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Mipim: The investor perspective

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Global investors are increasingly looking to spend their money outside London in order to achieve better returns and the new mayoral combined authorities are helping to boost that, the chief economist of one of the world’s largest property firms has told LGC.

wb headshot 02

wb headshot 02

Walter Boettcher, director of research and forecasting at Colliers International, said cross border investors such as pension funds and family trusts had long invested in London and other global ‘gateway cities’, such as New York, Tokyo and Berlin, and it had become “highly competitive”.

“I do think there is a shift because New York and London are expensive. Now they have been investing in the UK for a number of years, since the mid-2000s, and even more important have been working with the [same brokers] who they trust. The feeling is ‘we have done as much as we can in London’ and there is more interest in the regions.”

The feeling is ‘we have done as much as we can in London’ and there is more interest in the regions

Mr Boettcher said the days of investment returns as high as 18% were gone and investors would now settle for 6-7%. As a result, the trend over the past five years has been less capital investment from US private equity funds and more from Asian institutional funds.

He said “cross border investors and even international funds” were also increasingly interested in joint ventures as a way of boosting returns and despite the uncertainty created by Brexit the UK is still a good bet for property investment. According to Mr Boettcher’s analysis, the two factors driving this are domestic and global population growth, as the former supports the resilience of the ‘real’ economy in the UK while the ageing population internationally means the demand for annuities increases.

Colliers International provides a wide range of property services, from asset management to investment and advisory services, and has an annual turnover of $3.3bn.

Mr Boettcher said he was increasingly asked to talk about the “investability” of a region, and the “coherence” of its local political system and plans was important in providing investor confidence.

“Combined authorities, what they’re doing, instead of having a fragmented market, they’re pulling together. The mayors are figureheads – that’s how it’s supposed to work,” he said.

“All the ingredients are there for really cleverly done development.”

He highlighted the success of the West Midlands CA in putting £50m of seed funding into the Paradise project, generating £2bn in investment.

“It’s not about millions, it’s about billions. These new entities are going to have to think big,” Mr Boettcher said.

“We are not talking about £10m to transform bus services, although that’s part of it, we are talking billions to transform cities and satisfy the pension funds.”

He said the unique strength of combined authorities was getting “the principal stakeholders in a room”. As a result, the One Yorkshire devolution proposal was “too big and would lose focus like the regional development agencies”.

 

 

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