Viewpoint: John McGregor

September 4, 2019

North East Times’ property writer Chris Dobson talks to John McGregor, a property investment specialist with extensive experience across the UK and Central Europe with an emphasis on the Visegrád Group, the cultural and political alliance between the Czech Republic, Hungary, Poland and Slovakia

Taking a Visegrád 4 view, what would you say the view of Brexit is from these countries who are all members of the EU and Nato?

In short, the view would be that Great Britain has gone mad and the decision to leave the EU is illogical. The countries referred to in Central Europe would struggle without EU membership. The EU has been a fantastic vehicle for them and invaluable given the culture change between years of oppressive Communism and the reality of a Western-style economy. There is a large measureof incredulity given Great Britain has taken two years to get nowhere on Brexit. After all, this is Great Britain, the builder of a global empire, which is now struggling to get a consensus on the way forward to exit from a hugely important trading area that stands for equality, peace, openness and transparency. This is being replaced with an insular approach, extreme views and little loyalty.

Your specialist areas are across the three main commercial property sectors. Were you surprised that the first quarter of this year saw investment in UK shopping centres fall by 90 per cent? This is a phenomenal figure. Was that all down to Brexit?

This has nothing to do with Brexit. The internet has changed the world at a frightening speed. Shopping at leisure online for delivery the next day is a formula that is hard to beat. Footfall across the sector is plummeting and as a result the traditional High Street is under pressure. This is impacting on large city centre shopping malls too. Some people are in denial to believe this could happen. A further potential threat is the UK-wide Air Quality proposal. Clearly clean air is a good thing but paying a £12.50 penalty to go and shop with car parking charges on top could mean shoppers being £20 out of pocket before they have bought anything. This is a serious challenge. Institutional investors will survive, but property companies will be caught.

What investment sales there have been were in smaller UK towns. What does this tell you about the market?

I would say this is part of the churn of investment disposals. Faced with the pressures on the High Street, this is to be expected. It may look bleak but it’s time to rethink strategies. This could be a fantastic opportunity for some.

When looking at opportunities for investment, two general thoughts come to mind. Firstly, overseas based investors – should they invest more or sell their UK assets – and secondly, should UK investors play at home where they know the market or go abroad into possible unchartered waters?

Wherever you are, it’s all about opportunities. Youhave to have courage to go out of your comfortzone. Some think abroad is the same as the UK.It is not. Investors need to know the rules and it is not without currency, legal and cultural risks. The key is to take a careful look at opportunities and trends, take local advice and not dabble as that is the surest route to disaster.

Regional investments have seen average yields move to their highest levels in nearly eight years. What does this mean to regions such as the North East where secondary locations outnumber prime locations?

I believe institutional buyers in the UK regions are diminishing. This leaves high net worth individuals, small funds and property companies as the main investors. There is a great opportunity to take back property from institutions which should, by the way, be investing in property companies and not property assets.

You live in the northern part of the North of Tyne devolved authority. What changes would you like to see and what changes do you expect to happen?

I don’t know much about devolution for the North of Tyne. All I would say is that one of the joys of living in Northumberland is the fact that not many people live here in an area of outstanding natural beauty. In terms of the local economy, completing the dualling of the A1 would make a big difference. This has been talked about for years. Whether or not North of Tyne is sympathetic with this vital element of infrastructure remains to be seen.

As to a general view of commercial property in the short-term future, what would you say?

One must look at Real Estate Investment Trusts (REITs), which own and operate income-producing real estate. These can cover the three main sectors, but future success will depend on who can deal with all three sectors. We are in uncertain times.

I believe the key is to look at income, rather than capital gain. In general, we have been spoilt since World War Two, with large-scale retail development, both city centre and out-of-town, which have been very successful. Now the sentiment is changing and some of these schemes are now not so relevant.

For the next 20 years we need to re-focus. The priority should be a safety-first approachbased on delivering income. I would have thought Government-let buildings would be a good target for investors. I also think property companies will take over the drive in the sector from institutions. Maybe institutions should invest in property companies, rather than in bricks and mortar.

 

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