Investing in the UK – what’s driving decisions?

So, they’re right up my street in my role at Blake Morgan advising real estate funds, institutional and private investors and family offices on investing into real estate assets in the UK.

I’m very much looking forward to connecting with clients and contacts across the industry and debating the factors driving investment decisions. In advance I wanted to jot down some of the topics I’m sure will be on the agenda.

• Investors look for stability and certainty when making investment decisions, particularly those who can deploy capital globally. There’s no denying things feel quite uncertain at the moment in the UK – politically, economically and within the development industry. This is of course exacerbated by ongoing global instability and the impact this is and will have on the UK. We need to work harder to ensure the investors still see the UK as a safe and stable place to invest. Yes, there are challenges – from high interest rates to planning hurdles and sustainability requirements – but the UK is still a good place to invest and we need to continue to make that case to would-be investors.
• The planning and regulatory framework need to be fit for purpose and requires reform to attract investment into development projects. Investors will only look to invest if they know that there won’t be delays in completing a project (and getting a return). A planning system that is slow, under-resourced and unpredictable is a barrier to investment. This is exacerbated by the effect of the building safety regime, particularly delays getting Gateway 2 approvals from the Building Safety Regulator where the backlog is well documented. Making the planning and regulatory system around development more streamlined and efficient is not a new conversation but this will I expect again be a hot topic at MIPIM and UKREiiF. Much of the rhetoric around accelerating planning has focused on unlocking residential development and infrastructure, but we need more commercial, retail and employment spaces too, so I’m interested in talking about how planning reform will help stimulate investment into those parts of the market.
• The living sector has been a sector where investors have in recent years invested heavily. The sector is made up of build to rent (BtR), family and affordable housing, co-living, student accommodation and later living. With the shortage of housing in the UK, this is a sector that should continue to grow and attract investment, particularly as the UK Government has committed to deliver 1.5m new homes during this parliament. However, there are challenges. The problem around the planning and the regulatory framework referred to above is one. There are also issues around high construction costs and interest rates (which seemed to be calming but with the current conflict in Iran and the wider Middle East may get worse) and concerns around affordability. I will be interested to hear how investors in the living sector see the future and overcoming these challenges.
• Investment in industrial and logistics remains strong, particularly for high quality well located developments. However, some investors are becoming more and more interested in how this asset class could be suited to new uses. There has been a huge spike in data centre investment over the last couple of years. Whilst this has largely been in purpose built data centres, some investors are looking to re-purpose warehouse units to data centre use (subject to getting sufficient power which is another issue!). I’m interested to discuss how the data centre market is growing, and the other uses that will define the future of logistics spaces – from life sciences to drones and green tech.
• The world has changed a lot in the last six years and since the pandemic, and consumer demand for office and retail space is changing, and investors are responding. What occupiers now want out of on office or retail unit is vastly different from pre-2020. Sustainability, culture and design now plays a much bigger role in offices and higher quality is preferred (something which also comes with higher rent / return for investors). Specific, flexible and innovative retail assets are more attractive to investors – such as road-side retail which offers multiple uses including EV charging infrastructure.  I’m interested to discuss how the market continues to respond to this changing demand.

Those of you also working in the investment space, are there any other topics you think will be high on the agenda at MIPIM and UKREiiF? If you’ll be in Cannes or Leeds, it would be great to connect with you there.