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Is there still value in London?

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2015-12-18
The company has a new perspective post-downturn in the sense that it is interested in ‘alternatives’ – mainly through multi-family housing. But it is not tempted to find value in the UK regions, preferring to stick to core global cities instead.

And while London might look expensive to some, for Brunel and Ivanhoé there is still value to be had.

“Obviously London is heating up. On the investment side some prices are crazy. But there are still opportunities, and as we are focused on offices, we are looking in the City, City fringe and Midtown areas.

“We don’t have much interest in the UK regions. Seen from Montreal, London and Paris are already regions. We also don’t want to buy one-off assets in out of the way locations. Large, dominant retail assets like this are a lot of energy and effort.

“Multi-family housing is something we are really interested in. Since 2008, when a great number of people handed the keys to their homes back to their banks, so many have turned their backs on what I call the‘Desperate Housewives’ image of the suburbs.

“They are keen to live in city centres, and we see tremendous growth in this field.”

Brunel has some clear predictions for the future. Being Paris-based, she has seen the benefits of high-speed train travel in France and says: “High-speed trains created development in regions that had been left behind. Lyon, Bordeaux and Marseilles all prospered as a result.

“It has really re-shaped the country. Those cities became regional capitals in a country which, until then, had been heavily centralised through Paris.”

And in property terms, Brunel has seen, post-banking crash and Euro Crisis, a shift in expectations among property’s key customers – its tenants.

She says: “None of us will now put up with living or working in bad environments. I don’t believe tenants are bothered with lease lengths. What they do want, after the technological revolution we have just been through, is for the landlord to be a provider of the good space needed rather than just an old-fashioned landlord.”

2014 is proving to be a buoyant year for the UK economy and for the London real estate market. There is little doubt that London remains a magnet for both domestic and international investors. Nearly £30bn of assets were traded in the capital last year – the highlight being the £1.7bn disposal of More London.

London’s popularity has resulted in increased competition and low yields, which explains why 47% of respondents to our survey now see London prime real estate as over-valued. This pressure means that more investors are being drawn to regions where there is a promise of greater returns.
 

The strength of the London market and the growing optimism in the regions perhaps explain why 83% of respondents believe there is a low or very low risk of a UK real estate downturn in the next two years. In the longer term 49% feel there is a medium risk – a figure which is unsurprising given that the real estate market is notoriously cyclical.