Asian real-estate investors don’t appear to be too concerned about purchasing London office space despite Brexit worries. Chinese purchasers of London property have closed their wallets, however, buyers from Hong Kong, Singapore and South Korea are picking up their slack.
Asian purchases in 2018
In June, Victor Li, who succeeded his billionaire father, Li Ka-Shing as head of the CK Groups, purchased UBS’ HQ in the centre of London’s financial district for £1 billion. Singapore-listed property company, Ho Bee Land, splashed £650 million on a 21-story 602,000 sq ft office, called Ropemaker Place in June too.
Back in March, Cannon Bridge House was purchased for £248 million, as part of a venture between South Korea’s Mirae Asset Daewoo Co. and NH Investment & Securities Co. The Mirae group also acquired a £340 million building from Blackstone Group LP. Korea Investment & Securities Co. successfully bid for a 15-story office building for £200.5 million.
According to CBRE research, London office space worth £7.23 billion, have changed hands this year. Buyers from Asia accounting for 60% of the actions.
Between 2014 and 2015, China was the biggest source of Asian buying in London. Now, conglomerates, such as Dalian Wanda Group have exited the capital. There has only been 1 big deal this year for China, when Beijing purchased an office complex in London’s financial district, for their new embassy.
Investors from Hong Kong have taken the crown to a large extent, as they snapped up buildings such as The Cheese Grater and Walkie Talkie, setting a new record for a single UK office site.
Lease lengths of London office space
According to CBRE’s Executive Director, the City of London is home to the world’s most expensive commercial real estate and vacancy rates are around the 4 to 5% mark. This is below the average of 6.5%.
New York and London also typically have longer leases, around 10 years on average. Compared to cities such as Paris, Frankfurt and Tokyo, where leases average around 5 years, and as little as 2 in Beijing. Occasionally, investors can get even longer, as shown by CK Asset Holdings Ltd’s purchase of UBS’s HQ. This deal included a 17-year lease, with the possibility of raising rents every year to keep pace with inflation.
South Koreans seem to be favouring the UK over the States. New York does still remain a popular destination for their funds, but it all comes down to affordability.
London may be the worst-performing market in the UK for home prices. However, the office sector looks set to keep Asian landlords coming.
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