JLL: British currency slump attracting APAC RE investors

The steady depreciation of Britain’s currency since it voted to leave the European Union back in June has led to a surge of investment from Asia Pacific in to its property markets, according to JLL, which said this investment spike will continue if the sterling continues to lose value, writes Real Estate Capital's sister publication, PERE.

The steady depreciation of Britain’s currency since it voted to leave the European Union back in June has led to a surge of investment from Asia Pacific in to its property markets, according to JLL, which said this investment spike will continue if the sterling continues to lose value, writes Real Estate Capital’s sister publication, PERE.

“For many long-term investors, sterling deprecation provides an added fillip to the investment case, based on their perception that it will may appreciate once there is more clarity around Brexit and its economic implications, but it is not a case of one-size-fits-all,” Ben Burston, head of UK office and capital markets research, at JLL said.

The depreciation of the pound, coupled with a slight drop in capital values, has led UK commercial real estate to be discounted by 16 percent – relative to pricing in June post the referendum – on average to overseas capital, according to the property consultancy.

JLL findings highlight that the depreciation has spurred increased investment in the UK from the Middle East and Asia Pacific regions even though the market has experienced less capital inflow from the United States and global funds in general.

“We continue to see the emergence of Chinese capital globally. Chinese investors now rank just behind US as the second largest source of global cross border capital and we expect them to have an increasing influence on the UK market,” commented Alistair Meadows, head of UK capital markets, at JLL.

“Many investors from China and the wider Asia Pacific region come to the UK with different motivations and return aspirations to traditional UK and global investors. They seek diversification and safe haven forms of investment, and attracted to the depth, liquidity and familiarity of the UK market.”

Overall, overseas investors accounted for 48 percent of transactional activity within the UK market in 2015 and a slightly higher 51% in 2016, with the increase likely to be due in part to the currency movement, JLL said.

Investment inflows from the Americas (primarily the US) fell from 32 percent of the total overseas investment into the UK to 17 percent in 2016. In contrast, Asia Pacific-based investors recorded a surge in investment, with their share rising from 17 percent to 28 percent.

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