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London

Chris Ireland's view in Asia

Insights from JLL's new UK CEO.


​Recently I spoke in China at a UKTI trade mission.

JLL is the long term partner of UKTI and London & Partners, which is an organisation funded by the UK government and London mayoral authority to attract overseas businesses, students and visitors and help London businesses go global.

The Chinese market is immensely important to JLL. We have full business presence in 12 cities across China and have dedicated ourselves to developing strong UK/China ties in response to the increased amount of investment from this country to the UK and Europe. The UK real estate market has undoubtedly become the 1st choice of Chinese out-bound capital. As the leading UK property capital markets team, we have been advising investors new to the UK market on how, where and when to invest across the sector. JLL has market leading investment teams across the world. JLL has been directly involved in 4,000 transactions across 53 markets globally, involving US$71 BN of cross border capital in the past 27 months.

2015 was an exciting and successful year for UK property. Volumes in the direct market were approximately £65 billion / RMB 620 billion and returns, as independently measured, were close to 15%. This is a very strong relative performance when global interest rates and inflation are so low.

The start of this year has seen weaker investment in line with the global trend. This is primarily due to the UK’s referendum about European Union membership. The uncertainty regarding the outcome is temporary. We predict that the economy and real estate market will be much more active post referendum.

The underlying fundamentals of the UK economy are good and it is forecast to be the strongest in Europe. Unemployment is falling and there is a restricted supply of property to rent in nearly all markets and sectors. The overall consensus for UK property is still very strong, with the majority of forecasters suggesting total returns this year of 8-10%.

In a recent survey JLL undertook of investor sentiment, 61% of investors told us that they were expecting to be net buyers over the coming year and 55% of respondents said that they planned to increase their exposure to commercial property. This highlights the resilience of the asset class.

I, and JLL as a firm, believe that being in the European Union makes good economic sense for the UK. Trade and free movement of skills have been crucial to the success of the UK. However, it is important to realise that if the vote next month is to leave the EU, then this will not damage the pre-eminence of London as a financial and business centre. It may take the UK a while to navigate its way through new trade arrangements, but there is no doubt that we will be seen as a valuable trading partner due to our booming services, and that other European countries will still need and want to access our markets.

I know that 8 is a lucky number here in China. I believe that there are easily 8 reasons why London will always be attractive to the investor.

First, the language, time zone and proximity to mainland Europe will always make London an attractive place for international companies to base their headquarters. London office hours overlap with countries that collectively generate 99% of the world’s GDP.

Second, the city is increasingly a magnet for people and business with a population forecast to grow to 10.3 million people by 2030.

Third, the transparency of the UK market’s legal and tax systems makes London a particularly business friendly hub. Entrepreneurs’ visas, capital gains tax relief and Research & Development tax incentives all help to foster investment and innovation and keep London the first choice for many businesses and start-ups.

Fourth, London is becoming a hotbed for innovation. It has firmly established itself as the global leader in Technology and Media,…with one new tech company starting every hour since 2012. Over the last five years, a massive 45,000 new technology businesses have been set up. East London especially is becoming a hub as tech and media emerge as a dynamic part of London’s office market.

Fifth, London is undergoing an infrastructure revolution. One example is the new Crossrail development which will open in 2018 and connect London to the South East, opening up new areas of London.

Six, there is a desperate housing shortage in the city. The new Mayor Sadiq Khan has pledged to build 50,000 homes per annum. There will be ample opportunity for overseas investors to help achieve this plan.

Seven, London has and always will be a destination for students from across the globe. Student housing is becoming a global real estate asset class and London is leading the investment charge on this. Indeed, direct investment in the UK student housing market was over £4 billion in 2015. With the city’s full time student population expected to rise by 50% in the next decade, the opportunities for further development and investment are endless.

Finally, London’s sheer diversity and scale of population make it a hub for Europe and the world’s best talent. Among more than 4m workers you’ll find 230 languages, 400,000 creatives and some of the world’s best professional services partners. In the 1700’s a famous English writer Samuel Johnson remarked: “When a man is tired of London, he is tired of life; for there is in London all that life can afford.” That statement is still true over 200 years later. People come to London to make their lives and homes because of the strength of the social and cultural brand of the city.

I have spoken a lot about London, but the prospects for the rest of the UK are equally exciting. In a recent client survey, 37% of investors said they are looking outside London and the South East. A record £2.76 billion was transacted in 2015 in the office markets across the Big 6 UK cities due to quality of stock and strong outlook for rental growth. The government is also investing in this northern powerhouse and major infrastructure projects such as High Speed 2.

The UK and London are very much open for business and present new opportunities for investors from China.