Even now, after the triggering of Article 50 and the beginning of the formal process of the UK's withdrawal from the European Union, there are more questions than answers that arise from Brexit. The implications of the UK's exit from the EU remain unclear and shrouded in uncertainty – but what is very clear is that the knock-on effect on Sterling has made UK assets, and particularly real estate, attractive to overseas investors.
Asian investors in particular are taking advantage of Sterling's 30-year low to buy up prime London office and retail space – since the start of 2017, Ogier has advised Hong Kong-based CC Land on the purchase of the Leadenhall Building (known as the Cheesegrater) for £1.15 billion (thought to have been the second largest single asset sale in London's history), and other recent Chinese purchases include Société Generale's London headquarters, Ryder Court in Mayfair and Moor Place in the City of London.
Qatar (through its various investment arms), already one of London's biggest landlords, with stakes in Canary Wharf and the Shard, has recently committed to a further £5 billion of investment in the UK, including real estate.
But interest isn’t restricted to Asian investors – 2016 also saw Ogier advise on the sale of London City Airport to a consortium led by Canadian pension funds, the sale of LCR's stake in the 67-acre King's Cross development to an Australian pension fund and the acquisition of Grimaldi Square in Islington by a European fund.
The overseas investment trend does not end at the M25, or even at Britain's shores.
Ogier has also advised Luxembourg-based Corestate Capital Holding SA on the £48 million purchase of the iconic Liver Building in Liverpool in 2017. Figures for 2016 show that overseas investors poured £5.8 billion into UK real estate outside the capital over the course of the year, with Liverpool, Manchester and Edinburgh all attracting investors.
And there is interest in the rest of Europe too – the deal to buy P3 Logistics Parks by Singapore's sovereign wealth fund was another transaction on which Ogier advised, and was the second largest European real estate deal of the year, spanning nine European jurisdictions. A major survey of the real estate market by Intertrust Group found that 93% of investors planned to increase or maintain their holdings in German real estate in 2017, with 85% feeling the same way about France (possibly hedging against any potential flow of business from London to key European financial centres, including Frankfurt and Paris).
These transactions demonstrate that braver overseas investors are putting their capital to work in the UK and Europe – not just because favourable exchange rates offer immediate value but also because uncertainty is likely to remain for the foreseeable future and investors realise that they can't afford to just "wait and see".
As the progress of the formal Brexit negotiations crystallise the current uncertainty, and as the resolution of the next Greek debt repayment date (July) and elections in France (April), Germany (September) and the Czech Republic (October) offer a clearer direction to the future of the continent, the trend of acquisitions of UK and European real estate assets by overseas investors is a key one to watch in 2017.
This article first appeared in Business Brief.
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