Chinese and US money is set to dominate London’s commercial property market in 2015, according to research from property adviser Savills.
Chinese and US money is set to dominate London’s commercial property market in 2015, according to research from property adviser Savills.
At £2.2 bn (nearly €3 bn), Chinese investors accounted for more inward investment in the UK capital last year than all European buyers combined. US investors spent £3.4 bn, while the Qataris invested £1.2 bn. This contrasts with the big spenders in 2013 who originated from Kuwait (£2.1 bn), Singapore (£1.7 bn) and Hong Kong (£785 mln).
Savills data shows that of the £21 bn spent in the London market in 2014, £14.6 bn - or 70% - came from foreign buyers. Chinese investors were the biggest buyer group from Asia, with developers such as Shanghai Greenland, Ping An Trust and China Overseas Land Investment purchasing properties. Savills also notes that these investors are not limited to single transactions, and anticipate more activity. China Life was one of the biggest new entrants of the year with its deal at 10 Upper Bank Street.
US investors including Blackstone, Kennedy Wilson and Hines secured some of the larger deals such as Alban Gate, 111 Buckingham Palace Road and 25 Cabot Square, with Northstar entering the UK for the first time with the acquisition of a property in Woking before going on to purchase a €1.1 bn portfolio which included four assets in London. Other new entrants include parties from Taiwan, Turkey, Singapore, Israel and Yemen.
Rasheed Hassan, director of cross-border investment at Savills, said: ‘Debt is a significant factor in drawing in these international parties, falling swap rates and competition between lenders is making borrowing cheaper. Aside from that there is genuine confidence in the strength of the occupational market with rents steadily rising. These pull factors are further boosted by push factors such as the returns in the bond markets as compared to property and some economic instability across other geographies.’
Eric Zhao, Savills Chinese capital markets specialist, added: ‘Chinese investors coming into the UK market are mainly developers and insurance companies. The top Chinese developers are being driven by challenges in the domestic market and global branding needs. Insurance companies are beginning to diversify their huge capital outside of China after the restriction on overseas investment was lifted by the regulator. We have already seen the top Chinese firms make a statement in London and we are expecting more to follow.’
The rise in private investors entering London is another notable trend, according to the firm. Appetite from these parties has not been restricted to smaller lot sizes, with the Savills sale of The Gherkin to the Safra family as the most significant larger private investor transaction as well as others from China, Spain and Hong Kong.