Investors Don’t Care About Political Instability, And 7 Other Things We Learned At 'Follow The Money'
How much has been invested so far in the U.K. this year? How much should investors be factoring in the effects of Brexit? Will councils make money buying their local shopping centre? Here are the key takeaways from Bisnow’s Follow The Money capital markets event.
1. Investment This Year Has Been London-Heavy And Foreign
Around £5B has been invested in U.K. real estate so far this year, according to Datscha Head Of U.K. Research Lesley Males. Around £3B of this is in London — within which 80% is overseas investment — with much of the activity outside London focused on hotels. About which…
2. Investors in hotels need to beware of Brexit
Benson Elliot Senior Managing Partner Trish Barrigan said heed was not being adequately paid to the effects of Brexit on those hotel deals.
“I’m not sure people are pricing in a lot of the risks for hospitality,” she said. “It is a sector driven by foreign labour and Brexit could create a labour shortage, which creates additional risk.”
3. Real estate investment has continued in the face of Brexit, but don’t be fooled
Apollo Global Management Head of European Real Estate Roger Orf said he was not comforted by the fact that the London real estate investment market had a record year in 2017.
“Where are the investors who are investing in factories or plants or other areas that create jobs? Investment doesn’t really matter for the real economy unless it is job-creating.”
4. That said, foreign real investors will just keep on coming
Savills Head of Cross Border Investment Rasheed Hassan said foreign investors would not be deterred by Brexit, because in a lot of cases their domestic political situations are much worse.
“Something like Brexit doesn’t even touch the sides when you are talking about political instability with someone from the Middle East.”
5. The Koreans are coming
As an example, Hassan points to the fact that, following Samsung’s deal to buy 200 Aldersgate in the City last month for £320M, Korean investors have already spent more in 2018 in London than in the whole of 2017.
“They have been huge investors in Continental Europe, but in many European cities yields are now lower than in London,” he said.
6. Local authorities should continue buying their local shopping centre
Councils have made big investments in property over the last couple of years, and have faced significant criticism over this, especially when it comes to difficult-to-manage retail assets. But Orf said that such investments might be the only way to bring life back to town centres.
“It may not be good investment, but it may be a good decision,” he said. “Councils need to take control of their local areas.”
7. Managed office space will emerge as an asset class like managed hotels
Taking a long view on the changes sweeping through the office sector, Barrigan said managed offices could eventually emerge as a distinct asset class, in a similar fashion to managed hotels.
“Serviced office companies will trade on a higher multiple of earnings based on being asset light,” she said.
8. How bad will the correction be when it comes?
"I don't think there will be a massive correction," LaSalle Investment Management Head of Debt Amy Aznar said. "I think there could be some choppy waters, but there is still a pretty significant risk premium compared to bonds."