Regional REIT, a new commercial property investment trust focusing on commercial real estate outside London and the southeast, is set to list in London today. The flotation underlines the appetite for commercial real estate opportunities outside London, but does this include the international community?
The weight of international capital which has recently been looking to invest in the City has certainly helped to push up prices elsewhere. But only goes to show that for most international property investors, other than for trophy assets, it’s still all about the capital.
It is clear that liquidity and long-term security are the key considerations. Today’s real estate market is a truly global one but it is defined by cities, not countries. London real estate did not go into recession. The City underpins much of the current growth in the economy and in commercial property terms ranks alongside maybe two or three other global cities, including New York and Hong Kong.
Some have argued that high prices in the capital would force all investors to look elsewhere for strong returns but London is still fantastic value globally with exceptional current opportunities to acquire prime assets, especially while the volatility in equity markets has caused short term liquidity issues for some potential investors from Asia (but they are expected to return).
Recent speculation of a London bubble looks highly unlikely but prices have been rising too fast and more steady rises would be no bad thing.
This raises an interesting point about the success of the much-vaunted Northern Powerhouse project. Can cities outside London compete? Possibly to the domestic market but that remains difficult.
The weight of capital and strength of the pound has pushed some money into other international cities, including Paris, Frankfurt, Singapore and Sydney. The Government has worked hard to position Manchester into the chasing pack, with some notable success – President Xi last month confirmed new direct flights between Manchester and Beijing and substantial investment into the city and airport.
Leeds, Birmingham and Bristol do not fall within this category on an international scale. The lack of supply and comparative pricing when risk is adjusted for the difference in marketability still leaves London in pole position.
Regional REIT is attracting interest from existing and new shareholders, demonstrating there are those in the market interested in the UK regions as the economy picks up. There are opportunities outside London for savvy investors and REITs and listed single property companies are great platforms for the wider UK investor audience. Yet for most of the global real estate community, it’s still London and London alone.