LaSalle Investment Management contracts over £3bn in UK commercial real estate deals in 2018
LONDON (January 09, 2019) — LaSalle announces that it contracted 77 commercial real estate transactions valued at £3.33 billion across the UK in 2018 and forecasts that UK real estate will remain an attractive asset class to institutional investors in 2019, despite macroeconomic uncertainty associated with the Brexit process.
Making direct investments in UK commercial property on behalf of institutional clients from the UK and around the world, LaSalle deployed £2.29 billion across 24 acquisitions while generating £1.04 billion through 53 sales in 2018, compared with a total transaction value of £1.24 billion in 2017. These transaction figures serve to underline the continued resilience of the UK real estate market in the face of political risk, with a total of c£55 billion in UK commercial property transactions in 2018 exceeding the 10-year average of £44 billion according to data from JLL.
Office properties constituted 67 per cent of LaSalle’s UK acquisitions of which the London market accounted for 94 per cent. The sustained demand for London office property is symptomatic of how the capital has resisted leakage to competing European cities and continued to receive strong take-up, with LaSalle’s investment strategy remaining underpinned by the firm’s proprietary analysis of which specific commercial submarkets in London are best placed to achieve rental growth. Meanwhile, alternatives (e.g. parking, healthcare, student housing) accounted for 20 per cent of capital deployed but just 7 per cent of LaSalle’s exit proceeds, continuing LaSalle’s long-term shift towards increased exposure to alternative assets that demonstrate greater resilience to the challenges facing retail and industrial properties.
The proportion of capital deployed by LaSalle into UK commercial property classified as ‘long income’, defined as assets that generate ten year plus contracted terms and an element of predictable inflation-linked cashflow, rose to 26 per cent in 2018. The increase was driven by LaSalle targeting irreplaceable long-let assets to safeguard against market uncertainty, as well as demand from defined-benefit pension scheme clients for low-volatility, predictable income flows that match their liabilities while also generating higher yields than UK sovereign debt. With over £7 billion in institutional capital estimated to have been allocated for investment into long-income assets in 2019, demand for this asset type looks set to persist irrespective of the outcome of Brexit.
Julian Agnew, UK Chief Investment Officer at LaSalle Investment Management, said: “While we believe the most likely outcome of the current political situation to be a ‘Long Hard Brexit’, entailing a loose framework for future trade with the EU that’s fleshed out during the transition period, investors in the UK clearly remain faced with a significant degree of uncertainty. However, in the medium- to long-term we believe that UK real estate will remain attractive compared to other asset classes, that UK property will continue to attract international capital, and that not only London but also other cities such as Bristol, Birmingham, Edinburgh, and Manchester – all of which rank highly on our proprietary analysis of the UK regions’ preparedness for changes in Demographics, Technology, Urbanisation and the Environment – will continue to perform well.”
Chris Lewis, Head of Transactions for the UK at LaSalle Investment Management, said: “We have identified emerging and highly attractive opportunity sets within the UK commercial real estate market for our clients and are pleased to have been able to both deploy capital effectively and realise proceeds through a strong exit pipeline in 2018. We continue to target specific London ‘villages’ where we believe the fundamentals to support rental growth are strongest, while significantly growing land disguised as income as a portfolio of long-income investments with inflation-linked cashflow.
About LaSalle Investment Management
LaSalle Investment Management, Inc. (together with its global investment advisory affiliates, “LaSalle”) is one of the world’s leading real estate investment managers. LaSalle on a global basis manages approximately $60.5 billion as of Q3 2018 of private and public equity and private debt investments. LaSalle’s diverse client base includes public and private pension funds, insurance companies, governments, corporations, endowments and private individuals from across the globe. LaSalle sponsors a complete range of investment vehicles including separate accounts, open- and closed-end funds, public securities and entity-level investments. LaSalle Investment Management, Inc. is a wholly-owned, operationally independent subsidiary of Jones Lang LaSalle Incorporated (NYSE: JLL), one of the world’s largest real estate companies. For more information please visit www.lasalle.com.
This information is based on the market analysis and expectations of LaSalle and should not be relied upon by the reader as research or investment advice regarding LaSalle funds or any issuer or security in particular. The information presented herein is for illustrative and educational purposes and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy in any jurisdiction where prohibited by law or where contrary to local law or regulation. Any such offer to invest, if made, will only be made by means of a private placement memorandum. Past performance is not indicative of future results.