London realty space draws Asian interest

Brexit means different things to different people. For overseas investors at least, it has presented an opportunity. That’s generally the feeling among London’s real estate development industry, anyway. We asked them in our ‘Spring London Development Barometer’ what impact Brexit would have on the level of inward investment.

Fifty-three per cent of respondents thought that Brexit would lead to either no change or increased levels of international investment.

With significant deals of all shapes and sizes taking place, investors have been busy since the referendum.

London and the UK have long been the first port of call for Middle Eastern investors. The capital ranks as the top city ahead of Washington and New York, according to a report from CBRE. Funds like the Qatari Investment Authority have invested over £30 billion (Dh146.13 billion) into the UK the last 13 years. Domestic players are facing increasing competition from overseas investors.

But the respondents to our survey now believe that the majority of overseas investment into London is likely to come from Asia, which came out on top at 76 per cent whilst just 15 per cent said the same of the Middle East.

Investment from Hong Kong and China in particular has poured into the capital since

June 2016.

Major deals on some of

London’s commercial assets have strengthened the region’s grip on the sector.

With Asia flexing its muscle in the commercial sector, investors might see an opportunity to turn their attention elsewhere. Take housing. Our

‘Spring Development Barometer’ found that 81- and

77 per cent predicted an increase in demand for affordable/council housing and buildto-rent, respectively.

Compare that to the hotel and leisure and office sectors, and it gives an indication of what consumers are looking for in London. Just 52 per cent thought demand would increase for hotel and leisure, and 45 per cent thought the same of offices.

London needs investment and skills to deliver new homes; the question is who is going to provide it? With the government tightening its belt and showing a reluctance to commit too much in the middle of Brexit negotiations, the private sector has been asked to carry that responsibility.

Opportunities to diversify portfolios come not only by sector, but also in geography. London offers countless benefits from investors’ point of view, but they’ll need to pay for it. The prospect of higher yields and lower values are leading Middle Eastern funds elsewhere — 2017 saw half of its overseas investment into the UK directed towards the regions.

Places like Birmingham, Manchester and Leeds are leading the charge with overseas regional investment, with busy economies and strong housing markets turning heads from abroad. We asked the industry what their priorities were when it came to enabling development activity in the capital. It revealed a marked discontent with the decision-makers when it came to supply side measures. They told us that more needed to be done to improve town planning policies — that was their biggest concern.

They also wanted further funding from local and central government and expressed concern about the supply of land. However, London continues to be a safe haven for overseas investors. They continue to believe that in the long term London is a secure city for investment and their appetite will not be dampened by short-term politics.

■ Gavin Kieran is a director at M3 Consulting.