MIPIM UK 2015: The bulk of institutional money will be lent into investment property, rather than into new development in the UK.
So said Legal & General’s Ashley Goldblatt, when speaking at a session at MIPIM UK this morning, entitled From Development to Investment: Where is the Money Flowing?
Goldblatt said the higher risk that goes with development investment is not suited to investors such as insurance firms.
Fellow panellist Eoin Bastible, executive director at UBS Global Asset Management’s Global Real Estate, added: “I think the development lending part of the overall pie is less than 10% while the investment market is 90% of the debt market and within that it is roughly split 50:50 between residential and commercial. The interesting point is around spec development versus prelets or pre-sold deals. There is very little funding still for speculative development which is right given the last cycle we have been through.”
The UK regions remain a good investment, however London and the South East still dominate geographically.
And the private rental sector and student accommodation sectors have now gone from being peripheral markets to mainstream said Goldblatt. “We don’t feel any sector is off limits and actually it can be harder to make the arithmatics work in traditional assets.”
But Goldblatt warned that there was too much money chasing opportunities. When asked how much money is out there, he said: “Far too much. We did a back of an envelope calculation and estimate that there is £2 of debt finance for every £1 of need.”
The panel believed that London still had good opportunities, but investors should “pick their battles and chose investments wisely.”
Bastible said that the retail and logistics investment sectors had gone through a structural shift and Goldblatt believed that the retail sector “still had room” to invest but said “with the market being hit by a wave of financing by the big supermarkets three years ago, they are now going through a tough time. As such it is now much harder for the freeholders of big box retail sites to find easy loans.”
Bastible said UBS is now trying to capture the new trend hybrid between the retail sector and bricks and mortar logistics, for example supermarkets and their big box distribution centres.
lisa.pilkington@estatesgazette.com
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