Brexit: The view from MIPIM Japan

Christie Ou reports from the event in Osaka, where she finds many Asian investors seeing opportunity stemming from the convulsive events in the UK.

“We made an investment just a few months ago before Brexit happened. I was pretty nervous. No one knows what Brexit means; there is no detailed agenda and a lot of uncertainties. But when we were underwriting the risks, we still believed London will remain a metropolitan and important city. The fundamentals will not change overnight,” said Stanley Ching, head of Real Estate Group at CITIC Capital Holdings.

Following the Brexit fallout, Asian real estate investors gathered to discuss its impact on the first day of MIPIM Japan 2016 and appeared to share similar views on the issue.

Many Asian investors felt that it was very difficult to find investment opportunities in London in the past six months. Therefore, they find that the window of uncertainty provided by Brexit works in favour of those who have a longer-term of view.

“From a Chinese investor’s view, we believe that there are buying opportunities, which is evident from a few recent transactions involving London commercial buildings. Certainly Chinese investors now have the opportunity to buy assets they were not able to buy before, because there are still quite a few funds trying to make disposals to get liquidity while, at the same time, US and European investors are more cautious,” Ching pointed out.

“Asian investors now have more incentive. Those who were looking at the US market started to look at the currency issue, the price negotiation issue and the asset quality, and they think it’s the right buying moment [in the UK]. With renminbi having appreciated against sterling by six percent, it gives you more opportunities to choose the right assets in the UK than in the US when it comes to investing outbound.”

“I think it’s a good time to invest in the UK if you are looking to the next 20 years. There is still liquidity in the UK with so many credits available. If you have long-term money, you should do it, it’s a great time,” added Akihiro Tachibana, division head of the investment and development department at Takenaka Corporation.

The property market has certainly dipped a bit after Brexit, but at the same time the market is likely to see more Asian investors investing fairly aggressively in the London market. The panel thinks that although more conservative corporates have stopped hiring due to the current uncertainties – and that this has put pressure on the office market – there are many creative industries coming to the UK or London and demanding space.

“After the Lehman shock in 2009, everybody wanted a short-term lease at that time and that’s probably what will happen in the UK for the next few years. The office market will be quite stable in the short term, but problems will probably come after the EU has shaped its future,” Tachibana predicted.

“In a way leaving the EU means you will have more right to set your own policy that fits in your own situation; you have more freedom than just having a big cap on your head but can’t do anything about it,” said Ching. “With the uncertainties and elections in Europe, Brexit could possibly be a very clever decision.”

“We feel relatively better about the UK [than the rest of Europe]. Europe is a very fragmented region and young people are very different nowadays with a great opposition to globalisation and asset prices are heading out of control. We used to invest in the West for stability but now we find it hard to price the risk for something we traditionally thought was stable,” commented Lau.