Unlocking Urban Investment in the Current Climate

31 October 2011

Despite evidence of substantial capital to invest in European cities, access to leveraged debt has been limited, as lenders wait for concrete resolutions to the Eurozone debt crisis. It is this issue of unlocking investment capital that dominated the debate at the UIN panel discussion at EXPO Real, with participants from Deutsche Bank, Morgan Stanley, Allianz, Orion Capital, the City of Amsterdam, the City of Barcelona and the City of Edinburgh.

What are investors doing?

Investors appear to be seeking core well performing investment opportunities in established markets that have high clusters of corporate real estate.

• Counter-cyclical opportunities such as student housing, office to residential development and refurbishment of well performing buildings in core areas will be popular.
• Investors are alive to opportunities in ‘core’ cities outside ‘core markets’ that may be blighted by the national picture (Edinburgh remains attractive despite a poor climate more generally in Scotland).
• Transparency is all important to investors who would rather exercise caution in the current climate than be offered riskier high return opportunities.

What can cities do to help attract investment?

Cities must understand and adopt policies that support the position of investors.

• Investors have a strong sense of which cities are easier to work with than others. The key issues are: consistency of planning policies, and ease of entry into a market, regulation, and predictability of permitting.
• City strategies that provide strong incentives for conversion and redevelopment of existing buildings will help create core opportunities and be attractive to investors.
• Provision of land, deferred land payments and land use swaps are good ways of encouraging development, provided the land is viable for the intended end use and easy to develop.

Conclusions:

Discussions revealed that in the current climate, investors are seeking core opportunities in established markets where their equity can achieve an optimal return and where risks are low. The key task will be to ensure the creation of these core opportunities continues; through creative, transparent and investor friendly city strategies that attract investors. Greg Ward from the City of Edinburgh added, ‘This feedback from such major players was invaluable in helping us to continue to develop our inward investment offering.  It is hard to think of a way we could have facilitated this without the help of the UIN.  Well done on a great event!’