2018 has begun as frenetically as 2017 finished.
For 48 weeks of last year you would have been laughed out of town for suggesting a retail resurgence.
Then, in a breathless, five-day, pre-Christmas rush, the £3.4bn Hammerson/Intu deal was quickly supplanted as the year’s most eye-catching by Westfield’s £18.5bn sale to Unibail-Rodamco.
A blip? Not a bit of it. We’re just days into 2018 and already there has been a raft of major moves – all different, all meaningful and all dripping with wider significance.
Theresa May used her new year message to reinforce her pledge to tackle the housing crisis: “We will build more homes, so housing becomes more affordable and more families can get on – and climb up – the housing ladder.”
More meaningful perhaps is the news that Blackstone is moving into the affordable housing market through its backing of Sage Housing Association.
The private equity goliath clearly believes that its expertise gained in the US and Sweden will create a viable business. It hardly needs saying that it has the firepower to create a multi-billion-pound portfolio and make Sage one of the sector’s biggest players.
Activity ramping up
Still in residential, activity in the build-to-rent sector continues to ramp up.
Oxford Properties is in advanced talks to buy a stake in Delancey, Qatari Diar and APG’s PRS company Get Living.
Get Living has close to 2,000 income-producing units and if the deal completes it would mark a significant step in the sector’s maturity. It would be the first major institutional transaction involving an operational PRS platform and portfolio in the UK. It would include the former Olympic Village in Stratford – for most, the original UK PRS scheme.
No less significant is news that the Chinese government is in talks to buy the site of the Royal Mint, EC3, as it looks to create a 600,000 sq ft embassy, educational and cultural campus in the capital.
It’s an eye-catching display of soft power, given tantalising significance by the expectation that US president Donald Trump will open the new US embassy building in Nine Elms next month.
More importantly, it should give comfort that the flow of east-west capital will continue to head London’s way.
Hong Kong investors accounted for the lion’s share of commercial property investment in central London last year (32.9%, £6.4bn). Savills says it sees three new Asian investors arriving in London every week looking to spend; of the 331 overseas investors looking at London tracked by the agent, 240 are from Asia.
The long game
Is there a danger we read too much into all this? After all, a week may be a long time in politics; it certainly isn’t in a sector such as this one, which plays a much longer game.
But for such an intense period of activity to straddle the new year can only be an encouraging thing.
Yes, there’s caution in most 2018 forecasts – Capital Economics, for instance, is not expecting upside surprises any time soon. But that only adds weight to the areas of optimism. Colliers International has matched its 2017 forecast with an expectation that investment in UK commercial property will exceed £50bn. (Others expect even higher totals: JLL is pitching £55bn and CBRE £60bn.)
Few disagree that the “beds sectors” – such as hotels, built-to-rent and healthcare – will grow strongly. Meanwhile, KPMG is encouraged by logistics, PRS and flexible/serviced offices.
Yes, it’s easy to start the new year with optimism. But why wouldn’t you?
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