Sustainability costs Sydney, Melbourne in global real estate rankings

Sydney fell from seventh to 10th position and Melbourne dropped from 17th to 19th on Chicago-based real estate investment management firm Heitman’s global list of rankings released this week.

London, New York and Singapore topped the list.

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“ There have been some significant positioning changes, partially resulting from relative economic developments, spillover impacts from Brexit, and an increased focus on sustainability in this year’s market update,” said John White, Heitman senior managing director for public real ­estate securities.

In the case of Sydney, Heitman, which has about $US44 billion under management, reckons gateway markets tend to be supply constrained by high land costs and difficult permitting and planning regimes.

“As a result, ‘prime’ real estate assets in these markets are consistently in high demand from investor capital from across the globe due to locational advantage, prestige, attractive leases to credit tenants, stable income, and stable or increasing value but can also be difficult to access through direct investment,” Heitman says.

The US boasts seven cities on the 30-city index, the most in the rankings for any single country, but major European cities showed the largest upward movement in the rankings.

London tops the leaderboard of the world’s most attractive cities for real estate investment. Picture: iStock

London remained number one in ranking despite a gradual decline in its score over the past several years due to the Brexit impact on ­Britain.

Amsterdam and Frankfurt moved up into the rankings due to their strong sustainability coupled with the impact Brexit is expected to have on continental European cities. Amsterdam shot up four spots to seventh on the index, while Frankfurt improved by five spots to ninth place.

As the trade dispute between the US and China intensified, Beijing dropped four spots to rank 25th and Shanghai lost five spots to rank 23rd. Heitman added that questions regarding the Chinese cities’ environmental sustainability are growing.

New York retained its ranking in the second spot, while Los Angeles dropped to eighth spot. Both cities remained in the top 10 on the index due to their size and diverse economies.

Other cities to drop in the rankings include Tokyo, San Francisco, Chicago, Seoul, Washington DC, Brussels and Miami.

White says Heitman kept the survey at 30 cities, screening out cities that didn’t have enough inputs.

“We are looking at a broad depth of indicators such as the size of the real estate market, the size of the local economy, and the city’s representation in the liveability indexes,” White says.

“We look at a whole lot of different dimensions in the way we screen these cities, such as how many institutions like hospitals the city has. The more a city is a leader in those categories the more likely it is to feature in our cities index.”