London cemented its position as the destination of choice for commercial real estate investment by sovereign wealth funds by attracting almost four times more capital than its nearest rival, New York´s Manhattan, over a 12-month period, according to research firm Real Capital Analytics (RCA).
London cemented its position as the destination of choice for commercial real estate investment by sovereign wealth funds by attracting almost four times more capital than its nearest rival, New York´s Manhattan, over a 12-month period, according to research firm Real Capital Analytics (RCA).
RCA's analysis of deal activity in the 12 months to end-September 2014 found that sovereign wealth funds (SWFs) - led by Kuwait Investment Authority and Norway Government Pension Fund Global - invested £5.6 bn (€7.1 bn) in the UK capital's commercial property sector. That sum represented 44% of the total SWF spend on global real estate, and 73% of the SWF capital that flowed into Europe during the review period.
The recently rejected bid by Qatar Investment Authority and Brookfield for Songbird Estates, the listed majority owner of London's Canary Wharf Estate, highlighted London's enduring attraction for SWFs, according to Simon Mallinson, RCA managing director for EMEA. 'As Europe's largest and most liquid real estate investment market, London offers a regular turnover of substantial portfolios or trophy buildings that appeal to sovereign wealth fund investors because there is less competition for these big-ticket assets'.
Manhattan came second in the ranking of destinations that attract SWF real estate investment, with around €2.2 bn of transactions. Los Angeles was in third place with some €1.2 bn of investment flows.
The largest SWF deals in London included:
* Kuwait Investment Authority's €2 bn-plus acquisition of More London at end-2013
* China Investment Corporation's €940 mln purchase of Chiswick Park in west London from
Blackstone in December 2013
* Norway Government Pension fund Global and The Crown Estate buying into the Pollen Estate for €478 mln in August 2014
'The weight of sovereign wealth capital channelled into the London market has intensified competition and pricing for prime assets, persuading domestic UK investors in particular to look at opportunities in regional UK cities, such as Manchester,' Mallinson added.
RCA's database also shows that Qatar Investment Authority has been the largest SWF investor in London property during the past three years after closing deals totalling about €5 bn. Government of Singapore Investment Corporation is currently the largest SWF owner of European property by purchase value.