Amsterdam, Chicago, Tokyo and Washington DC Commercial Property Prices Have Not Fully Recovered from the GFC as Pricing in Other Global Cities Hits Records

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Prices of office, retail and industrial properties in Amsterdam, Chicago, Tokyo and Washington D.C. have not fully recovered from the slide triggered by the Global Financial Crisis, which erupted a decade ago.

RCA CPPI Global Cities

RCA CPPI Global Cities

Gateway cities are clear winners in the ultra-low interest rate environment that has prevailed since the GFC, outperforming their national markets as investors have favored core, city center properties in the most globally connected markets.

A series of ground-breaking market indices created by Real Capital Analytics (RCA) show that the four cities lag far behind the price gains in other major global destinations for commercial real estate investment, where competition for properties and low interest rates have driven up pricing to record levels.

The company’s new RCA CPPI (Commercial Property Price Indices) reveal that in the second quarter of 2017 the Global Cities Composite, comprising 27 of the most important investment markets, was 36.1% above pre-GFC levels a decade earlier. The four cities have failed to recover to their prior peaks in 2007 shortly before credit markets froze and triggered a widespread fall in property prices -- the Global Cities Composite tumbled 22% in the two years to the end of 2009.

Except for Amsterdam, Chicago, Tokyo and Washington, pricing in the other cities has fully recovered and gone on to set new records. Indeed, prices in Hong Kong have tripled since the peak of 2007, while in Manhattan and London’s West End they have nearly doubled.

Robert White, RCA’s President and Founder, said: “Gateway cities are clear winners in the ultra-low interest rate environment that has prevailed since the GFC, outperforming their national markets as investors have favored core, city center properties in the most globally connected markets. A wealth of information is conveyed by our suite of new indices, which for the first time provide accurate comparisons of the true pricing trends for the leading global commercial property markets”.

Local economic challenges and oversupply generally explain why the four cities have not followed the general trends. More recently, the RCA CPPIs are showing a change in trends and cities such as Amsterdam and Chicago have started to gain momentum as price appreciation in the most heated markets calms. Manhattan and London’s West End district have underperformed in relative terms recently reflecting investors’ concerns about deploying capital in these markets at this late stage in the investment cycle, RCA said. In London, the situation has been compounded by the uncertainty following the U.K.’s decision last year to leave the European Union.

The Global Cities Composite of RCA CPPI rose 8.3% in the second quarter of 2017 from a year earlier, led by strong gains in Boston, Hong Kong, Melbourne and German A Cities. In London’s West End, the price gains were 0.2% from a year earlier. RCA’s transaction volume data show that investment in Manhattan fell 50% to $17.6 billion in the second quarter of 2017 from a year earlier, while in the West End of London the fall in transaction volumes was 17% to $7.8 billion.

The RCA Global Cities Indices are a sub-set of a full complement of more than 350 indices produced and published by RCA. They are the first and only property price indices covering all major investment markets around the globe that are based on actual transactions as opposed to appraisal valuations. The RCA CPPI is a culmination of several years of intensive research and development involving a team from RCA, the Massachusetts Institute of Technology Center for Real Estate, and the University of Amsterdam.

RCA’s Robert White concluded, “These indices are a major advancement for the commercial real estate asset class and set a new standard of accuracy and transparency in the performance of the world’s most liquid markets. I am extremely proud of these indices which add to the firm’s history of pioneering advancements in commercial real estate information and analysis.”

Ends.

Note to editors:

The German A Cities are: Berlin, Cologne, Dresden, Dusseldorf, Hamburg, Munich and Stuttgart.

Manhattan and London’s West End are central sub-markets within the greater metropolitan areas of New York and London, respectively.

About Real Capital Analytics (RCA)

Real Capital Analytics (RCA) is the authority on the deals, the players and the trends that drive the commercial real estate investment markets. Covering all markets globally, RCA delivers timely and reliable data with unique insight into market participants, pricing and capital flows. The most active investors, lenders and advisors depend on RCA’s market intelligence to formulate strategy and to source, underwrite and execute deals. An industry pioneer since 2000, RCA has offices in New York, San Jose, London and Singapore. For more information, visit rcanalytics.com.

About the RCA CPPI

The RCA CPPI (Commercial Property Price Indices) are a suite of price indices developed and published by Real Capital Analytics. They are transaction-based and accurately measure commercial real estate price movements using repeat-sales regression methodology. They are the result of three years of intensive research and development by the brightest senior analysts from RCA, the University of Amsterdam and the Massachusetts Institute of Technology Center for Real Estate. There are currently more than 350 indices, which provide direct comparability across markets and property types in 15 countries. The RCA CPPI Global Cities report is published quarterly and the U.S. RCA CPPI report appears monthly. To learn more about the RCA CPPI and to receive the reports, please visit rcanalytics.com/rca_cppi/

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Mark Bell
@realcapital
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