EXPO REAL 2018: Growth in the tech and life sciences sectors, the rising cost of assets in other European cities and sustained investment in infrastructure will keep London competitive – whatever happens next March.
Most speakers at Expo Real kept it Brexit-light this week, but one session on the UK & Ireland stand, run by EG this year, tackled the topic head on.
“Confidence needs clarity and the sooner we know exactly what Brexit looks like, the sooner we can take a view on it,” BNP Paribas Real Estate chief executive Andy Martin told a packed event.
But he acknowledged there was already “a positive story on Brexit” in terms of the inward investment it had already drawn, with “no material impact” on sentiment. “If you look at transactions in the first half of the year, London had as many as Hong Kong in terms of big ones. I’m seeing still money coming into London.”
With “UK pricing still good”, John Miu, chief operating officer of ABP London Royal Albert Dock, said: “Some see Brexit as an opportunity to come to the market. Where there is risk there is reward.”
Yet there was caution around whether sentiment would continue to hold up as the clock ticked down to 29 March 2019, with less than six months to go until Article 50 deadline day.
“I think we will start seeing decisions getting delayed a little bit – and we are seeing that happen,” Martin said.
Stefan Wundrak, head of European research at TH Real Estate said that if the “semi-soft Brexit the government seems to be pushing” was the reality, Brexit would not be such a bad thing – especially with other European cities becoming more expensive investment propositions.
Wundrak said there were fundamentals working in London’s favour – from tech to infrastructure investment.
“We are long-term holders and the investment market in London is a different proposition,” he said.
He predicted London would be a “prime beneficiary” as the tech sector developed further and favoured London. Despite a 12-month delay to Crossrail, the UK government’s commitment to investing in transport infrastructure was encouraging, he added.
“The fact is it’s there, it is going to open and it will make a difference to people’s lives. Investors probably can stomach a year, though it is disappointing. We look at cities and ask whether [governments] are putting money behind them. London is not looking so bad.”
Opportunity to grow
And as well as drawing in new sectors, Brexit may not deter financial services business either. Martin said BNP Paribas saw “Brexit as an opportunity to grow in the UK. You’ve seen a huge increase in tech take-up and those are long-term decisions. Life sciences in London is going to be a growth industry, too. You need to look at the full gamut of what makes London interesting – not just one event.”
Wundrak said with the occupational market holding up, TH Real Estate would push the go button on a major development if there was a prelet: “It’s quiet but it’s still not particularly quiet. It’s not a major change.”
Acknowledging that sterling’s weakness had helped draw investors, Martin said London would continue to thrive even as the currency recovered.
“People are looking at pricing to see where we are in the cycle,” he said. “There was a pricing advantage and maybe in the resi market you saw opportunists coming in. But the decisions recently have been long term. There was money moving globally and a lot of it was coming to London. It always will.”
Mui said ABP was “pushing on innovation and tech” in its development at the Royal Albert Dock, with AI, life sciences and big data all contributing to London’s growth.
But he said London would need to offer scale to draw the very biggest global investors.
“In order to generate something new, you need critical mass. You’ve got to create a platform and use soft power. For Ali Baba to come to London you need critical mass. Critical mass is what will make London successful.”
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