There are numerous reasons why UK real estate remains attractive to foreign investors. Despite any concerns over what the impact of leaving the EU on both UK and global economic markets might be, UK real estate has remained robust.
Investment volumes are still sitting above the three year average at around £62bn. The market’s resilience combined with its liquidity and strong fundamentals helps to breed confidence and maintain UK real estate as an attractive proposition. Indeed, international investors, especially those who are taking a long-term view and those who seek to benefit from currency advantages as a result of the weakened pound, are not being easily deterred.
The City of London investment market has long enjoyed and continues to welcome inward investment offering a stable home for foreign capital with its comparatively high yields. Yet the story does not end there. When speaking of the UK investment real estate market for overseas investors this should not ignore the growing interest in other city conurbations, including the “Big 6” centres of Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester. Significant investment is expected to fund vital infrastructure projects and government devolution is set to unleash the full economic potential of these locations. Prime offices in the Regions as well as in London, for example, remain ahead of key European and Asian markets and continue to drive foreign investment.
However, it is the industrial and logistics sector which currently flies the flag for UK real estate investment and has now become the most popular commercial property asset class. Following the recent success of another Shedmasters event (premier networking for industrial and logistics senior decision makers, during MIPIM in Cannes), co-sponsored by Stevens & Bolton and Savills amongst others, the importance of the sector could not be overstated. According to Savills, compared with other global assets, UK industrial property is leading the way with 12 month returns of 17% versus, say, UK office property and German 10 year Bunds with returns of only 7% and 5% respectively.
There is logic behind this too. Online spending is set to rise by a staggering 127% over the next ten years and is already accounting for 21% of total retail sales. E-commerce is driving growth and the need for industrial and logistics space. As occupier demand continues to outstrip supply, performance in this sector will prevail. Now more than ever, the mantra “location, location, location” is key as the logistics sector looks for ways to satisfy the demands of the 24-7 consumer lifestyles of the ‘now’ generation. Whether it be national logistics networks in the Midland’s Golden Triangle (between Nottingham, Birmingham and Bedford) with its access to major transport systems; “last mile” delivery in city hubs with their greater spending power; or multi-storey and mixed use developments which embrace new technologies, logistics is answering the call for immediacy. In doing so, the sector (and UK real estate as a whole) will carry on finding ways to create value and new opportunities for UK and international investors.
Stevens & Bolton and their guest Savills look forward to discussing the above and more with you at their Think Tank: ‘Best Practice UK Regions v London - Where’s the logic in logistics: Locating the value for investors’ at the Expert Talk.
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