Global Investor Sentiment

As the UK and Mainland European markets continue to be bolstered by interest and investment from across the globe it is important to understand the prevailing sentiment from the key centres of demand. Here we provide a quick snapshot of what we expect to see from various jurisdictions in the year ahead.

The perception is that there is to be little change in outbound capital policy in China. It is expected that the existing capital controls will stay in place for at least the short term, continuing to impact the ability of Chinese companies to invest abroad. There are still a number of private individuals who could be active in the UK and continental Europe.

Hong Kong investors continue to monitor London but are looking for value. London is having to vie for their attention due to a slightly “softer” domestic market and attractive bond returns through lending to mainland Chinese developers. Some of their competitive edge for London has diminished at present due to lending rates at home becoming more expensive. As such they could be looking to finance in the UK. The general feeling is that they want to see a discount for sentiment, the currency position isn’t enough for them to be as aggressive as we have seen them previously. They are actively monitoring the wider European market for any sign of distress.

Overall Singaporean investors think that today is a good time to enter the UK market, they feel that pricing has moved and looks compelling when set against what is achievable at home. In addition they feel that competition is somewhat reduced today. However for those that are yet to make their first purchase it feels like a bold move to be chasing assets in the UK today given the political climate and as such some may be drawn to continental Europe instead.

2018 was a significant year for Korean investment into Europe and London in particular, with over £3.2bn of assets acquired in the British capital. Savills advised on 55% of these deals. We expect that mainland Europe will be their key focus for this year, and we will see some big deals happen in Paris in the first half of the year. South Korean investors will continue to look at the tier 1 markets but they are showing a clear willingness to look at tier 2 / 3 markets as well given the compressed pricing environment. Wider UK regional product can be included in this.

Outbound investment from Taiwan is back on the agenda following the surprise deal by Fubon in Frankfurt at the end of 2018. The locations of interest are Frankfurt, Central London and for some, Japan. Their requirements are generally unchanged as they seek core, quality product, with a long WAULT, as few tenants as possible and market yields.  

Malaysian investors’ primary focus continues to be on resolving their situation at home. However they are keeping a firm eye on outbound investment and should be participants this year across Europe.

There is a wait and see approach from many Middle Eastern investors in relation to the UK and Brexit. The continued impact it has on currency is the key factor driving when they are willing to deploy. There is also growing perception from some investors that the market is turning and that there may be some discounts on offer. The expectation is that Middle Eastern investors will return to a normal activity level later this year and continue to be opportunity led and yield driven as well as being more active on the continental European market.

New York City office investment sales are rebounding and domestic investors and users are helping to fill the void left by mainland Chinese investors. There is reduced concern over the rising US interest rate environment. The US investors that do not have an established track record, or UK footprint, do not see a sufficient yield discount to compensate for the geo-political uncertainty when looking to invest in London, their traditional gateway into Europe for investment. Ultimately demand for the UK and Mainland Europe from Asian, Middle Eastern and US investors continues to be strong. We expect that the statistics for 2019 will likely show a year of two halves from a UK (in particular London) perspective as the Brexit situation progresses. For Mainland Europe we expect continued steady levels of investment, driven primarily by stock availability and pricing. In order to understand the likely impact of any given jurisdiction in any given year, you have to understand the drivers / push factors alongside the pull factors of a particular market. Through Savills Global Cross Border Team and Savills extensive Global Capital Markets network we have the required knowledge.