DEBATE ROUND-UP TRUTHS
Should savvy investors be looking at the residential sector or is it wiser to stick with the safer returns of London’s commercial property market? Samantha McClary reports
L
ondon and residential are the hot topics in real estate at the moment. London mayor Boris Johnson last week announced plans to
increase his target of building homes in the capital to 42,000 pa, almost double the amount built in 2014, new PRS funds are springing up and the availability of affordable housing remains a political hot potato for every party. But for investors in London is
residential the safest and most lucrative bet? Or will the traditional asset class of commercial real estate be the winner? That was the topic in a BNP Paribas Real Estate-supported discussion on investing in the capital. Early on in the debate, supporters of
residential investment made the caveat that investors looking for returns from homes should be targeting London’s zones two to six, not the already overpriced zone one. But soon the argument over which asset class would win turned to supply. “Resi is great, but commercial is
secure,” said BNP Paribas Real Estate chief executive John Slade, adding that a lack of supply of decent and suitable stock meant that demand and fundamentals would remain strong. “There is not a lot of commercial
development right now. If you are looking for big floorplates there are very few buildings,” he said. “But if you go to the South Bank, there is a lot of resi coming through.”
There are fewer than five buildings in
central London that can offer 100,000 sq ft over the next 12 months, said Mark Swetman, founding director of LS Estates and a former Hines director. He added that in the short term this lack of supply in London offices would create real rental growth, giving commercial the upper hand in terms of investment choices. However, Legal & General Investment Management’s head of real assets Bill Hughes said that in the long term, residential was likely to win out, particularly the PRS. As an investor in commercial property and at the early stages of a major push into the residential market, Hughes was able to argue both sides of the
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