UK Asset Management

Recovery + Reinvention

By Erica Rascón on May 11, 2015 in News

Asset Management companies in the UK have experienced several years of growth due to foreign capital flowing into the country during the lean years. As rents stabilize, the rate of growth is clearly unsustainable. Yardi brought together several asset management experts to discuss how asset management will reinvent itself during economic recovery and prosperity.

According to Richard Williams, managing director asset services UK, CBRE
, The answer boils down to the company’s country of origin. Far Eastern and Middle Eastern investors continually require traditional asset management services. “That’s where most of our team’s work has come from in the last year. Although they tend to buy trophy properties, we spend a lot of time teaching them the fundamentals of asset management. It’s impossible for them to do this from Asia where they’re based.”

Locally, there is a different story. Shaun Hose, director of asset management, BNP Paribas Real Estate, explains, “Now, the market has improved to such an extent that the yield shift alone won’t meet target returns. Institutional investors are looking for assets they can intensively manage and have levers to pull. The regions are high up on the agenda for UK investors as occupier markets come back, but London markets continue to be dominated by foreign investors.”

This leaves local investors seeking a select few assets that will offer the value that they need: core plus assets with both income and an angle, and doughnut assets that are inside the M25, but outside of central London.

Such properties include multi-let industrial, or distribution centres, with their low vacancy rates, resilience, and growing popularity. Such centres are often occupied by online retailers, powerhouses whose bravado is far from diminishing. There is also a notable amount of obsolete properties that could use a second wind.

The introduction of permitted development will prove to be a game changer for the latter assets. Permitted development allows offices to be converted into residential spaces more quickly and easily, opening a new realm of options for underperformers within a portfolio. In the future, lawmakers may make it easier to convert industrial spaces into community and leisure spaces as well.

Regional shopping centres have not been excluded from the list of promising assets for local investors. Increasing footfall and dwell times at such properties becomes even more important for milking income returns. To attract more customers and keep them spending at the premises longer, asset managers are turning to technology such as free Wi-Fi. The service offers convenience to consumers while providing valuable data for owners. Companies are also exploring real-time digital communication platforms, with the hopes of providing consumers with apps that can offer promotions and special discounts.

Asset managers in the UK are finding innovative and creative ways to reinvent themselves in the face of a stabilizing market. Their roles as investors, negotiators, and planners will remain vital for the economic health and diversity of the nation.