ULI UK: Global Investor Appetite - Who’s Hungry for UK Real Estate?
November 15, 2013
On 13 November 2013, a select group of ULI members and guests gathered at Narbarro’s offices to debate the future of global investment trends. With a distinguished panel of international real estate experts on hand to share their views, the discussion focused on the increasing appetite for UK real estate, asking if the current level of investment interest in the UK can be sustained.
Clare Thomas, Real Estate Partner at Nabarro, opened proceedings by summarising some of the key results from the firms’ thought leadership report on Global Investor Appetite, which polled over 600 global occupiers and investors. Over 73% of respondents indicated that the attractiveness of the UK will increase in the next 2 years, with the greatest appetite being for prime offices and residential assets. (The full report is available here.)
Against this backdrop the panel, comprising Anuj Mittal, Managing Director at Angelo Gordon; Jon Zehner, Head of Global Capital Markets at LaSalle Investment Management; and Hideto Yamada, Managing Director at Mitsui Fudosan, debated the extent to which investors are still able to make money in today’s UK real estate market.
The panel broadly agreed that while Central London would continue to be attractive, it is starting to become increasingly expensive. It seems that investors wanting higher returns are now more prepared to branch out into secondary locations and different asset classes. Residential in particular is coming back in a big way, with the advent of the student housing sector making it an extremely interesting investment proposition, particularly across the UK’s major gateway cities. However, the panel was in agreement that while residential will develop as an asset class in a mature market, it isn’t yet evolved enough for institutions to make sufficient returns and will only be truly worthwhile following future capital gains.
The big question mark for investors will be around interest rates, with a real lack of certainty around the extent to which rental growth will match a potential rise in rates. While the risk spectrum appears to be changing, the key will still be to take a long term view and ensure there is a sufficient risk buffer in place.
On a final note, the panel asked whether investors would expand their portfolios outside of London into the UK regions or whether they would start to look overseas. For many, European locations, from Germany to the Netherlands, are starting to look like better investment options where there is still the opportunity to buy good property assets, cheaply. Yet despite this, the overriding consensuses remained that while international investors are talking about Europe, UK institutions will remain faithful to the UK and start to look more widely at the regional investment market, where opportunities undoubtedly remain.