04.05.2018
Ian Craig
Markus Klempa

Let’s talk UK Real Estate, together

Go West to Invest

Ian Craig and Markus Klempa of UK law firm Stevens & Bolton LLP explain why the UK investment property market has been and remains attractive to overseas investors, and survey some emerging markets and geographies which offer further opportunities.

The UK in­vest­ment pro­per­ty mar­ket re­mains an at­trac­ti­ve pro­po­si­ti­on for in­ter­na­tio­nal in­ves­tors. The per­cen­ta­ge of over­seas ow­ners of UK in­vest­ment pro­per­ty has be­en gro­wing for so­me time and by the end of 2016 re­a­ched ne­ar­ly 30% of to­tal UK com­mer­ci­al investment
pro­per­ty, clo­se to dou­ble what it had be­en in 2006. Far from sound­ing the death knell for the UK in­vest­ment pro­per­ty mar­ket (as was pre­dic­ted in so­me sec­tions of the me­dia), af­ter so­me in­iti­al un­cer­tain­ty fol­lo­wing the vo­te in Ju­ne 2016 the Brexit vo­te has ac­tual­ly pro­vi­ded an
ad­di­tio­nal im­pe­tus to the in­vest­ment pro­per­ty mar­ket, par­ti­cu­lar­ly for in­ter­na­tio­nal in­ves­tors who be­ne­fit from cur­ren­cy ad­van­ta­ges as a re­sult of the wea­ke­ned pound.

 

The Ci­ty of Lon­don in­vest­ment mar­ket has en­joy­ed a long pe­ri­od of at­trac­tiveness to in­ward in­ves­tors and a weight of mo­ney re­mains on hand re­ady to be de­ploy­ed. The wea­ke­ned pound has gi­ven Asi­an and Far Eas­tern in­ves­tors a par­ti­cu­lar ad­van­ta­ge, but we have al­so se­en Ger­man funds re­turn to the mar­ket with a num­ber of Ci­ty of Lon­don of­fice acqui­si­ti­ons in 2016-2017. In ad­di­ti­on to pro­vi­ding an op­por­tu­ni­ty to de­ploy lar­ge amounts of ca­pi­tal with at­trac­ti­ve cur­ren­cy re­turns, the Ci­ty mar­ket re­mains fun­da­mental­ly a well-re­gu­la­ted, sta­ble home for for­eign ca­pi­tal un­der­pin­ned by con­ti­nu­ed oc­cu­pier de­mand (par­ti­cu­lar­ly in high tech sec­tors) and a high-qua­li­ty de­ve­lop­ment pipe­line. Prime yiel­ds of­fe­red by Lon­don of­fices, for ex­ample, re­main ahead of the ma­jor Asi­an mar­kets and most of the key Eu­rope­an ones and the­re­fo­re con­ti­nue to be a source of de­mand from the over­seas investor.

 

Of the other core in­vest­ment pro­per­ty sec­tors, the in­dus­tri­al and lo­gi­stics sec­tor has en­joy­ed a pre­vious­ly-un­pre­ce­den­ted boom pe­ri­od with in­ves­tors of all ty­pes cha­sing the­se as­sets (par­ti­cu­lar­ly tho­se "last mi­le" as­sets within or clo­se to ur­ban areas). The in­dus­tri­al and lo­gi­stics sec­tor is now clo­se to 20% of the com­mer­ci­al in­vest­ment pro­per­ty uni­ver­se in the UK. Stel­lar re­turns on in­dus­tri­al and lo­gi­stics in­vest­ment (so­me at over 20% to­tal re­turns) have un­der­pin­ned growth across the UK in­vest­ment funds mar­ket. Yiel­ds on sheds have com­pres­sed to his­to­ri­cal­ly low le­vels (so­me are now at the le­vels his­to­ri­cal­ly on­ly as­so­cia­ted with prime Ci­ty of­fice investments).

 

Re­si­den­ti­al pro­per­ty (par­ti­cu­lar­ly the build to rent sec­tor) is a gro­wing as­set class which is slow­ly ap­pea­ling to the tra­di­tio­nal in­sti­tu­tio­nal in­ves­tor ba­se in the UK while re­tai­ning its ap­peal for smal­ler pri­va­te de­ve­l­o­pers and in­ves­tors. Howe­ver, despi­te the fact that the UK re­si­den­ti­al pro­per­ty mar­ket is many times the va­lue of the UK com­mer­ci­al pro­per­ty sec­tor and the pri­va­te ren­ted sec­tor alo­ne is worth mo­re than £1tn over­seas, UK pro­per­ty in­vest­ment in this sec­tor re­mains ve­ry low in to­tal terms. The op­por­tu­ni­ty must the­re­fo­re re­main for this sec­tor to be ope­ned up to UK and over­seas investors.

 

When we speak of the UK in­vest­ment pro­per­ty mar­ket for over­seas in­ves­tors we are still re­fer­ring pri­ma­ri­ly to Lon­don. Howe­ver, over­seas mo­ney has in­crea­singly found a home el­se­whe­re in the UK whe­re the “Big 6” cen­tres of Bir­ming­ham, Bris­tol, Edin­burgh, Glas­gow, Leeds and Man­ches­ter are pro­ving at­trac­ti­ve. Boosted by si­gni­fi­cant in­vest­ment in in­fra­st­ruc­tu­re and go­vern­ment de­vo­lu­ti­on to un­leash their full eco­no­mic po­ten­ti­al, growth in the Re­gi­ons is expected.

 

Ste­vens & Bol­ton look for­ward to dis­cus­sing the abo­ve and mo­re with you at our Think Tank: 'Go West to Invest: Let’s talk UK Re­al Es­ta­te, to­ge­ther' at the Ex­pert-Talk: Eu­rope­an Re­al Es­ta­te Mar­kets on Ju­ne 19th, 2018 at the Tower 185 in Frank­furt am Main.

Re­ser­ve your seat now!

Das Event zum Thema
Die Autoren
Quelle: Stevens & Bolton LLP
Ian Craig
Real Estate Partner
Stevens & Bolton LLP
Picture Copyright: Anna Saverimuttu Photography
Markus Klempa
Real Estate Managing Associate
Stevens & Bolton LLP
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