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Last night, I attended a very insightful real estate predictions panel event, hosted by Dentons. The panelists (PfP Capital’s BTR fund director Alex Notay, Hermes’ Head of Private Markets Chris Taylor, Fenwicks Property Director Jeremy Collins and IPF Chair and LaSalle IM’s Philip Nell) discussed their thoughts on the outlook for the sector in 2019. Much was said about the different asset classes; with a particular focus on PRS/BTR, which all agreed will continue to grow in terms of portfolio allocation, and the shifting nature of retail which will require fulfillment and logistics to evolve accordingly. With regards to the office market, the panel agreed that in London at least, 2019 should continue to prove its resilience. This is, according to Notay, partly due to the fact that permitted development schemes have adversely impacted the stock of affordable office space in London in particular. Taylor believes that, as long as London remains a hub for the big tech multinationals and the UK continues to see an inflow of talent that wants to work here, we’ll be fine, Brexit or no Brexit.
Research shows that investors seem to agree with this. According to IG, after the initial shock post-Brexit vote, office rents across the UK started to pick up in mid-2017 although the outlook for 2019 is softer. Looking at London, in their 2019 Outlook Report, Savills IM said that the capital’s office market remained healthy in 2018. Rental values are expected to remain stable into 2019 thanks to low levels of supply and occupiers’ preference for new stock. One of the analysts’ key picks for investment in 2019 is multi-let London office buildings. A report published yesterday by JLL explains why. According to JLL, London remains the top gateway city in the world, as it maintained its position as the number one destination for global real estate investment in 2018. This investment activity momentum will be maintained into 2019, as real estate continues to look attractive in comparison to other asset classes. Though yields are at a historic low, robust corporate occupier fundamentals are leading to positive returns and, although investment activity may slow from the current high, investors will continue to hold their exposure to real estate albeit with a more selective search for assets with strong income growth.
Will London continue to be a tech hub and a leading talent pool? Tech Hub seems to think so. Today, Europe’s longest-running tech workspace and startup support organization committed to London long term, investing £2.2 million in a brand new TechHub in Shoreditch to open in March. TechHub’s startups are committing to London too.
TechHub, founded by Elizabeth Varley, has been providing workspace and business support in East London since 2010 to what are now over 400 member companies. Varley told me that they previously had to move further East to find space that was both large and affordable enough. She spent over a year looking for a place that would bring them further back into the city (the new, larger hub is on Clere Street and has allowed TechHub to up the number of spaces for scale-ups with teams of 30 or more) and has now committed to it long term – or “long term in the life of the tech industry” as she puts it – signing a six-year lease. When asked about the area, Varley told me that “demand in Shoreditch is still significant, since tech and related businesses continue to be interested in the density and value from being in the Shoreditch area and close by. On or just off Paul Street we see TechHub re-joining Barclays Rise, Google, TechStars, Microsoft, Silicon Valley Bank, Idea London and local unicorns like Farfetch and Monzo are very close by. That creates a strong density of tech community support that’s higher than it’s ever been. Startups would have a difficult time affording the area if we didn’t offer what we do at the prices we do.”
I asked Varley what she thought would happen to the London tech scene, and TechHub, in the event of a hard Brexit. Echoing Taylor’s words last night, she told me that “we expect to remain in a strong position. We may see more engineering growth in Europe than London, but there’s nowhere in Europe that can compete on access to finance, big customers, and the sheer scale of London and its talent. London will remain by far the largest city in Europe, and that will always have huge benefits to business.”
The London tech community – as also evidenced by giants such as Google and Facebook doubling down on their London presence in 2018 – continues to believe in London’s status as THE global capital, and is putting its money where its mouth is. This should help underpin the market into 2019 and beyond, Brexit or no Brexit. Investors should exercise caution, but there is no need to panic, at least not yet.
January 23, 2019 at 09:39AM
Forbes – Entrepreneurs