London’s real estate sector robust enough to ride out political uncertainty
8 October 2019
London will continue to thrive despite the ongoing political and economic uncertainty, according to the capital’s property leaders who convened at the London offices of Japanese developer Mitsui Fudosan (MFUK) in October 2019.
As the Brexit saga rumbles on and uncertainty persists, the brunch meeting at MFUK’s Berkeley Square office – chaired by London First’s Sue Brown — was a timely opportunity to take stock of the challenges and opportunities facing the capital’s commercial property market.
MFUK’s Managing Director Eiichiro Onozawa kicked off proceedings by discussing the implications of declining growth and productivity in the UK, the weakening pound, the UK’s declining global influence and politico-economic uncertainty.
Onozawa highlighted the need for more attention to be given to the ‘Big Picture’ rather than micro factors and asked what the UK’s priorities should be at this precarious time and questioned whether the government and London’s property leaders are focussing on the right issues?
Jules Pipe, London’s Deputy Mayor for Planning, Regeneration and Skills, stressed that while there had been a fall in central London office purchases in the last quarter, this was down to the ongoing political uncertainty rather than London becoming a fundamentally unattractive place in which to invest or do business. Pipe pointed to London’s tech sector as one of the key drivers of future growth.
“London is and will continue to be a real incubator and accelerator for technology, whether in the nascent medical and bio-tech sectors or in fin-tech, gov-tech, clean-tech – it’s become a real global centre for those industries,” Pipe commented.
He pointed at the £3 billion of venture capital that was invested into the UK tech sector in the first half of this year and the real cutting-edge AI developments taking place in London, which are attracting huge inward investment.
“More than 700AI companies are now based in London, which is twice as many as in Paris and Berlin combined. London remains a centre for investment now and the future, although it’s not necessarily translating into office space purchases right now,” said Pipe.
The discussion moved on to the pent-up demand for top quality office space in central London and the impact on rents. And despite many of the barriers to development in the capital, there remains a great deal of pent up demand which is not being met. JLL Chief Executive Chris Ireland expressed his concern at the lack of new, major developments coming on stream.
“It’s almost surprising that the occupier market remains strong given we’re in the eye of the storm of the uncertainty that we’re in at the moment. But we don’t have a pipeline for new developments that is going to form the opportunity for the future, whether it’s in tech or life sciences. The constricted supply is part of what is fuelling occupier demand, which remains pretty strong,” commented Ireland.
Emma Cariaga, Joint Head of British Land’s £3.3 billion mixed-use Canada Water development, which received planning permission earlier this week, highlighted the need for affordable homes to be built within commutable distances from central London to maintain the capitals’ attractiveness to employers.
“Keeping commuting distances short and choosing a location where there is easy access to a pool of highly educated talent who haven’t had a dreadful journey to work is key — South East London is the only part of the capital in the last 10 years which has managed to retain any kind of affordability,” Cariaga commented.
The meeting concluded with SEGRO’s Business Unit Director Alan Holland echoing the panel’s confidence in London’s future but calling for London’s boroughs to find a way to better work together.
“The emerging London Plan is great in terms of its strategic direction but the coherence starts to fall away slightly when we cross London boroughs. However, the fact remains that when we ask our customers – often global multinational companies — where they want to be, they say they all want to be in London,” added Holland.
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