miami (18th) and Stockholm (20th) joined the top 20. Toronto, Singapore, Moscow and Seoul dropped out of the top 20.

Cross-border investment rose 38.8 percent year on year compared to an 11.3 percent growth in domestic spending, as international investors once again increased their market share. While Europe, where cross-border buying rose 35 percent last year, remains the biggest area for foreign investment, growth has actually been more rapid in the Americas (46 percent) and Asia (43 percent), underlining the truly global nature of the marketplace.

The biggest source of cross-border capital was the Americas, with US$75.3 billion invested non-domestically. Europeans are the No. 2 international buyer but a significant share of this is targeted within the region.

The fastest growing stream of international investment, however, has been Asian capital flowing out of the region. Asian global investment rose 56 percent last year compared to a 54 percent increase by American investors, a 26 percent rise by Europeans and a 13 percent growth by Middle Eastern and Africans.

Typically, Asian investors cross borders easily but much in the past has been within their own region. That has changed dramatically in recent years as Asian businesses have diversified abroad, focusing initially on gateway cities in the US and the UK but now spreading more widely, the report said.

“Core markets still offer attractive returns for core investors but those seeking higher returns are having to take on risk either in core markets or by targeting quality assets in second-tier locations,” said David Hutchings, head of EMEA investment strategy. “However, caution is needed as real estate usage is evolving as tenants adjust to new technology, new working practices and demographic change.”

Asia

Investor demand in Asia remains strong and liquidity is high as real estate allocations from pension funds and insurance companies continue to rise. However, the pace of activity has been held back, partly by economic uncertainty but also by a tightening in lending conditions in some markets.

Overall trading rose at a below par rate of 5.5 percent in the year to June as a result, with domestic buyers cutting spending by 3 percent. By contrast, many international investors are rediscovering their interest in the region, with foreign buying up 43 percent. The most active international players are regional, led by Hong Kong, Singapore and China’s mainland, but US investors are No. 2, Canadians are highly active and UK and German investors are also in the top 10.

“Core Asian markets are generally outperforming,” noted John Stinson, head of Asia Pacific capital markets at Cushman & Wakefield. “However, an expectation of relatively low growth returns for the next three to five years is encouraging large Asia domicile funds and investors to re-weight from some core markets and redeploy in emerging markets or increase allocation to the US or Europe.”

Americas

Activity in North America rose 14.3 percent in the year to June, strongly driven by foreign players who pushed activity up by nearly 47 percent and increased their market share from 8.8 percent to 11.3 percent.

In the US, foreign investment rose 43 percent, fueled by Canadian, Chinese and Australian buyers.

“With better signs emerging in the US that the economic recovery is picking up and much of the increased investment to date driven by higher pension fund allocations and growing international demand from high net worth investors, in both cases notably from Asia, the relative strength of foreign demand in the US is likely to escalate further in the year ahead,” Carlo Barel di Sant’ Albano said.

North American yields have continued to compress and the process has spread to second-tier markets as investor confidence and finance availability have improved.

In Latin America, investor confidence has been subdued by weaker economic growth and held back by rising vacancy where development has added to stock. However, while investment fell 1.2 percent last year, this was driven by a 19.5 percent fall in domestic activity. Foreign demand picked up by 38.6 percent, giving non-domestic buyers a 44 percent share. The region’s main markets, Mexico City and Sao Paulo, both saw investment fall but growth in smaller “tier 2” markets in Mexico as well as cities such as Santiago helped balance this out.

Europe, the Middle East and Africa

EMEA recorded a 30 percent increase in volumes in the year to June, with strong domestic demand (up 26 percent) and foreign investment rising 35 percent. As demand and pricing increased, interest has spread further to new markets, with southern Europe and Spain most in focus but interest also is up in tier-two cities in the UK and Germany and quality stock in most markets finding a ready buyer and better finance.

“Europe’s moment in the sun will continue, driven by the key ingredients of relative safety, a promise of recovery and improving availability of stock as banking and company restructuring continues,” said Jan-Willem Bastijn, Cushman & Wakefield’s head of EMEA capital markets. “The explosion of the tech scene in many European cities, notably London, has also underpinned expectations of a better occupational market.”

Economic performance has been better than the previous year but still subdued overall and volatile quarter by quarter and market by market. The UK and Sweden are among the better performers but a number of previously stressed peripheral markets are now recovering, led by Ireland and Spain. A key ingredient of this recovery and its translation to property meanwhile is an improvement in corporate confidence which is pushing investment and occupier demand, with a focus on modern space and new working and retailing practices.