'My conviction is that smart capital will move if there are dislocations,' Alexander Fischbaum, managing director, AF Advisory, told PropertyEU's Outlook Investment Briefing held last week in New York.
'People may have invoked Brexit clauses and pulled out, but vendors still want to dispose of the assets, so they may accept 20% or whatever.'
In the UK post-Brexit, not everyone is sitting on the fence and waiting for some clarity, delegates at the briefng heard. The combination of a lull in the market, the termination of many deals that had a Brexit clause and have fallen through and the sharp weakening of sterling are luring opportunistic investors to the UK market.
'Our clients that are active in the UK, especially private equity funds that have more of a risk appetite, are actively looking for opportunities,' said Robert White, founder and president, Real Capital Analytics.
'My conviction is that smart capital will move if there are dislocations,' added Fischbaum. 'People may have invoked Brexit clauses and pulled out, but vendors still want to dispose of the assets, so they may accept a 20% discount or whatever.’ It is all to play for, and the market ‘will polarise between overseas investors that have currency on their side and UK capital that will have to focus on the UK because going abroad has become more expensive.'
The weakening of sterling is making UK assets cheaper and therefore more attractive, but it also poses a threat if it is seen as anything more than temporary. If the slide in the value of the pound continues, investors will wait for it to fall further before making acquisitions. The biggest threat of all is a change in international investors' perception of the currency, said White. 'A lot of the foreign investment has come to London because of sterling, but if it is no longer regarded as a strong and stable currency then that whole situation may change.'
UK offices in the eye of the storm
Experts agreed that the UK office sector will be in the eye of the storm in the short to medium term. Even if the threat of a mass exodus from the City might never be realised, the uncertainty will weigh on sentiment.
'Offices are most at risk,' said White. 'Retail and logistics, on the other hand, could do really well with the lower pound. Long-term trends will continue to drive the market, with ecommerce driving logistics and tourism driving the hotels sector.'
The recent trend to invest in alternative sectors, from student housing to hotels, will continue after Brexit, said Damian Harrington, director and head of EMEA Research, Colliers International. 'I do not really see any change in the shift towards alternative sectors.'
UK residential will continue to be a good bet because of the demand/supply imbalance, but this does not apply to the London prime market, which has already seen price declines. Trouble is brewing, said Charles Ostroumoff, director of Arca Property Risk Management: 'There were only 5,000 £1 mln-plus high-end apartments sold last year in central London, and there are 20,000 set for delivery in the next two years. If that is not a bubble, I don’t know what is.'
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