Real-Estate investors need to search beyond safe-haven cities for value

Real-Estate investors may need to start looking outside the typical safe-haven cities to find the value they crave. That’s what global property management firm Knight Frank’s latest Global Cities research shows.

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According to the upmarket property consultancy, investment interest in commercial property has risen so high, that values in the best-known cities have rocketed. Indeed, $1 million isn’t always enough to buy an entire office floor in Hong Kong.

How far does $1 million go?

The research analysed how much prime office space could be purchased by private investors, for $1 million. The results may come as a surprise.

• Hong Kong          1,087 sq metres/11,698 sq feet
• Tokyo                   2,906 sq metres/31,282 sq feet
• Paris                    3,406 sq metres/36,662 sq feet
• Zurich                  4,065 sq metres/43,754 sq feet
• London                4,078 sq metres/43,899 sq feet

The data shows that if you’re after 10,000 square metres for your $1 million investment, you need to try, Shanghai, Los Angeles or Boston, among other cities.

“Our analysis demonstrates that private investors remain focused on the ‘safe haven’ cities, where they get less bricks and mortar for their money but more long-term security,” said Anthony Duggan, Head of Capital Markets Research at Knight Frank.

Search for higher yields

The more well established, safe-haven global cities do provide a guaranteed income and return on investment. However, with $1 million not netting as much as many investors might like, some are likely beginning to search for new opportunities.

They include markets that aren’t as established as the top ten in Knight Frank’s list. In addition, emerging markets commercial property investment comes at a higher risk, but with the potential to produce impressive returns – eventually.

“Even some of the world’s wealthiest individuals will find pricing in Hong Kong, Tokyo and London less attractive moving forward,” Knight Frank’s Harker said.

“As a result, we will see astute buyers selectively moving up the risk curve to less well established, or emerging business centres where the property market dynamics are improving, the yields are higher and, ultimately they can get more for their money.”