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How liquid is your market?

Stefan Wundrak

Stefan Wundrak, Head of European Research, analyses the flow of investment across European cities over the past five years.

Liquidity in an investment market is usually measured by total investment volumes. Unsurprisingly, the largest cities in transparent investment countries, sometimes with the help of relatively expensive currencies, come out on top. In Europe, London and Paris lead by a significant margin. However, this methodology falls short in explaining how active a market really is. Cities in less centralised countries such as the Netherlands, Italy and Germany, appear significantly less liquid because investments are spread out over more than just one dominant city.

The table below shows a method of correcting this city size bias. It sets investment volumes (over the past five years) relative to the weight of the respective city’s economy (GDP). This also mitigates the currency bias, which tends to boost Switzerland and the Nordics.

On this measure of investment liquidity, German and Dutch cities compare quite well, whereas Paris appears relatively quiet as a market. Although London still stands out in the UK, the difference compared to regional cities is a bit less pronounced. Once again, Sweden is confirmed as a very dynamic investment market, punching above its weight.

The bottom of the league table is populated mainly by emerging cities in Central and South Eastern Europe. These markets still lack the transparency and institutional stock to compete with Western European cities. The prominent exception is Warsaw, which is becoming established as a core European market (followed by Prague).

The poor showing of Southern European cities is partly cyclical, as well as due to the Eurozone crisis affecting the flow of investment to these markets. However, the observation that Spanish cities have a higher investment intensity is valid, and at least to some extent, due to better transparency in Spain.

Investment intensity scoring (investment volume/city GDP)

Rank

City

Country

Score 0 - 10

1

Berlin

Germany

10.0

2

London

UK

8.8

3

Frankfurt

Germany

7.5

4

Stockholm

Sweden

7.1

5

Dusseldorf

Germany

6.7

6

Gothenburg

Sweden

5.6

7

Warsaw

Poland

5.5

8

Manchester

UK

5.5

9

Edinburgh

UK

5.0

10

Paris

France

4.6

11

Hamburg

Germany

4.6

12

Prague

Czech Republic

4.5

13

Munich

Germany

4.1

14

Amsterdam

Netherlands

4.1

15

Cologne

Germany

3.9

16

The Hague

Netherlands

3.8

17

Oslo

Norway

3.6

18

Dublin

Ireland

3.1

19

Vienna

Austria

3.0

20

Helsinki

Finland

2.8

21

Copenhagen

Denmark

2.7

22

Madrid

Spain

2.1

23

Sofia

Bulgaria

1.9

24

Bucharest

Romania

1.9

25

Barcelona

Spain

1.8

26

Lyon

France

1.8

27

Milan

Italy

1.7

28

Brussels

Belgium

1.6

29

Zurich

Switzerland

1.4

30

Bratislava

Slovakia

1.4

31

Budapest

Hungary

1.2

32

Rome

Italy

1.1

33

Istanbul

Turkey

0.7

34

Bordeaux

France

0.7

35

Toulouse

France

0.5

36

Antwerp

Belgium

0.4

37

Ankara

Turkey

0.3

 

This article is intended solely for the use of professionals and is not for general public distribution.

Any assumptions made or opinions expressed are as of the dates specified or if none at the document date and may change as subsequent conditions vary. In particular, the document has been prepared by reference to current tax and legal considerations that may alter in the future. The document may contain "forward-looking" information or estimates that are not purely historical in nature.  Such information may include, among other things, illustrative projections and forecasts. There is no guarantee that any projections or forecasts made will come to pass.  International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying asset comprises real estate, less government regulation in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments. Past performance is no guarantee of future performance. The value of investments and the income from them may go down as well as up and are not guaranteed.  Rates of exchange may cause the value of investments to go up or down.  Any favourable tax treatment is subject to government legislation and as such may not be maintained. The valuation of property is generally a matter of valuer’s opinion rather than fact. The amount raised when a property is sold may be less than the valuation. Nothing in this document is intended or should be construed as advice. The document is not a recommendation to sell or purchase any investment.  It does not form part of any contract for the sale or purchase of any investment. TIAA Henderson Real Estate (TH Real Estate) is a name under which Henderson Real Estate Asset Management Limited provides investment products and services. Issued by Henderson Real Estate Asset Management Limited (reg. no. 2137726), (incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3BN) which is authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored.

Stefan Wundrak

Stefan Wundrak

Head of European Research

Stefan's biography