Asian investors are expected to become the kingpin of the UK real estate market this year, outpacing their rivals in the process, according to Kevin McCauley, senior director of research and consulting at CBRE in London.

Asian investors are expected to become the kingpin of the UK real estate market this year, outpacing their rivals in the process, according to Kevin McCauley, senior director of research and consulting at CBRE in London.

Speaking at German investor Patrizia’s conference in London this week, entitled ‘Value for money: No return without risk’, McCauley said that Asian interest in the UK was soaring: 'They’ll be the dominant investor in the UK this year. I’ve had more meetings with Chinese and Singaporean investors in the past six months than I have in the past two years. That shows you how much interest is out there.’

Asian investment in the UK rocketed by 112% last year to £10.3 bn, according to McCauley. CBRE is also forecasting that Asian investors will account for up to £10 bn of deals this year. In total, £53 bn of deals were transacted in the UK last year, of which almost half – or £21 bn – were closed in the last quarter.

Interest on the part of Asian investors has not abated this year. In January, China Investment Corporation (CIC), China’s largest sovereign wealth fund, completed its acquisition of Chiswick Park in west London from Blackstone for around £780 mln.

Chinese construction firm China Overseas Land and Investment is believed to have recently made an off-market bid to buy Carmelite Riverside, an 12,500 m2 office building in the City of London, from Orion Capital Managers and Quadrant Estates for around £160 mln. Taiwanese insurer Cathay Life is also believed to have bid, according to a London-based advisor who asked not to be named.

London is typically the gateway city to Europe for Asian investors looking to invest in Europe, due to its transparency and liquidity. In addition, the IMF has said that it expects the UK to be the top G7 performer in 2014, which is also driving investor interest, McCauley added.

Also, Asian investors have deep pockets, enabling them to outbid many of their rivals. Last year, they accounted for 14 office deals in central London priced at more than £200 mln each and an additional 33 deals in excess of £100 mln each. As such, they far outstripped UK investors, who accounted for just 9 deals above the £200 mln mark, or German investors with just 5 deals above the same mark, according to CBRE.

London was the top global investment city last year, accounting for 8% of the total, according to CBRE, with around £25.01 bn of deals – broadly half the UK total - followed by New York with just under £18 bn and Paris with £8.93 bn. Munich – the only German city to make the top ten – accounted for just £3.57 bn, according to CBRE.

Nonetheless, the nature of Asian investment is shifting. Investors are not only in it for the long-haul but have also started to ‘flip’ properties when they see a good opportunity to exit, McCauley said. For example, ING sold office block 88 Wood Street in London to Korea’s National Pension Service for £183 mln in 2009, which then flipped it and sold it to Malaysian pension fund KWAP for £215 mln in 2013.