London can survive a banker Brexodus, says property boss
‘One of the great strengths of this place has been its ability to reinvent itself,’ says Great Portland Estates CEO
The chief executive of a large London property developer said the capital will survive even the worst-case scenario of tens of thousands of financial services jobs leaving the country because of Brexit — but that it will need to reinvent itself once more to do so.
Toby Courtauld, the head of FTSE-listed Great Portland Estates, which invests in and develops London property, said he expected a difficult period as the UK works through its exit from the European Union, but that he remains a “long-term optimist” about the city’s prospects.
Some estimates suggest that up to 75,000 financial services jobs in the UK could disappear if firms lose their ability to sell services and products to the bloc from the City of London. Asked on a Brexit-focused panel at the FT’s Property Summit whether such a figure would pose a long-term problem for London and its property market, Courtauld admitted it would mean a lot of empty office space.
His comments came after it emerged the European Banking Authority would be leaving its London headquarters — offices it only recently moved into — and relocating to Paris after Brexit. The move will affect around 160 staff.
And late last month, Lloyd Blankfein, the chief executive of Goldman Sachs, suggested in a Tweet that the Wall Street bank could struggle to fill its new London HQ in Farringdon. The bank currently employs around 6,000 people in the UK.
Courtauld said it was wrong to think of London as only being about the banks and fund managers based there, adding the UK capital had proved its ability to reinvent itself. He said: “If you look at the last decade in particular, the growth of tech, London has emerged as the centre in Europe… That, to me, is a classic by-product of a really entrepreneurial economy, something that is growing quite quickly, generating lots of new dynamics.”
However, he added that any Brexit deal with Brussels that made the UK less appealing as a broader investment destination would spell bad news.
He said: “It is a question of confidence and what it says about London and the UK’s openness as an economy, and our ability to attract people in from overseas and the ability for people to move around. If that becomes a structural issue then I think we do have something much more problematic, and it will go to confidence and ultimately to economics.”
London remains the world’s leading city for property dealmaking, according to recent figures from property firm JLL, helping to push activity across Europe, the Middle East and Africa up 14% year-over-year during the first nine months of this year.
Speaking on the same panel, David Marks, co-managing partner of Brockton Capital, a real estate fund, said investors looking for yield had been encouraged to consider UK commercial real estate — “not risky stuff where it’s all about hands-on asset management and you’re performing CPR on an asset the day you buy it”, he added, but assets with “stabilised, 10 years of income” that could deliver yields of between 3.5% and 6%.
“These are huge, Grand Canyon-esque yield gaps over 10-year gilts, five year swaps, global bond yields — whatever you want to say,” he said. “With prudent leverage attached… you’re easily cleaning a high single digit return on equity. It’s utterly compelling.”