Foreign money moving into the regions

 

The UK is hot property for foreign investors at the moment. In an interview with Gameplan, Damian Wild, Editor of Estates Gazette, considers the impact on the commercial property market.

Damian WildIt’s no secret that the UK’s commercial property market has seen strong influx of foreign investment – in the first quarter of 2014, €5.2 billion was invested in London property1 – more than Tokyo and almost twice as much as in New York.

Of course, it’s the high-profile deals that attract attention. The Singapore developer Metro Holdings has recently made its first UK investment in Manchester, and the expectation is that London’s iconic Gherkin will be purchased by an overseas buyer.

Foreign investors are looking beyond London

Influx of Investment infographic

Generally, the market outlook remains strong, notes Damian Wild, Editor of Estates Gazette. “Overseas investors have primarily piled into prime, forcing domestic players to look further afield and so driving down yields. However, the picture is changing as more and more overseas investors are willing to look beyond London. There has been strong growth in Manchester, Bristol, Edinburgh and Cardiff this year, and international investment is now also being attracted to the regions. Some argue that London commercial real estate is seen as overheating – and that the regions are benefiting as a result.”

The very fact that institutional investors and other domestic players have been forced increasingly to look beyond London prime for value has been of benefit to mid-market players from an investment point of view. But, he adds, “there is still too much stock out there that risks becoming obsolete and un-investable once new sustainability regulations kick in in a few years’ time.”

Political changes mean new opportunities

Along with the shift in the market, a changing political landscape is opening up opportunities for mid-market players. “The UK Government’s commitment to devolution across the UK in the light of the Scottish independence referendum outcome will empower cities, city regions and some county regions – provided the Prime Minister’s words are backed up by action,” says Damian. “All this will create opportunities for mid-market investors, developers, advisers and occupiers alike.”

The future of inward investment

If the UK, and London especially, continues to set the right priorities and continues to welcome overseas investors, there is, says Damian, “no reason to think that inward investment will stall. However, the months and years ahead will bring plenty of political turbulence: a general election, a London mayoral election (we need a powerful salesman on the world stage) and, almost certainly, an EU in-out referendum. It’s the latter that could be most destabilising of all.”

Footnotes

1. Source: Cushman & Wakefield

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