Royal London backs the City with new UK property fund

Private property no tresspassing sign

Royal London Asset Management (RLAM) announced the largest ever launch of a UK property fund today, with an existing portfolio worth more than £2.7bn seeded by the firm's maturing life funds.

The new fund will only look at commercial property, and already owns assets including the Victoria's Secret and Hugo Boss stores on New Bond Street and others in Covent Garden, Trafalgar Square, Oxford Street and St Paul’s.

It will invest mainly in the City and other prime London locations, and its launch is a vote of confidence in the capital's resilience in the face of Brexit, according to RLAM's chief investment officer Piers Hillier.

Read more: London commercial real estate attracts record first quarter investment, CBRE figures show, as overseas investors shrug off post-Brexit vote uncertainty

“From an investor perspective, the City market has been very robust. London will always be a world city, and has a very diverse economy,” said senior fund manager Drew Watkins.

“Outside of finance and banking, the insurance market is world-leading. The technology sector is growing significantly, and the legal industry is a large part of the London economy.”

Although Brexit is something that Royal London will “need to monitor”, Watkins adds, the continued interest from both domestic and foreign investors in City properties shows that no one is banking on a mass business exodus.

Read more: Aberdeen Standard gives its long lease fund a facelift with a £40m Harley Street deal

China's CC Land, for example, bought the Cheesegrater for £1.15bn in March, while Hong Kong food giant Lee Kum Kee grabbed the Walkie Talkie in July for £1.3bn.

In some ways, the UK's decision to leave the EU might even work to Royal London's advantage. The real estate fund will also invest in retail and dining locations in the West End, which is a tourist hotspot, and official data over the summer showed UK tourist numbers hitting a record high due to sterling's devaluation.

“In the West End you've got the theatre districts, the restaurants. They're a large part of the London economy and are quite resilient to Brexit,” said Watkins.

Read more:A record-breaking number of tourists have flocked to the UK in the year so far

Full story: Royal London backs the City with new UK property fund: City A.M.

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