The UK commercial property market remains attractive to overseas investors despite the Brexit vote, according to new research.
A recent survey of JLL’s global investor client base found that 72 per cent of overseas investors see the fall in sterling as an opportunity to invest in the UK, with over a quarter (27 per cent) of those saying it was an ‘immediate opportunity’.
Despite a quarter of investors saying they would reduce allocations to the UK in the near term, the majority of respondents (63 per cent) are not planning to make any changes to their investment strategies until a new UK/EU relationship is drawn up .
Investment volumes have declined in the months following the referendum but demand is expected to pick up, particularly among private overseas investors, according to JLL UK CEO Chris Ireland. “Larger institutional investors are taking a more cautious approach and will need time to evaluate market sentiment,” he said.
“The appeal of commercial property as an asset class remains undimmed – hardly surprising when yields for prime property with strong tenant covenants still attract yields of at least 4-5 per cent,” he added. “This compares to average corporate bond yields which are now at 2.19 per cent and 10-year gilts at a little over 0.6 per cent.”
London for the long haul
London remains firmly in the sights of global investors who are expected to continue to plough capital into the UK capital. That’s according to Ben Burston, a director in JLL’s research team.
Though half (55 per cent) said they believe that central London’s office market will be worst hit by initial subdued occupier demand, consensus is that it will bounce back with more than a third of investors saying that London will remain their primary entry point to the UK, regardless of any new relationship with the EU.
“A deep pool of equity capital stands ready to step in to London’s commercial property market when signs of stability emerge,” Burston added.
JLL’s UK Investor Confidence Index from August found that 54 per cent of investors with a presence in UK property are expecting to concentrate their efforts in London and the South East.