OBI @ MIPIM – The ‘Smart Money’ Report

Will Lewis | 28 April 2016

Who or what is the clever money on in property at present? During MIPIM week, there are hours and hours given over to discussing what cities are doing and that they need to do to attract investment. We thought it would be worthwhile for OBI to get together with a few of the property people we work with, to look at the issues around investment, and ask ‘what are investors looking for in a city?’

Mike Ingall, chief executive, Allied London

“Cities need to be able to tell a story. Manchester has that – it has a history that not many of its competitors can match – it was the ninth largest city in the world in 1900. As a city, it probably needs to believe in itself more – over the years, we’ve heard too much of it comparing itself to Barcelona or wherever – that doesn’t matter. Believe in the strength of your story. Leeds is also getting there – the Sky story is a great recent example of why a major business should invest in a city such as Leeds. Investors and developers can be quite polarised on their views of cities – I wouldn’t build 500,000 sq ft of office space just anywhere. It’s not so much that people are attracted by or put off by the people that run cities, although a business-friendly leadership that knows what it’s doing obviously helps.”

Franco Sidoli, director, CBRE

“Investors are tenant-led, ultimately. One of the topics we’ve seen discussed here has been whether the more modern way of developing offices – that stripped-back style that appeals to a lot of tech companies, that has a ‘Shoreditch’ feel – will be of sustainable appeal to investors. The fact is, the look doesn’t really matter. If that’s what occupiers are signing up for then that’s what matters to investors – that funkier kit won’t make a building less attractive in the current market in my view .Although for how long it will be the flavour of the month in terms of what occupiers want is another matter. It will come full circle at some point, you’d think! There are a lot of good sizeable investment deals being done in the regional cities – we’ve recently sold the Albert Dock in Liverpool for Arrowcroft, Piccadilly Place offices in Manchester for Carlyle and funded large scale development schemes in Birmingham (Paradise Circus) and Leeds (Wellington Place) for Hermes.”

James Jakeman, principal, Benson Elliot Capital Management

“As a pan-European fund manager, we’re constantly looking at how cities are shaping up: what’s happening on the macro side in terms of transport and digital infrastructure are crucial foundations for sustainable occupational activity and investment liquidity. There isn’t a one-size-fits-all plan for cities – but we continue to like what we see throughout the UK regional hubs. Some of our Fund III investments such as 10 TempleBack in Bristol and 55 Princess Street in Manchester offered particular opportunities at a building level but perhaps more importantly exposure to individual city centre markets offering favourable growth fundamentals. Having managed these holdings through to a more mature occupational basis, we’ve since exited back into core institutional ownership. We see no reason why the UK regional markets won’t continue to be underpinned by core institutional capital requiring stability, liquidity and transparency.”

Peter Mather, managing director, Tristan Capital Partners

“We’ve spent time in the UK regions – investing in locations such as Manchester and Birmingham. The increase in rental levels UK-wide and relatively low levels of supply make the regions interesting and at present there are also places with emerging infrastructure that can challenge historically stronger areas. Even in London, for example, areas such as Greenwich peninsula and Stratford are evolving – there are more interesting things you can do there than in central London. Parts of the UK where major infrastructure projects are about to start could see something similar happen.”

Conclusion – Will Lewis
The sense we get from the investors and advisers we work with is that this is very much a time that people are looking to back bold, ambitious projects. The supply of quality product is still relatively slow in coming though in most of the UK’s regional cities, but the developers that have been prepared to stick their necks out are getting some spectacular results. There’s a weight of capital ready to invest in the UK and the need to demonstrate ambition on the world stage has never been greater.

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