Concrete Analysis | Uncertainty is an opportunity for investors looking to the UK

UK retail property has long been a magnet for investment from Asia, underpinned by strong fundamentals that will continue to drive it even in times of uncertainty. This includes a mature e-commerce model, a sophisticated logistics network, diversity in retail locations and a similar consumer demographic. As the capital, London remains a powerhouse, a gateway city for global investors drawn by often double digital digit rental growth on its prime streets. In fact, London shops have been seen by many as the ultimate safe haven investment, with buyers bucking the ‘wait and see’ trend this year despite the odds. This is due to the quality of assets being sold.

CBRE’s own figures show that £1 billion has been transacted in London retail in the first half of the year, with another £600 million expected to complete later this month, and £400 million more on the market. To put this in context, volumes for the typically slower first half of the year have averaged around £700 million over the past few years. The last few weeks have seen the sale of Debenhams’ Oxford Street flagship store from British Land in one of the biggest deals in London since the EU referendum. Spanning 363,000 sq ft, the seven storey building was sold for £400 million to a private investor and is testament to the strength of confidence in the market. Another notable example this year is the sale of Zara’s new flagship at 61-71 Oxford Street for £183 million. With the date of the EU referendum announced before the latter completed, and the Debenhams sale in the immediate aftermath, the deals are proof that, with the right insight and on-the-ground knowledge, investments can be found to suit business needs.

While 75 per cent of Central London retail investment by Asian buyers has been on Oxford Street and Bond Street, the draw of London’s luxury streets is another important factor. Only last month, 169 New Bond Street, let to luxury watch and jewellery brand Piaget, sold for a record £65 million. The deal for the 3,500 sq ft boutique store represents the highest price paid per square foot for a UK real estate asset, and is a reflection of the healthy competition maintained around London’s most exclusive shopping destinations.

Some have questioned the outlook for investment in the UK in light of Brexit, and the value of the sterling against the yuan reached an all-time low. However, against this backdrop, prime London retail is still seen as a sector offering long-term income and capital preservation. A fall in currency actually presents a buying opportunity, and overseas buyers, who represented 60 per cent of volumes in the first half of 2016, stand to benefit from a significant advantage.