Brexit ‘still has potential to create investment opportunities’

The investment and occupation markets have remained buoyant since the UK voted to leave the EU owing to the country’s cosmopolitan cities continuing to attract foreign investment. But as Brexit draws nearer will there still be opportunities for investors? John Slade, chairman of Evans Randall, admits he has been “surprised” by the minimal impact from the EU referendum. “There was a temporary six-month lull, then the market came back. Everyone looked at London and said ‘well, nothing’s really changed’.” The mass evacuation by businesses that was feared following the vote has yet to materialise and bar the European Medicines Agency there appears to be few others heading to other shores, he added, speaking as a member of the panel at EG’s session on ‘UK Investment: Where there is change, there is opportunity’ at MIPIM UK. Simon Williams, joint head of national markets at BNP Paribas Real Estate, has witnessed a similar situation across the UK’s regions and believes that Brexit is put into perspective when viewed through the lens of the global financial crisis. “Brexit only affects us. It’s not a huge thing for the world. There is still money out there circulating.” “The changes that are happening create opportunities because people have different views on what the impact of those changes are going to be and that’s what makes a market. Some people think it’s time to sell and others think it time to buy,” he said. Still the odd obstacle However, Brexit is making conversations with prospective investment partners more tricky, Eoin Condren, director of joint ventures at U+I, admitted. “Euro denominated funds or sovereign wealth funds and insurance funds, particularly the Germans, are having a good chuckle right now. They’re saying they’re probably not going to invest in the UK for at least the next six months unless there is an extremely advantageous opportunity to do so. “That said we’re also constantly speaking to folks out in Asia and there are certain countries out there that have a huge amount of interest in investing over here, and when we mention Brexit they laugh and say ‘you think that’s political risk? We’ll show you political risk,’” he said. But he does expect some parts of the UK to suffer because of Brexit and points out that U+I focuses on cities it believes have specific traits that will enable long-term economic growth and make them internationally relevant, such as tourism and diversity. Despite the difficulty of enticing European investors into the market, “debt lending in the first six months of this year is up 27% on last year and that’s despite where people perceive where we are in the cycle and what’s going on politically. It does show that there is cash out there to do stuff and that will keep the market going,” Williams pointed out. Yet Williams said he expected investment volumes to fall over the next six months as he believes that investors will hold on to their assets unless they are forced to sell them. However, he added that “it’s not a structural change it’s just a pause for breath, but until we know the general direction of where we’re heading people are going to be a bit more cautious.” But Slade said that for him the possibility of a Corbyn-led government brought about by the political chaos of Brexit is more terrifying than Brexit itself. Looking for opportunities Real estate prices have been more buoyant than expected by some, considering the political situation, with the revaluation of sterling supporting volumes, said Slade. Williams added that “the yields people can achieve here are a lot softer than they are elsewhere. We feel they’ve held up remarkably well, but mark that in comparison with how they’ve gone in France, Germany and the US. You’re getting a good risk-adjusted return here. “We’re looking like pretty good value for money when you compare us to some of the top countries in the world,” he said. And it’s not just investors from the Far East looking to put cash into the UK property market – domestic demand has been steadily increasing as well. “There’s a big wall of insurance, annuity and pension fund cash coming into the market because the baby boomers who are coming up to retirement age are the first generation that haven’t got final salary pensions,” Williams said. “They’ve got to buy annuities and other financial products to live on and that’s creating an awful lot of liquidity in those markets. “It’s generated a whole new part of the market.” Williams said that schemes with local authority “lease wrappers” are “being seen by the mainstream UK institutions as being completely resilient from any sort of downturn in the cycle or political shock”. For Condren seeing past London and its financial centre is key to the country’s creation of new opportunities. “I think relying on the finance industry is a mug’s game,” he said.   The panel Eoin Condren, director of joint ventures at U+I John Slade, chairman at Evans Randall Simon Williams, joint head of national markets at BNP Paribas Real Estate   To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette