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Commercial property markets back on firm ground after Brexit

by International Commercial Investment on July 3, 2017

Source: The Express

Commercial property is set to continue its recovery one year after the EU referendum result panicked investors who rushed to dump funds targeting the sector.

FTSE 250-listed St Modwen Properties and Great Portland Estates both deliver updates next week amid continuing uncertainty over the impact of Brexit.

Shares in St Modwen, the UK’s largest brownfield property developer, have bounced 45 per cent since its post-referendum dip and Ben Maitland, securities analyst at Beaufort Securities, expects to see healthy growth in net-asset value per share in next Tuesday’s half-year results.

“St Modwen has just sold its stake in the New Covent Garden Market development at Nine Elms Square in Battersea, south-west London, for £190million, which puts it on a sound financial footing,” said Maitland, adding that the land sale significantly reduces the company’s debt and balance sheet risk.

“The outlook for commercial property for industrial, logistics, private rental and student accommodation is good.”

Graham Spooner, investment research analyst at The Share Centre, said St Modwen is a buy as its debt has been reduced and the shares trade at a large discount to net-asset value.

Great Portland Estates will publish a trading update after May’s full-year results showed a pre-tax loss of £140.2million, with analysts forecasting profits of £58.2million in 2018 amid market resilience.

Hargreaves Lansdown senior analyst Laith Khalaf said it is now a year since open-ended commercial property funds were forced to suspend withdrawals after investors withdrew billions in a post-Brexit panic: “The sector has regained its poise as economic data has proved more robust than expected.

“Commercial property remains sensitive to a UK slowdown. London property is particularly vulnerable as the capital relies so heavily on financial services, which are considered a flight risk if Brexit talks go badly.”

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International Commercial InvestmentCommercial property markets back on firm ground after Brexit

London is the gateway to the world for EU business

by International Commercial Investment on July 3, 2017

Source: City A.M.

I write this article having just returned from a four day sprint through Europe, visiting the Czech Republic, Poland, and Romania.

A City business delegation joined me and showcased the best of the UK’s offer to the world, with companies such as the LSE, Smart Pension, Accenture and Comply Advantage.

The focus of this trip was to speak to senior business and government representatives in these key growth markets about the UK’s financial and professional services offer, and how we can help drive this growth in the years to come. I was also able to listen to their concerns and thoughts on the City and how we service their economies, and hear their thoughts and desires on Brexit.

It was universally acknowledged in these three countries that London is far and away Europe’s largest and most important centre for financial and professional services.

Businesses told me that they want to have the closest possible relationship with London once we exit the union, and its associated Single Market, as this would be the best outcome for them and their clients. This message from European businesses seemed to be making it through to government, I am happy to report.

I emphasised to those with whom I spoke that the upcoming negotiations are not binary and zero-sum. With political will from both sides, a broad, mutually beneficial deal can be reached to foster business growth, and ensure continued investment on both sides of the English Channel.

When I met with our European friends I stressed that the City of London is not just an asset for the UK, but a European one as well, as it is the only global-scale financial centre on the continent of Europe.

Having this centre on their doorstep allows European businesses efficient and cost-effective access to the world’s markets, driving growth, investment and prosperity.

Europe has a long and prosperous history of global trade and business, but in today’s world that is rapidly rebalancing towards the Eastern Hemisphere. We must work to protect and grow Europe’s global-scale assets, whether it is our unique cultural offer across the continent, our established products such as Scottish Whisky and Champagne, or our expertise in financial services, centred in London, that is unmatched across the world.

London serves not only as a gateway to Europe for global investors, but also a gateway to the world for European businesses looking to expand and invest overseas.

In Poland, I was given a tour of a tech incubator focused on up-scaling businesses from startups to regional – and eventually global – companies. The City of London is the natural partner for work such as this. When companies have access to the UK, they have access not only to London’s deep pools of capital and business expertise, but the world’s as well.

There must be an ambition across Europe to create an outward facing “Global Europe” not focused on protectionism, but based on a desire to grow global trade and the spread of European products and services across the world.

The City of London, as the world’s leading financial centre, is the ideal partner for this ambition, and I look forward to deepening relationships across Central and Eastern Europe as friends and business partners.

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International Commercial InvestmentLondon is the gateway to the world for EU business

UK remains Europe’s top destination for foreign investment in financial services

by International Commercial Investment on June 29, 2017

Source: Telegraph

Britain shrugged off the Brexit vote to remain the main destination for foreign investment in financial services in Europe last year, although Germany and France are proving increasingly attractive to investors following the EU referendum, a new study has found.

The UK’s finance industry drew 99 foreign direct investment projects in 2016, up 5pc on the year and the most for a decade, according to a report by accountancy giant EY.

However, EY said that Germany and France also grew in popularity among overseas investors, with the former attracting 39 financial projects and the latter drawing 25.

For France, that marked a 25pc rise, while Germany enjoyed an 18pc jump.

The continuing lure of Britain for financial services came in the face of the vote to leave the European Union a year ago, which surprised the City and raised fears London could lose its status as Europe’s banking powerhouse.

London is used by many international banks, asset managers and insurance firms as the base for their EU operations. Firms have drawn up contingency plans to ensure they can still access the EU’s single market after Britain leaves, including proposals to move jobs to European cities such as Paris, Frankfurt and Dublin.

Bruno Le Maire, France’s finance minister, on Thursday said the country planned to establish a court that would deal with disputes over financial contracts that are governed by English law after Brexit. Such a court could bolster Paris’ appeal to financial services firms looking to move operations. English law is used widely in international finance.

EY found that 69 of the financial projects the UK attracted from foreign investors last year went to London, compared with just 19 for the French capital and 12 for Frankfurt.

The US and China were the biggest sources of foreign direct investment in financial services in Britain.

“Despite the referendum, UK financial services continued to attract record levels of investment last year,” said Omar Ali, UK financial services leader at EY. “However, the outlook for 2017 and 2018 isn’t so certain.

“We can see from our study that investors have concerns about what Brexit may mean for the future and they want greater clarity on corporate taxation and incentives for foreign investors.”

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International Commercial InvestmentUK remains Europe’s top destination for foreign investment in financial services

Low-cost long-haul boom beefs up second runway case in spite of Heathrow, claims Gatwick chief

by International Commercial Investment on June 29, 2017

Source: Telegraph

Gatwick is hoping the Government will give the go-ahead for a second runway in its forthcoming airport plan after ramping up long-haul traffic beyond what independent experts expected it to hit.

Chief executive Stewart Wingate said the Government was set to start consultations on a new airport strategy this year and that he believes his airport now merits expansion more than it did when its plans were scrutinised by the Airports Commission lead by Sir Howard Davies in 2015.

“What we would like to see as part of the airport strategy is an endorsement of an additional runway as well as or instead of one at Heathrow,” Mr Wingate said.

He added Sir Howard had predicted Gatwick would only have 48 long-haul connections by 2050 if it built a second runway but a rapid rise in the low-cost long-haul industry means it now has more than 60 just with its existing single runway.

Mr Wingate said major commitments from the likes of Norwegian, which has said it would base 50 Dreamliner aircraft at Gatwick if it was expanded, had also substantially changed the proposition the airport offered from just a few years ago.

“As we went through the Airports Commission the question raised that we had to answer was ‘can you support long-haul connectivity’?,” Mr Wingate said.

“We would argue that Dreamliners and the low-cost long-haul market mean we are well placed.”

Mr Wingate was speaking as the airport welcomed a record 44.1m passengers in the year to March, up 3.2m on the comparable prior period.

Revenue rose 7.7pc to £381m thanks a higher level of sales in areas from airline charges to car parking. Charges to airlines rose 2pc but this was partly offset by an increase in the level of discounts offered to help encourage greater passenger numbers.

Mr Wingate said its charges equated to an average £9 per passenger, which he claimed was up to a third of the amount of some rival airports.

Costs also rose partly because it has employed more people and pay has risen. But its outgoings rose less rapidly (7pc including depreciation and amortisation) than sales which the airport said supported its operating profits.

The airport also splashed out this year with its largest ever level of capital investment in 12 months of £272.6m – including on a new security area in the North Terminal – and is set to spend £1.6bn in the seven years from April 2014.

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International Commercial InvestmentLow-cost long-haul boom beefs up second runway case in spite of Heathrow, claims Gatwick chief

Passenger numbers jump 8.1% as London Luton gears up for expansion

by International Commercial Investment on June 18, 2017

Source: Bdaily

London Luton Airport has revealed another month of passenger growth in May as it presses on with its ambitious expansion drive.

The airport ferried 1.4m passengers through its terminals last month, an 8.1% increase on the same month last year which comes off the back of a similarly impressive 13.1% increase in passenger volumes in April.

It comes as LLA continues its expansion efforts with current redevelopment focused on expanding its retail and dining offering.

The airport has lined up some big name brands, including Bella Italia and Krispy Kreme, amongst a line-up of 43 new shops and restaurants as it looks to compete with its bigger South East rivals Heathrow and Gatwick.

LLA’s passenger number surge comes at a time of increases across London’s major airports, with Gatwick and Heathrow both posting impressive numbers over the last 12 months and underlining the need to accommodate ever greater passenger volumes with new expansion efforts.

Nick Barton, Chief Executive Officer of LLA, said that it was ‘fantastic’ to see another month of ‘outstanding’ growth at the airport, which was now focusing on improving road and rail links in and around the airport.

He said: “Our investment is enabling us to offer not only a more relaxing and enjoyable airport experience, but also an ever-widening variety of destinations.

“Whether you’re a business passenger or flying away for a leisure break, LLA can offer options for all budgets, and we’re making the airport easier to reach than ever as we improve road links and public transport access.”

LLA has targeted a 50% increase in annual capacity by 2020 and has a number of expansion works in the pipeline, including a new £200m light rail service (pictured) linking the airport’s train station with the airport itself.

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International Commercial InvestmentPassenger numbers jump 8.1% as London Luton gears up for expansion

UK property prices set to rise by over 6% by 2021 fuelled by buy to let surge

by International Commercial Investment on June 1, 2017

Source: Property Wire

Property prices across the UK will rise by 6.1% in the next five years, bringing the average property value to almost £300,000, according to new research.

It is expected that property hotspots will emerge in the North of England with employment opportunities and business start-up rates helping to close the gap on the current property hubs of London and the South.

The research from Barclays Bank also predicts that buy to let investments and high net worth millennial investors are set to lead the way in fuelling the property market going forward and they are likely to look for higher yields outside of London.

Overall, despite an uncertain economic and political climate, the report says that the UK property market remains buoyant with prices set to rise by an average of 6.1% by 2021 with high employment rates and an increase in rates of average earnings contributing to rising property prices across the country.

London is set to see prices rise the most with growth of 11.88% by 2021, followed by the East of England with growth of 9.38%, the South East up by 8.74% and the East Midlands up 6.67%. Scotland and the West Midlands are both projected to see price rise by 5.88%.

The South West is expected to see price growth of 5.31% over the same period, the North East 5.31%, the North West 4.01% and Yorkshire and the Humber up 3.6%. Northern Ireland and Wales are set to see the lowest price growth at 3.04% and 2.88% respectively.

However, while the South of the country is expected to see the largest property price increase over this period, property investors are looking north for good value for money and income stability. Some 38% of high net worth investors looking to purchase property in northern regions think that property prices are going to rise there, with 27% who plan to purchase citing strong rental income as a reason to invest there.

The report points out that the Midlands has the fourth highest expected price increase in the UK at 6.28%, behind London, the East of England and the South East. Warwick in the West Midlands has emerged as one of the top 20 areas of highest growth, with an expected increase of 29.5%, driven by higher than average earning rates and the highest level of business start-up rates in the region.

Scotland has the fifth highest expected price increase at 5.88%. East Renfrewshire makes the top 20 areas of highest growth with an expected increase of 23.8%, with its large proportion of highly qualified residents expected to drive up prices.

The research reveals that younger investors will be a key driver in the growth of the UK property market over the next three to five years. The millennial investors surveyed have 41% of their investment portfolio tied up in property, compared to 23% amongst those aged over 55.

The younger group are also more bullish in their approach to investing in bricks and mortar with 75% intending to increase the percentage of their portfolio in property over the next three to five years, compared to just 10% of over 55s.

The research also shows that millennial investors are also more likely to own more than one property, compared to over 55s, and are reaping the financial rewards of multiple property ownership with 48% of their annual income generated from rent. Those aged 18 to 54 who are planning to buy new property are more likely to take advantage of a buy to let mortgages to fund future property purchases at 23% compared to just 7% of those aged 55 and over.

Despite figures from the Council of Mortgage lenders showing that buy to let lending has slowed, the research suggests that it is on the rise among investors who want to expand their portfolios despite the recent tax changes that affect them.

The report also reveals that higher value investors are seeking to maximise returns through property purchases 65% of those looking to buy doing so for rental income. Some 62% of those with rental properties expect the proportion of the income they receive from rent to increase over the next three to five years, with half predicting it will rise by up to 20%.

‘It’s encouraging to see that property is still viewed as an important part of the investment portfolio with high net worth investors typically owning three properties and over a quarter planning to buy property because they believe that it offers long term investment security,’ said Dena Brumpton, chief executive officer of Wealth and Investments at Barclays.

‘There is also increasing confidence among property investors, as many are taking a long-term view when it comes to putting money into property. It’s also interesting to see from our research how investment prospects are emerging outside of the established property heartland of London and the South of England, with economic growth and employment opportunity fuelling growth in hotspots across the UK,’ she explained.

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International Commercial InvestmentUK property prices set to rise by over 6% by 2021 fuelled by buy to let surge

Buyers and sellers pause and adopt wait and see approach ahead of general election

by International Commercial Investment on June 1, 2017

Source: Property Wire

The number of house hunters registered with estate agents in the UK fell in April and the supply for sale also dropped, according to the latest research.

One reason could be buyers and sellers adopting a brief wait and see attitude ahead of the UK general election next week on 08 June, says the latest monthly report from the National Association of Estate Agents (NAEA).

In March there were 397 house seekers per branch, down from 425 in January and February, but this figure dropped 4%to 381 in April.

Last April amid Brexit uncertainty, the number of house hunters searching for properties was 17 per cent lower at just 325 per member branch.

The data also shows that supply fell in April. In March there were 39 properties available to buy per branch but in April this figure dropped by 8% to just 36 per branch, the lowest level seen since April 2016 when agents had just 35 properties to market, as sellers held off until after the European Union referendum.

The number of sales agreed per branch fell from 10 in March to eight in April, while the proportion of sales made to first time buyers stayed the same at 25%.

The rate of sales agreed above asking price rose to 7% in April from 5% in March. In line with this, the number of properties which were sold for less than the asking price dropped from 75% in March to 72% in April.

‘Periods of political uncertainty tend to halt activity in the housing market, and this is exactly what we’re seeing this month. All of the main political parties have outlined significant housing promises in their manifestos and we’d hope to see these policies rolled out in the new Government’s first six to 12 months in Parliament. Buyers and sellers alike are recognising this and adopting a wait and see strategy to decipher how or if the value of their existing or future homes will be affected,’ said Mark Hayward, NAEA chief executive.

‘However, despite the fact that increasing housing stock is playing a part in the election campaigning, more often than not we find these pledges are unachievable and turn out to be empty promises,’ he pointed out.

‘It’s therefore important that the market doesn’t totally stall as this could trigger an unintended domino effect, which we could still feel the effect of years later before supply increases. A business as usual approach will ensure house hunters are met with a healthy supply of properties to view, and sellers get a fair price and a good buyer,’ he added.

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International Commercial InvestmentBuyers and sellers pause and adopt wait and see approach ahead of general election

London house prices to soar by 11.88 per cent by 2021

by International Commercial Investment on June 1, 2017

Source: CITY A.M.

London house prices are set to rise by an overall average of 11.88 per cent by 2021, almost double the national average (6.1 per cent), according to a new research by Barclays wealth and investments.

The study found that Richmond upon Thames will enjoy the largest increase in the UK at 39.1 per cent followed by Camden, Westminster and Wandsworth that are expected to grow at 33.9 per cent, 31.9 per cent and 31.1 per cent respectively.

The average overall price increase in London over the 2017-2021 period is expected to be 2.27 per cent per annum compared to 1.31 per cent in the UK.

Investors from London own an average of four properties while the total value of a property portfolio in the capital is over £2.2m. Also, over three-quarters (79 per cent) of investors in London said they plan to buy new property in the next three to five years.

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International Commercial InvestmentLondon house prices to soar by 11.88 per cent by 2021