London real estate will continue to attract foreign institutional capital regardless of a UK exit from the EU, major investors concluded at MIPIM UK this morning.
More than 20 delegates, including 19 global institutional investors, discussed real estate opportunities in the UK at the closed-door RE-Invest summit in London.
The consensus among the pension funds, sovereign wealth funds and other institutions – collectively overseeing some $180bn (€160bn) in real estate investments – was that the global capital would continue to flow into the city over the long-term, despite any geopolitical or macroeconomic shocks.
Most of investors believed UK real estate is close to the top of the market but it is unlikely to correct before 2018.
The summit also discussed the rise of ‘alternative’ sectors, including residential, student housing and hotels.
It was the second time the roundtable event RE-Invest – this year sponsored by TH Real Estate and Nabarro – was held outside MIPIM’s traditional home of Cannes in France.
Here are the main findings:
The UK market
• London will continue to attract outsized international capital flows over the long term.
• A UK exit from the EU will not be a ‘game changer’ for the city.
• However, a ‘Brexit’ could have more of in an impact on Scotland’s real estate market, should it encourage a renewed push for Scottish independence.
• Competitive pricing is creating concerns, but the consensus is that the market will not correct before 2018.
• Certain UK markets outside London, such as Manchester, are seeing a marked rise in investment and economic activity.
• Alternative sectors in the UK are attracting international investors away from traditional markets
• Student housing has been particularly interesting, and in some cases has encouraged some investors to ‘skip’ retail when looking beyond offices.
• Investors were concerned about added risks that come with alternatives – such as operating risks in the hotel sector – and how these are not always priced into investments.
• Real estate debt investment is increasingly being seen as an alternative property play, offering secure income at a time of peak pricing in the direct market.
• Investors should look to operators and investment models from more mature alternative markets – for example, multifamily operators in the US could bring new perspectives and practices to the UK’s emerging private-rented sector (PRS).