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Hong Kong real estate buyers snap up offices in London

01-Aug-2017


PropertyWire

Commercial real estate buyers from Hong Kong are the most active in London, buying some £2.2 billion of offices over the first half of this year, new research has found.

This is significantly above the £458 million recorded over the same time period last year, according to the latest commercial property report from international real estate firm Knight Frank.

But while the Hong Kong investors are very active the analysis shows that more Germans are investing in the sector, attracted by the returns available relative to their domestic market and the weakness of sterling.

A broad range of other global buyers are investing in London real estate, including from Slovakia, Singapore and Thailand and UK buyer are also active in the office market.

‘A deep pool of buyers continue to chase City of London offices. Looking forward, we expect that Far Eastern investors, in particular Hong Kong buyers, will continue to buy strongly in the second half of 2017 and we predict that the total annual spend by Hong Kong domiciled investors will reach £4 billion, nearly four times the volumes transacted by this buyer group last year,’ said Nick Braybrook, head of City capital markets at Knight Frank.

‘Importantly, this increase in activity is being facilitated by a rise in the supply of available opportunities to purchase over the last few months. Sellers have been attracted to the market by the continued strong demand from both domestic and overseas buyers with availability up 20% in the second quarter to the previous quarter and up a third on this time last year,’ he pointed out.

‘However, with the strong demand we expect from Hong Kong and other global and domestic investors, the supply numbers could fall rapidly over the next few months as deals are completed. This is likely to put further downward pressure on prime yields for City of London offices, currently trading at 4.25%,’ he added.

According to Anthony Duggan, head of capital markets research at Knight Frank, London is certainly not alone in attracting money from Hong Kong. Indeed, Chinese and Hong Kong capital was responsible for 13% of all global cross-border real estate investment last year, second only to the United States.

‘While there is some uncertainty surrounding capital flows from China as part of ongoing capital controls, we expect Chinese and Hong Kong investors to remain active,’ he said.

‘Despite the capital controls in place, limiting some outbound investment from China, it is clear that deals deemed appropriate, that is in line with existing areas of business and business plans, will continue from both conglomerates, private investors and SOEs,’ he explained.

‘In addition many investors will continue to raise funds and invest through their overseas, e.g. Hong Kong or Singapore, entities,’ he added.


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