Investment opportunities for offices exist outside central business districts, Kamco Invest says

Employees want to avoid mass transit commutes and work closer to home

Skyscrapers in the City of London square mile financial district. There has been an increase in demand for regional offices outside of major central business districts such as London. Photo: Bloomberg

Shifting work trends amid the pandemic have led to an increase in demand for office spaces located outside major business districts, experts say.

A majority of employees globally still prefer to work from offices but want to avoid mass transit commutes and work closer to home instead. This has led to an increase in demand for regional offices outside of major central business districts in cities such as London, experts said at a webinar organised by Kamco Invest and M7 Real Estate.

“UK real estate remains an attractive asset class for GCC investors,” said Mohammad Al Othman, executive director of real estate at Kamco Invest, the investment arm of Kuwait Asset Management Company.

“Despite the concerns GCC investors showed in 2016 due to Brexit, investment appetite towards the UK and sterling remained strong.”

A Knight Frank report issued earlier this year indicated that London’s office investment market is set to attract £46 billion ($62.9bn) in capital this year owing to its strength as a commercial hub.

The coronavirus pandemic, which shuttered borders, disrupted global trade and halted global travel last year, has led to major shifts in working trends, including in the Middle East. These work patterns, which have continued despite a gradual reopening of economies over the last few months, have opened up pockets of opportunities for commercial real estate investors.

Meanwhile, the webinar also discussed how Middle East investors should approach international real estate investing and offered insights into the opportunities and risks in property markets in 2021 and beyond.

“Our view is that the [UK] regional office market is likely to improve in occupier terms because of affordability and developing trends from the pandemic,” Richard Croft, executive chairman of property investment firm M7 Real Estate, said.

He discussed the impact of easy monetary policy on real assets and the divergence between the performance of asset prices and the real economy. Mr Croft explained why such a backdrop provided a supportive investment environment for real estate.

Kamco Invest currently manages 14 commercial properties in the UK, Germany and the US valued at $1.1 billion.

The webinar participants also discussed how the emergence of the “omnichannel” business model in retail has driven demand for different types of real estate, such as urban logistics and retail warehouses.