London continues to be a magnet, but foreign investors are venturing beyond the capital to find opportunities in regional cities, experts agreed at Real Asset Media’s UK Investment Outlook: FDI and Capital Flows, which was held in July at Nuveen’s London headquarters.
One way to spot a winning city is to look at whether students choose to stay and work there after graduating, said Rob Sim, Managing Partner, Europa Capital: ‘University retention rate are a key to the city’s success, which is why we have invested in furnished apartments to be rented in Manchester, which is booming’. Cambridge is another example of success in retaining university graduates.
‘Nuveen has a project betting on cities that are tomorrow’s winners, and all the big six in the UK are on the list,’ said Robin Hutchison, Head of Asset Management, Janus Henderson UK Property PAIF. ‘We invest in all of them and have made a huge investment in Edinburgh StJames, but if faced with a choice we will always seek to invest in London over the regions purely on a liquidity basis. Liquidity in our open-ended fund will lead us to choose a multi-let building in the capital over a multi-let building in Birmingham’.
London dominates the UK market in terms of volumes and deal flow, but ‘the big six regional markets are remarkably strong and now there is good liquidity in Manchester and Birmingham, which is important for international capital’, said Tom Leahy, Director of Market Analysis EMEA, Real Capital Analytics.
‘The problem for Asian investors is that they want large lot sizes and there is a limit to the number of £100 mln-plus deals that regional cities can offer,’ he said. ‘But German funds are big investors in the UK regions, and French capital is also looking at those markets’.
The trend is likely to continue. ‘We used to find mainly domestic buyers for our assets in the regions,’ said Hutchison. ‘ But now international investors have widened their horizons and are keen to invest, maybe entering into a partnership with a local asset manager’.
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