NEWS REGIONS GAIN AS LONDON GETS TOUGH PAUL STROHM
Great Portland Estates’ response to current investment conditions in central London is to cease buying buildings, chief executive Toby Courtauld told MIPIM UK delegates at a packed conference session entitled “Offices: Where to invest 2015-2018”. “We are not buying anything at the moment,
but we are developing,” he said. “Buying real estate in London today is tough.” Courtauld said GPE research showed that there was £28bn of capital currently targeting London and that it would continue to remain the number one or two destination
Great Portland Estates chief
executive Toby Courtauld
for foreign investment. One solution to the difficulty of investing in London is to look to the provinces, said Hines UK senior managing director Ross Blair.
REGIONS MUST RETAINSKILLS TO COMPETE
The UK’s core regional cities need to make the most of the economic base created by universities and hold on to the graduates they create if they are to compete with London. That was the view from panellists at an EG debate entitled “Is the development/
occupational gap between London and the regions widening or narrowing?” Graeme Tulley, director of planning at GL Hearn, told the audience: “If they haven’t got the social infrastructure, cities won’t retain graduates and therefore benefit from the skill set they have created in their universities.” Simon Durkin, head of European research and strategy at Deutsche Asset & Wealth Management, agreed. He said that regional cities need to build on the areas that set them apart from London. But Urban & Civic executive chairman Nigel Hugill suggested that the regions were fighting a tough battle against the capital. “Some core cities perhaps aren’t catching up because occupational success often depends on who you know and what networks are available,” he said. “People can’t afford to live in London but they can’t afford not to.” All panellists concurred that strong rail links were necessary for the regions to bloom. Hugill said: “The benefits of having strong rail links to London for small cities are conspicuous and should not be underestimated.”
SNAPPED ATMIPIMUK
Hines has already been active in Birming- ham and is starting to look at Manchester, among other cities, said Blair. He claimed there was a captive audience in those locations because large tenants have been sitting on their hands in space they have outgrown but are making the decision to relocate as the economy recovers. Mat Oakley, head of commercial research at Savills, said the UK’s regional cities would see growth in capital values in the next five years as investment spreads out of London. “They were seen as risks but are now being regarded as big opportunities,” he said.
LOW RETURN IS NEW NORM
Investors in real estate may have to prepare for a new norm of lower returns, Alan Patterson, AXA’s head of research and strat- egy, told the audience at the Investment Property Forum’s “A new property cycle: the same again?” debate. “Investors in bonds and equities have come
to accept that in recent years that returns are going to be lower. Perhaps property investors will have to adjust their expectations too, and get used to an environment where less than 5-6% is an acceptable return,” said Patterson. “There may come a time when a 3%, 2% or even 1% return will be seen as normal risk premiums for property.”
HRH the Earl of Wessex
EG’s Sam McClary receives royal recognition for her fundraising efforts
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