This Acquisitive Asia-Backed Investor Says London Real Estate Is Cheap
The London property investment market is more reliant on foreign investment than almost any other in Europe. With this in mind, the view of an investor who has supported Korean investments in Europe bodes well for the sector’s post-Covid recovery.
“London is cheap right now,” Valesco founder and CEO Shiraz Jiwa told the audience at Bisnow’s digital event on London’s capital markets this week.
Last year, Valesco closed its largest single deal in Europe when it bought an office tower in Brussels for EUR 1.2 billion (£ 1 billion) and it has announced it would sell between £ 100 million and £ 1 billion after UK deals. Look for GBP. In the UK, the company bought Cannon Bridge House in the city in 2018 for £ 248 million and Microsoft’s UK headquarters in Reading for £ 100 million. The company manages EUR 2 billion in assets and typically does business for Asian and Middle Eastern investors.
“If we look at relative value and look through the lens of a pan-European approach, and that includes the UK, look at prime office returns in the City of London, they are 100-200 basis points wider compared to Berlin or Paris,” said Jiwa. “While London’s liquidity is stronger, London’s resilience is stronger, the infrastructure and talent are always up for discussion, but at the property fundamentals level, London is cheap and we see this as a real opportunity.”
Jiwa referred to CBRE’s EMEA Investor Intent Survey, published this week, which found London to be the top investment preference for investors looking to buy commercial property in Europe. He also cited research by Knight Frank which identified £ 46 billion in capital to invest in London offices this year.
“Swap rates are historically low, vacancies are low, the development pipeline has fallen off a cliff and very little Grade A space is being built, making the London offices look particularly strong,” he said.
It was necessary for the lenders speaking at the event to balance confidence in London’s long-term prospects with some of the immediate problems caused by the coronavirus pandemic in particular.
“There is short-term nervousness and headwinds in some sectors of London, such as student accommodation where short-term income losses are possible due to student absenteeism, or offices where there is a feeling that there is quite a bit of the gray areas available,” said Alexandra Lanni. Head of Investments at CBRE Global Investors for EMEA Credit Strategies. “Can you get over this initial feeling and nervousness and look beyond that at the longer term fundamentals of the London market? We try to ensure that we grant loans to systems that are resilient in the long term, both from an ESG perspective and from a location and real estate basis. You can be in areas that need stabilization as long as you are confident of the longer term prospects. “