In November 2021, Howard Kennedy's Anthony Hunt and Rebecca Davison were joined by a panel of experts to discuss where foreign investment into the UK is currently coming from, the potential opportunities available to investors, developers, and financiers and the investment trends which are emerging post-pandemic.
The panel of speakers included:
- Thomas Lloyd-Jones, Partner, Zenzic Capital
- Clare Anna, Co-founder and Chief Commercial Officer of London Rock Partners
- Andrew Harrington, Founder of AHV Associates
The panellists discussed a number of key themes relating to foreign investment into the UK including:
- How the demand for distressed assets is outpacing supply;
- Increased investment in the industrial and residential sectors;
- Hotels as an asset class;
- A discussion on the return to office; and
- Increased investment from the West.
Demand v supply
The panel discussed their expectations of investment into the UK real estate market throughout the pandemic and agreed that generally UK real estate is still an attractive investment, particularly for overseas investors. The expectations, especially in the early stages of the pandemic, were that the market would see many distressed assets available for investment – but the reality was quite the opposite.
The panel agreed that the number of available distressed assets was much less than anticipated. Demand for UK real estate is much greater than supply. Clare commented that many of the available assets available for investment are the same as those that were available pre-pandemic. The weighting of demand over supply in this way speaks volumes as to the strength of the UK real estate sector.
Asset class
There are multiple asset classes available for investment within the UK real estate sector and the panel discussed those which are proving to be more popular post-pandemic.
Rebecca commented that when it comes to industrial real estate, we are seeing a greater need for smaller, more localised, industrial sites to meet the constant need of home (and almost instant) delivery. As for the demand for residential real estate, there is an increase in re-purposing real estate following the changes to both the retail and office landscape in many towns and cities across the UK.
Hotels as an asset class
The panel specifically discussed hotels as an asset class, and its resilience in the market. Hotels have a unique benefit by comparison to other asset classes in that operators can be adaptable to the customer’s needs. Hoteliers have an opportunity to offer their space to customers for a purpose that is most in demand, provided they are geared up adequately to do so.
Clare discussed this unique benefit for hoteliers to repurpose their space and noted that whilst it is an opportunity, it will be heavily impacted by the behaviour of big corporations. For example, the nature of the future of office space may increase or decrease the need for office/corporate space within hotels. The amount of travelling in the corporate sector post-pandemic will also have a huge impact on the way in which hotels are used.
Hotels are a resilient asset class, but the success of each hotel will vary largely on its operator’s adaptability to the changing market conditions.
Return to Office – Corporate Space Requirements and Hybrid Routine
In discussing the future of office space and hybrid working, Andrew was of the opinion that office attendance within the next year or so will resemble pre-pandemic levels because it makes sense for people to be in an office; in Andrew's experience, those that have tried to adapt to a virtual office in recent years have inevitably reverted back to the office. Andrew added that he also expects to see a change in the nature of office space coming out of the pandemic so that office space becomes more welcoming for employees – the idea here being that high-quality office space that is in a good location and is welcoming to employees will see a greater return to the office amongst employees in comparison to those who fail to invest in their office space.
Increased Investment from the West
As one of the final points of discussion, the panel considered whether international investors would be interested in retail assets primed for repositioning in the post-pandemic world. In touching on this point first, Thomas stated that while he was unsure whether the demand for re-positioned assets (such as in the retail sector) will come from domestic or international buyers, he nonetheless expects there to be a high level of activity and interest in re-positioned assets given the value to be had and the potential for high returns attached to refurbishment risk.
Andrew however made the very interesting point that the UK may soon see more investment from the West. In making a comparison to the United States, Andrew argued that the re-positioning of retail assets is already well underway across the pond and that he would not be surprised if American investors begin to play a very strong role in the repositioning of retail real estate in the UK in the near future.
Anthony touched on Andrew's point about US investment, noting that interest from American non-commercial funds at the early stages of the pandemic focused more on the residential sector given the financial opportunity this sector represented at that time. Moving forward, their focus may shift towards the opportunities presented by the retail sector rather than residential.
Summary
The above takeaways from the panellists demonstrate a general sense of optimism that there is an appetite for investment in the UK in the post-pandemic world and that London is well-placed to recover from Covid-19 disruptions to investing and more generally to everyday life.
For more information please see the below link to the panel discussion.
https://www.howardkennedy.com/Latest/Event/Economic-breakfast-series-24-November-2021
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