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Investments into London commercial property by Chinese nationals surged by around six times year-on-year to £2.72 billion (S$4.93 billion) in Q1 2017, reported China Daily, citing data from CBRE.
One of the major deals is CC Land’s £1.15 billion (S$2.08 billion) acquisition of Leadenhall Building in March, while smaller transactions valued at around £100 million (S$181.08 million) rose in number as well.
For instance, Guangzhou’s R&F Properties and China Estates respectively acquired Vauxhall Square and 11-12 St James’s Square for £158 million (S$286.11 million) and £175 million (S$316.89 million) last month.
According to CBRE’s Head of international capital markets, Chris Brett, upcoming deals involving Chinese investors, particularly those from Hong Kong, are “at an all-time high”.
He said the demand for London commercial real estate is currently “very strong” mainly due to the weaker Pound Sterling. Following the Brexit vote last June, the currency depreciated against the yuan, falling by 20 percent to its lowest level in October 2016.
While some experts think that CC Land overpaid for the Leadenhall Building, JLL’s head of the China desk Eric Pang said the management style of the new owner will determine the property’s value.
The landlord’s ability to maintain good ties with lenders and anchor tenants is important, he explained, adding that Chinese investors can get returns ranging from four percent to 17 percent from commercial properties.
Moreover, profit margins on earlier investments are improving. For example, Beijing-based developer ABP expects £3.2 billion (S$5.79 billion) in revenue from a multi-use block near London City Airport, in which it invested £1.7 billion (S$3.08 billion).
Reignwood, another developer from Beijing, expects to surpass the breakeven point for a London hotel in 2018, after it spent £500 million (S$905.41 million) since 2010 to transform Ten Trinity Square into a mixed-use project consisting of a private-members club, residential block and a hotel.
This article was edited by Denise Djong.
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