Cameron Ramsay (left) heads JLL's UK capital markets research and strategy team, and Noel Lander is a senior director in the firm's capital markets team.
Over the past few years, rising interest rates and tougher financing terms have scared many institutional investors away from commercial real estate investments. But cash-rich ultra-high net worth investors, including both experienced real estate professionals and emerging investors, may be able to take advantage of recent price corrections to purchase “trophy assets” that have the potential to remain in their families for generations.
Because private investors can act more nimbly than institutions, this could be a great time to consider buying UK commercial property. That's the view of Noel Lander, senior director of capital markets at JLL, who told Spears there is “a lot less competition” for quality assets right now.
“Market and economic cycles are near the bottom, but individual investors often have the ability to take a longer-term view,” he said.
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Additionally, Lander added, many vendors are “willing to offer even larger discounts to all equity buyers given the speed and certainty they can provide in the transaction.”
End-to-end expertise
Lander, who has worked in JLL's capital markets team for more than 20 years, says high-net-worth individuals and entrepreneurs can leverage the global firm's expertise as an “end-to-end” real estate management and investment firm. At the same time, with support from the global team of insights, high-net-worth investors can grow their diversified real estate portfolios and gain greater confidence while navigating an increasingly complex real estate environment, including the changing tax implications of real estate ownership and understanding how ESG factors impact their investments.
“We've found that many private high net worth individuals prefer the control and flexibility of directly owning real estate,” he says. “Firms like JLL can really educate UHNW investors about the market. We look forward to working with both entrepreneurs who have made their fortunes in and understand real estate, as well as those looking to diversify and are familiar with other industries, including technology.”
The scale of the opportunity in commercial real estate
While volatility is creating uncertainty in many sectors, Lander says office yields in London's West End are “relatively stable”.
“Properties close to St James' Park or in the centre of Mayfair may experience some periods of instability if the property is being passed down through generations of a family, but generally they are not as volatile as other parts of the market,” he added.
Cameron Ramsay, head of JLL's UK capital markets research and strategy team, added that the office sector has faced challenges from the rise of flexible working, but we are now “starting to see greater balance”.
“Prime office space is one of the biggest opportunities as we move into the next cycle,” Ramsay added. “Given the reduced competition, now is a great time to take advantage of quality property opportunities in good locations.”
There are also ample opportunities in mixed-use development: some of the firm's recent listings include a modern development on King's Road in Chelsea, with retail space on the ground floor and residential and office space above, and a promising group of buildings along Chiswick High Street that are well suited to residential redevelopment.
When it comes to investment returns for his ultra-high net worth clients, Lander finds it helpful to have in-depth discussions with them to understand the “drivers” of their capital and the legacy they want to create with their investments.
“We have seen examples of investors looking to buy buildings to house existing operations, but we have also seen a number of companies looking to relocate from London to major regional cities such as Birmingham, Manchester and Edinburgh.” Meanwhile, in Cardiff, JLL recently sold the BBC Hoddinott Concert Hall for £17.35m.
Ramsay adds that the breadth and depth of opportunities available in the commercial real estate world has expanded significantly in recent years. “We've seen a real explosion in asset types over the last few years. Traditionally, the commercial real estate sector has been seen as office, retail and industrial space, but there are now many other strong growth sectors,” he explains. This includes multifamily housing, which is already very mature in the US, Germany and other parts of Europe including Scandinavia, but is still growing rapidly in the UK, as well as the “more nascent” science and technology, data centre and renewable energy sectors, he adds.
Sustainability and Global Expansion
The UK continues to lead the world in life sciences and is rapidly emerging as a renewable energy hub, on which JLL's Exeter office provides extensive advice. Commercial property investments include wind and solar farms and sustainable battery production facilities.
Lander says the firm, which has 150 dedicated sustainability professionals in the UK, is at the forefront of the industry's shift towards environmental awareness and efficiency. One notable recent example is the establishment of a dedicated energy infrastructure advisory team, which gives JLL “a significant presence in the renewable energy market that many of our competitors don't have.” These types of investments may be a good fit, as more investors are looking to “deploy their capital in the most responsible way possible,” Ramsay adds.
For ultra-high net worth individuals searching for commercial real estate opportunities, JLL can also leverage insights from its 100,000-strong global network. As well as leading the market in property investments in London, the firm has offices in international centres across Europe, the US, Hong Kong and Sydney.
“One of our USPs is that we're present in all these jurisdictions,” Ramsay says. “An investor might be looking for commercial property in London, but their next destination might be Singapore or New York, where we can work with our local team.”
The firm also has a network of 550 researchers around the world “integrating real estate investment data to support investor decision-making,” Ramsay says. At the annual real estate industry CoStar Awards, JLL has been recognised as the most active acquiring agent in the West End, and a market leader in many other parts of the UK.
In addition to the attractive opportunities presented by direct ownership, JLL also advises private investors on debt financing and strategic asset management, and investors may be considering joining some projects as silent partners and “taking a more passive role in investing in buildings and portfolios,” Lander said.
Lander said the company hopes to build lasting relationships with private investors as they become more confident about buying property, whatever their investment objectives.
“We've seen it ourselves before where someone has built a £100m portfolio and their first deal was £1m. It might start out small but the next deal might be £5m, £10m or £20m.”
To find out more about investing in commercial property, contact a JLL expert: https://jll.co.uk/en/campaign/private-investment