How can London retain its attraction as a global investment destination?
Changes made in the City of London in the late 1980s have had a lasting effect on the whole capital, reckons John Slade, chief executive of BNP Paribas Real Estate UK. He recalls a relaxation of planning controls (partly in response to the then-embryonic Canary Wharf) which helped transform the Square Mile from a warren of narrow streets to a modern city, bringing heavyweight investors, as well as the rest of the capital, in its wake. “Many of London’s strengths haven’t changed, including the weight of occupational demand and the number of long leases. These combined make the city a very stable place to invest,” he observes.
Slade is clearly amused at the suggestion that several decades of success might mean that London is in danger of sitting back while thrusting rivals like Singapore make a bid for its crown. “We are so aware of the competition that I don’t think we’ll get complacent at all,” he says. Nevertheless, Slade concedes that centres closer to home, like Frankfurt, may well attempt to replicate London’s success in areas such as financial services. “But I see development in places like Frankfurt as complementary to London. What happens elsewhere doesn’t have to be to the detriment of here,” he adds.
On the key question of whether London can retain its pull as an investment magnet, Slade is resolute: there is a huge amount of foreign money requiring a home and much of it is heading for the capital. He says: “In January a lot of people said London property was too expensive. Now they are reconsidering. Prime values have come down from their peak, but only marginally. Just a small downward move has caused a real shift in sentiment, one that is wholly beneficial for London.”
What do other members of the London Forum think?
Nick Belsten, director and head of central London office, Indigo Planning
Continuing London’s success will lie in maintaining its attractiveness in the eyes of potential overseas investors. In the short-term, they are viewing London as a profitable investment option given the lower value of sterling post-referendum. Providing a swift planning process for everyone, including overseas investors, is essential; the mayor and local boroughs must ensure the system is efficient to help secure foreign investment, but also robust and flexible enough to work positively during all economic conditions. Boroughs must work harder to attract investment and promote London – having clear plans that are commercially realistic will encourage this.
Bill Page, business space research manager, LGIM Real Assets
London offers occupiers a dynamic environment, a well-educated workforce and an urban environment suited for agglomeration benefits. Investors gain through stronger rental growth and longer leases compared with the rest of the country. Infrastructure is improving and will increase London’s worker catchment. At a global level, the transparency, professionalism and liquidity of its real estate helps London punch above its weight for global capital flows.
However, any city’s report card will have a “could do better” section. Greater improvement to transport and fibre infrastructure and clearer structures for investors to help fund such schemes are important. An effective mayor is more vital than ever following both Brexit and the extra, more vocal, competition for global capital from the new mayors that represent devolved authorities. The most important thing London can do, however, is to ensure its workforce is not priced out. More homes at appropriate prices and tenures will help its workforce grow, and reduce the risk of it going elsewhere, taking investors with it.
Jo Valentine, chief executive, London First
The government needs to move quickly and make infrastructure and investment decisions wherever possible. For example, a positive decision on expanding London’s airports will send the strong signal that London remains very much open for business.
Simon Cookson, real estate partner, DLA Piper
Investors do not like uncertainty but active investment for many institutions is not optional. Should they carefully consider their choice of investment destination? Yes, as always. Has the universe of mature economies which can reasonably be expected to provide long-term stable returns changed? No.
London is a world city intimately connected with the global economy. Despite Brexit, it still has a benign business environment, one of the world’s leading financial services industries, a multinational work force, English language, the rule of law and is a key location in the world’s geography between Asia and the east coast of the United States.
David Waterhouse, associate director of strategic development, Design Council CABE
London, arguably more than the rest of the country, is still working through the implications of Brexit on the development and property market. London competes on a global scale, not just within European markets. The supply of land and favourable planning conditions will ensure that London remains a destination for inward investment. But London cannot consume its own smoke, and must look strategically to its hinterland to comprehensively plan for London and the greater South East. The new London Plan provides a timely opportunity to do this.
