Brexit: Billion-dollar Australian pension fund eyes up UK office space opportunities

Australia’s largest pension fund is looking at UK real estate following Brexit

China's increasing controls on overseas investments may pave the way for other investors in UK office space

Bankers may be leaving London, but Britain’s exit from the European Union could still offer opportunities to buy UK commercial real estate with the market in flux, according to Australia’s largest pension fund.

AustralianSuper, which has A$120bn (£73bn) in assets, is looking to invest more overseas, with real estate and infrastructure in the UK, Europe and the US of particular interest, Melbourne-based chief investment officer Mark Delaney said.

“Brexit may present an opportunity for us, but we will need to be patient,” Delaney said in an interview on 24 August. “There are likely to be some good quality assets that become available that will be worth looking at.”

Uncertainty surrounding the terms of Britain’s exit and future access to the single market has seen international banks look to Dublin, Frankfurt and other European capitals for office space -- raising doubts about London’s economic prospects and causing the value of older buildings to decline. With some investors losing their appetite for riskier assets, opportunities remain for long-term buyers, Delaney said.

A global retreat of Chinese dealmakers as more stringent capital controls start to bite could also prove a boon for other money managers, he said.

Dalian Wanda last week scrapped plans to buy a land plot in London for £470m, amid the Chinese government’s intensifying scrutiny of overseas investments. The government in Beijing this month formally laid down new rules on overseas investments, making explicit its campaign against what it calls “irrational” acquisitions of assets in industries ranging from real estate to hotels and entertainment.

Chinese firms have been “the price setter” in many asset classes such as real estate and infrastructure, said Mr Delaney. If the flow of funds from China continues to diminish that will create more opportunities for other investors, he said.

AustralianSuper, which paid A$900m in 2016 to take a majority stake in the 67-acre King’s Cross redevelopment in central London, isn’t alone in seeing value in the UK, where the pound has declined about 17 per cent against the Australian dollar since the Brexit vote in June 2016.

Australian developer LendLease Group, which is working on Google’s new London headquarters, also says it remains optimistic overall about the city.

“There’s no doubt some decisions will be deferred because it’s tough in a time of uncertainty for businesses to commit capital,’’ chief executive Stephen McCann said in an interview on Monday. “It remains a very good place for us to invest in the medium to longer term.’’

Delaney said he wants to accelerate a shift to managing money in-house, from almost 28 per cent of assets currently to 30 per cent by the end of the year and ultimately 50 per cent. AustralianSuper says the program is delivering A$100m in additional value to members a year.

AustralianSuper’s flagship fund returned 12.4 per cent after taxes and fees in the year to 30 June.

Bloomberg