Why Foreign Investors are Buying Regional Property over London
At MIPIM, the annual meeting of the commercial property industry which took place last March in the south of France, the British government took the opportunity to showcase the UK to the 3,500 attending foreign investors.
Following the referendum vote, many feel the government’s stands were there to quell any fears that the UK is closed for business.
“This is an incredible opportunity for the UK to show everything that is great about Britain,” Mark Garnier, the parliamentary under-secretary of state at the Department for International Trade told the assembled crowds.
The Government’s Spotlight to Investors not on London
Over the last year or so, investors have increasingly found better value in buildings outside London, where a relatively untapped property market can yield stronger returns. That’s because the value of buildings is relatively much lower than the capital, while rents are still at a reasonable level.
“We find London challenging from a pricing standpoint,” explains Rob Wilkinson, chief executive of Paris-based asset management firm AEW Europe, “whereas in the regions, the pricing is not as acute and the occupational side is pretty good in most city centres.”
Research from Savills shows that Middle and Far Eastern buyers have been particularly active in the last year, almost doubling the amount of money they have spent in the UK’s regional markets in 2016 to around £1.9bn. In total, foreign investors accounted for nearly one third of all investment that took place in the UK regional commercial property market last year.
Trend for Regional Investment set to Continue
James Gulliford and Richard Merryweather, who jointly lead Savills’ UK investment team, say the trend is set to continue. Gulliford explains that UK investment makes sense for many overseas buyers because of its legal system and standardised market.
“On top of this, the sterling devaluation has made pricing attractive for investors whose currency is pegged to the US dollar,” he says. “There has also been a temporary absence of UK institutional buyers which has created a marginally less competitive marketplace.”
Richard Merryweather adds, “We’re seeing the first signs of foreign buyers looking at markets such as Bracknell and Portsmouth that provide more yield compared to the traditional hubs of Birmingham and Manchester”.