Paragon’s Marcus Wroe has offered his expert advice to international investors when it comes to investing in commercial property in the UK and Europe.
International investors continue to take a keen interest in UK and European property. There are plenty of commercial opportunities out there, but with the market shifting, navigating through many considerations and variables poses a real challenge.
Europe as a continent can seem like an enigma, being home to the world’s most competitive locations such as London and Paris, as well as emerging and high-growth markets like Portugal and Romania. There’s also growing awareness of the opportunities from different asset types. From offices and retail to student residential and care homes, it’s no longer enough for investors to buy a portfolio of industrial ‘sheds’ in Germany and Poland.
How can overseas investors navigate through the confusion? Here are some top tips for anyone looking to achieve commercial success in UK and European property, from a UK-based building consultancy’s perspective.
Think outside ‘big box’
There is a growing trend of international investors switching from industrial property to other asset types or at least diversifying their portfolios in that direction.
Paragon has seen this directly, with a Far East client which has previously invested heavily in European sheds now moving into an asset management phase on those developments and shifting its transactions towards offices and student residential.
Offices prove attractive to many looking to invest in commercial property and there is often scope for new owners to add value. For example, Qatar’s Alduwaliya Asset Management bought Riverside House (right), a South Bank office block for around £150m in 2017, and Paragon is now advising on a 90,000 sq ft Category A refurbishment during the client’s asset management phase to increase value.
Look to UK regions and emerging markets
Many international investors are rethinking their approach to investing in commercial property in UK’s regions and emerging markets.
Traditionally, London has been key focus for overseas investors looking to the UK, but now they are seeing value in its main regional centres such as Edinburgh, Manchester, Birmingham and Bristol. Cities like Dublin have also seen a huge influx of investment, in this case based on concentration of global technology companies at the city’s famous Silicon Docks.
Paragon has advised South African investors on 29 transactions in the UK in recent years. Many of these investors historically sought high-profile property in London but are now looking much more open-mindedly at the whole UK market. They are hungry for new asset classes all over the UK and in every sector, with an uptick in investment driven by discounts on currency as the pound weakens.
Likewise, markets which have previously been low down on portfolio lists of those investing in commercial property in Europe, such as Romania, Portugal and Italy, are having a resurgence and enjoying the benefits of inward investment. Buying here instead of Germany and France, for instance, can offer high growth potential and lower competition.
Get global service, local knowledge
Overseas investors may be based thousands of miles from the location where they’re investing in commercial property in Europe, which can create a host of problems around service levels, local knowledge, time zones and language barriers. Do they hire a UK consultant who can provide excellent service but lacks local knowledge, or a local company which knows the area but isn’t used to working with international clients?
Ideally, investors should be able to access both world-class service and local knowledge. For example, Paragon delivers services across Europe by forming and maintaining strategic alliances with local services providers who work closely with UK-based experts. This provides overseas investors with a trusted team delivering across the whole project lifecycle, from transaction and development to management.
A key benefit of this approach is that overseas investors get one overarching view of the project, enabling informed decisions when investing in commercial property in Europe. All the better if this view focuses on the hard facts in succinct UK-style reporting aligned to their strategy and objectives.
Hold judgment on the UK
The UK’s imminent exit from the European Union has left most investors facing a lot of uncertainty. This alone doesn’t necessary mean that international investors are shifting funds from the UK to the rest of Europe instead.
Looking back at the market immediately after the 2016 referendum, Far East investors pulled out of the investing in property in the UK but, after the value of the pound fell, US and Middle East investors piled back in and sparked an increase in transactions. Investors don’t like uncertainty, but they do like favourable exchange rates.
However overseas funds invest, it’s vital to choose a trusted consultant to deliver their projects and portfolios. Commercial acumen, technical expertise and access to local knowledge are all non-negotiable as far as many are concerned.
Another bonus is being able to provide a broad range of services – such as building surveying, environmental surveying and technical due diligence – across all asset classes, from hotels and retail to industrial and offices.
With a decade of experience on European projects, Paragon has advised global clients on €5bn of European real estate transactions in the past three years across countries including Germany, France, Portugal, Italy, Spain, The Netherlands, Hungary and Poland.
European property is in a unique state. The market is shifting and, in the coming months, the old rules may no longer apply. But there remains plenty of opportunities for overseas investors who identify the right markets and assets, and partner with the right consultants to invest in commercial property in Europe.