Whilst property markets in Asia are still reeling from the effects of the global pandemic, UK commercial properties are already showing signs of life.
Singaporeans look to real estate investments to boost their income and prepare for retirement. However, as property investment in Singapore slumps, real estate investors are looking elsewhere for unique opportunities to prop up their portfolio amid a global pandemic.
The first half of 2020 saw property investment sales plunge by 45% to $6.13b from $11.24b last year. Buy-to-let real estate in Singapore has likewise been hit by the economic slump as tenants struggle to pay their rent. As coworking spaces emptied out due to work-from-home orders, operators like WeWork have to contend with halted payments and tenants trying to break leases. According to analysts, office REITs in Singapore face amongst the highest exposure to coworking operators in the Asia-Pacific at almost 5%.
By comparison, UK buyers remain optimistic as property prices rise and demand increases despite the recession. Recent market updates from Savills show that commercial investments in the UK rose by 42% in June at £1.3b, up from £755m in May. Experts say this may be a sign that the UK investment market is starting to stabilise.
Given that landlords everywhere are uncertain about tenants making their rent, the best property investment will depend on location and a robust labour market. In this case, commercial buy-to-let properties would make more sense compared to residential.
Commercial properties provide more security because they typically have long-term leases and have annual inflation linked rent increases. Additionally, the 3% stamp duty surcharge on buy-to-let is not applicable to commercial as well as semi-commercial properties.
Property investors will also be happy to know that London is further cementing its reputation as a prime choice for property investment with the development of London’s first Level 1 amusement park. The London Resort is a proposed £3.5b theme park in Swanscombe, Kent, set to open in 2024.
Construction of this ambitious project--one of the largest across Europe--will begin in 2021. This 2.1 million square meter construction project will generate about 30,000 jobs and attract a multi-billion pound investment that will transform the banks of the River Thames London into one of the largest, immersive experience centres in the world. It is definitely a game changer and a huge opportunity for economic growth in the region.
PY Gerbeau, Chief Executive of London Resort Company Holdings (LRCH), underscores the importance of the project to the UK during this difficult time. In an interview with the BBC, he says, “We hope to bring a bit of pride, hope, and become a symbol for Kent and UK plc to be right up there with the big boys.”
Known as the saviour of the Millennium Dome, Gerbeau is no stranger to challenging projects. He shares, “All these massive investments obviously have hiccups and difficulties. We're in a good place. The good news is that's what we do for a living. We're mechanics. We fix things.”
Analysts already project 8 million visitors in its first year alone. Meanwhile, The Paramount Hotel’s research estimates a 79% occupancy at £260/night within the first 3 years. This will ultimately give a stable 10.8% yield - which is nearly four time better than central London residential returns on investment.
Seems that it could be time to abandon residential property in London and go commercial.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
Do you know more about this story? Contact us anonymously through this link.
Alexander Knight is the Sales and Marketing Director (Asia) of The London Resort Hotels and is Singapore based.