Regulated by RICS

MIPIM Asia – Brexit not a concern

I had the pleasure of attending MIPIM Asia in Hong Kong a few weeks ago, which was the first time Malcolm Hollis attended the event. I also joined fellow RICS members at its Annual General Meeting and to celebrate the RICS 150th anniversary.

At Malcolm Hollis we already work with a number of Asian investors and their local agents in the UK. We saw MIPIM Asia as an opportunity to find out first-hand how the UK commercial real estate market is viewed in the Far East, what opportunities investors are still keen on and what concerns they have. Below are a few of the things I took away from these conversations, but what was especially interesting was the interest that was shown in our (Malcolm Hollis) position as an independent specialist firm that doesn’t get involved in valuations or as an agent.

It may be stating the obvious, but investment from Asia has the potential to prop the UK market up at a time when many British and European investors are treading with caution. Across Asia, there are numerous property businesses that are bigger than our banks, which shows the buying power that they have.

We have advised on record levels of transactions this year with our building surveying, M&E, environmental, RCA and lifts teams (to name a few!) advising our clients who collectively have acquired over £12bn in assets and prepared over £4bn for sale.

The Brexit question

Despite the doom and gloom we all feel about the way Brexit is going over here, most investors I spoke to out in Hong Kong were not too concerned about what deal we end up with or whether we are in or out. They are clear that their investments in UK real estate is for the long term. The UK offers a level of security that investors aren’t afforded in many other countries thanks to the intricacies of the laws surrounding commercial leases. The general feeling is that Britain will bounce back from any negative impact of Brexit to still offer investors good long term returns.

Who is investing and where?

Hong Kong, South Korea and Malaysia continue to dominate the investment landscape, but more and more is going to be coming from China over the coming years. A new ruling from the National Development and Reform Commission of the People’s Republic of China (NDRC) has created new routes for Chinese investors to put more money in UK property and infrastructure development. Compared to the returns that can be achieved by them investing locally in Asia, the UK market is highly appealing.

Everyone feels they know the London market and understands it enough to have an opinion as to what is going to work for them. I also had a lot of questions thrown at me about the regions too. There is a growing realisation that it is the cities away from the Capital that offer the best value both in terms of what can be bought now and the long term returns. The attitude to investing in the likes of Manchester, Birmingham, Leeds, Bristol and other key markets is changing, but the approach that Asian investors are taking is also different to the one they take in London. They are not markets that investors are directly familiar with and they therefore feel they need to rely on trusted advice from partners in those areas who know the lay of the land inside out.

Knowing the detail

Asian investors also appreciate the level of detail required as part of comprehensive technical due diligence surveys and are cautious about the levels of capital expenditure for refurbishments, planning controls and regulations that affect the on-going ownership of UK assets. Leasing terms, obligations and their impact on service charges, maintenance and cost recovery in dilapidations are areas which can be often overlooked as part of a transaction but at investors peril!

As published on LinkedIn.