Insights 1st February 2021 Asian investment

Workman has first-hand experience of Asian investment in UK real estate on behalf of Asian investors. Workman, Howard Kennedy and BDO recently hosted an online panel discussion analysing opportunities for 2021.

Experts on the panel examined trends in the UK real estate market, how they might change in future, and which asset classes are the most affected by current market disruptions.

The panel discussion provided insight into the headline real estate issues of the moment:

  • the changing tenant-landlord relationship;
  • the continued rise of meds, sheds and beds;
  • the acceleration of localism and the re-birth of the office (clue: it will be bigger), and;
  • the all-important ESG targets.

Think outside London

Kevin Lin is President of TusPark UK, a science and technology service corporation with an investment arm as a venture capital and private equity group fund. Lin has invested more than £250m in Cambridge since 2018. He considers science park facilities to be at the heart of its business.

Kevin explains that Asian investors are becoming more likely to consider areas outside the London bubble:

“Due to the pandemic, I have seen even greater demand for life-science-based facilities. We can see construction is underway in many areas. We know some new lab facilities are being developed in Cambridge, Oxford and south of London. Because of the impact of the pandemic, some of the traditional businesses may move out of London. But for some areas there is still very convenient transportation access. For example, Kings Cross to Cambridge is only around 50 minutes.”

Why the office is not dead

The panel agreed that more employees will be looking to work from home two or three days per week. However, the general view was that offices are on everyone’s watch list. Office, the panel believes, are still very necessary, with a role as team-hubs and collaboration spaces. But offices will need to operate in COVID-secure environments for the foreseeable future.

Oliver Jackson heads up UK Investment for Resolution Property Investment Management. The firm is an exclusive investment manager for Fosun Property, a leading investment group from China. The firm invests in value-add real estate opportunities in 14 European countries. Jackson explained why he believes the office is not dead:

“The trend in the UK, as in a lot of countries, was for a decreasing amount of space per employee in offices, over the past five to 10 years. But that decline in space is going absolutely reverse over the next few years. The actual amount of space that an employer is going to have to afford their employees will increase. First, in terms of their kind of personal desk space. But also breakout space and an increased amount of circulation space.

“Particularly the bigger corporates will suddenly find they have enough space now. So, my prediction for London, and other office markets in the UK and around the world, in the next 9 to 12 months and beyond, is actually they’re going to experience a little bit of a mini-boom. And this will be exacerbated in London by the fact that we’ve had a bit of a shortage of office space.”

Asian Investment in UK Real Estate: Space in Central London

Office space in central London will become, similarly to retail, more about the experience rather than functionality. So believes John Morton, Surveyor, City Investment, Gryphon Property Partners.

“On entering a corporate space there’s going to be a much bigger reflection of the experience and portraying more about what this company is about. That’s going to be a central issue in retail as well: it’s not going to be about how many jumpers you can fit on a shelf, but more about the experience.”

The role of the landlord

Our own Julian Bates, partner, Workman, expanded on the trend towards managed space and the added-value that is now being delivered by landlords in the evolved iteration of the landlord-occupier relationship, which he sees as exponentially more collaborative than ever before.

“The old idea of the landlord-tenant relationship is long gone. And the idea that landlord services stop at the entrance to the offices is gone. We’re finding that occupiers are far more receptive to landlords delivering a greater range of services to occupiers, not just of the facilities management variety but also of the experience variety; the lines are becoming blurred.”

The race to Net Zero

Finally, the panel discussed ESG, with Julian describing its importance to Workman’s fund clients, who see ESG as the biggest area in 2021.

“Many of our clients have given significant commitments to be Net Zero by 2050, 2030, or earlier. We’re spending greater and greater amounts of time working with them to get their buildings to that position as soon as possible.

“That will inevitably impact upon the investment market, so all landlords need to pay attention. It’s always been the case, but strong occupier relations and services lead to better retention.”

Watch now | Leveraging opportunities in 2021: insights for Asian investment in UK real estate

asian investment into UK real estate