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LGPS will remain key investor in UK real estate, says JLL

LGPS will remain key investor in UK real estate, says JLL

Local authorities will continue to be active in the UK property market, while private equity will make a comeback in the regional investment market.

This is according to Alistair Meadows, lead director for UK capital markets at property specialist firm JLL.

Writing in the firm's 2017 outlook for the UK real estate, Meadows said the LGPS interest in property investment, which was strong throughout 2016, is set to continue this year.

'The regional market had seen a substantial influx of capital from local authorities, which spent over £1 billion on UK property during 2016, led by Spelthorne Council’s purchase of BP Business Park in Sunbury for more than £350 million.

‘Local authorities have been encouraged to become more entrepreneurial and are attracted to the income property offers given their low cost of capital.’

He added, however, that the recent upsurge of activity has generated significant attention. Therefore, JLL said the central government would monitor local authorities’ activities and management capacity more closely in 2017.

‘On the other hand, private equity was less active during 2016, but discounts on secondary products will attract renewed interest in 2017 – although it remains to be seen how liquidity will come to the market,’ he said.

Asia lead the charge in London

According to JLL research, the British capital in particular continues to benefit from sustained capital inflows from the Asia Pacific region and investors from Hong Kong are currently at the vanguard of investing.

‘Private buyers and property companies from Hong Kong and China are targeting London as they look to increase their overseas exposure, perhaps reflecting concern that regulatory changes may make it more difficult to deploy capital overseas in future.

‘Many private buyers have also viewed exchange rate depreciation as an opportunity, and we expect this to persist in 2017.’

Surge in alts

Meadows said the uncertainty over the economic outlook and Brexit would accelerate the drive for investment in alternatives, where income streams are often less vulnerable to uncertainty surrounding the near term economic outlook.

‘Strip income deals are growing in popularity and investors will be increasingly prepared to move up the risk curve as alternative markets mature and underlying operational businesses are better understood, he said.’

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