The UK is proving to be a more resilient market than many expected, and real estate investors are moving beyond London to other regions in the UK which are seen as less vulnerable to possible Brexit referendum after-shocks. This is one of the scenarios highlighted by a panel experts at the PropertyEU Outlook Europe & UK briefing, writes Nicol Dynes.
'Looking ahead the UK regions will be more interesting places for investors to deploy their money,' said Simon Williams, head of investment at BNP Paribas Real Estate. 'In places like Birmingham there is a lot going on and a positive feeling that things are getting better. People are a lot less nervous about the impact of Brexit on their local economy.'
Outside of London there has not been much development in major cities so far, and people see a buying opportunity not just because of the weak pound but also because 'they see value and a transparent, well-regulated market,' said Williams.
UK cities and regions outside London should also start to benefit from the country-wide push on infrastructure and housebuilding announced by Philip Hammond, Chancellor of the Exchequer, in his Autumn Statement this week.
'Investors will definitely look more at regional opportunities in the UK,' said David Inskip, director, EMEA Strategy and Research, at CBRE Global Investors. 'If you go to regional cities, even the financial services companies are less impacted by Brexit because they are more focused on the domestic market. There are growth prospects in these secondary locations, but it may be a trade-off, high yields for less liquidity.'
Local players have contributed to the renewed interest in British property and they are not the usual suspects, Williams explained: 'Local authorities have replaced some of the funds that have withdrawn. They are replacing income lost from central government cuts by investing in property, as it guarantees income and generates returns.'
Rynda Property Investors, which had not invested in the UK for many years, is now looking at the country again and focusing on the North, said CEO Michael Walton: ‘It is easy to focus on the negative aspects of Brexit, but some regional businesses are doing tremendously well. We like the North of the UK and we focus on value-add opportunities in the office market, as there is strong demand and a strong letting market.'
The only downside is that it is harder to find debt finance in that market, he said. In general, Brexit and the presidential elections results in the US are having an indirect but negative impact on the availability of debt, said Walton: 'The protectionism heralded by Trump could affect the debt market in the UK. People looking to advance 5-year loans are now more cautious, as they do not know what the world will look like in five years’ time.'
Debt is less available especially for small or value-add deals, leading some value-add specialists to consider leaving the UK, said Will Rowson, partner at Hodes Weill & Associates: 'It is true that debt is getting more expensive and in some cases harder to find.'
