UK’s ‘unregulated’ market an income growth opportunity

Union Investment Real Estate has invested in the UK market for over 30 years but only two years ago established a London presence in a decision borne out of London and the UK “being integral to our ongoing strategies,” said its head of investment management UK and Ireland Miles Skinner.

“It offers great diversification to have local offices and a global presence,” he said. “Now, more than ever, International markets are of increasing importance,” he added while speaking to Real Asset Insight’s Richard Betts.

The ‘living’ sector is one in which investors are active for portfolio diversification reasons. “But in a UK context, we have an unregulated market so that presents clear opportunity for income growth, it presents an opportunity for hedging against inflation,” he explained. Built-to-rent multifamily is the main focus, he said.

“And as much as we’ve seen sensational headlines around the office sector, we feel that the office sector does still play a really important part of a diversified real estate portfolio.”

For Union investment, he said that means focusing on future-proofed, long-term, sustainable assets.

“ESG is very much integral to that, and is so now ingrained and incorporated into our investment philosophies that it’s not so much a tick-box exercise within our investment committee papers, it’s very much in the round and absolutely at the forefront of our thinking.”

Union Investment is not just concentrating its activity in London.

“Inevitably there is focus on London, but the regional markets remain very important to us as well.”

He said the firm has investments in Birmingham, Manchester, Glasgow and Edinburgh and supply of best-in-class offices is diminishing in these markets which are becoming very constrained.

Offices “need to earn the commute,”he said.“They need to be places that people want to go to collaborate. We’re hearing a lot of rhetoric from the big corporates encouraging their employees back but the office,” he said. But the product needs to be right we’re fortunate that we have a fairly resilient high-quality portfolio, so we are operating in that top-tier space.