By Andrew Batt:
London’s transparency, relatively long leases and high yield spread above the risk free rate, makes it the most popular city globally for investors seeking to diversify away from their home markets.
The city witnessed a 30 percent increase in cross-border investment as compared to 1H 2011, and maintained its place as the Number 1 city for commercial real estate investment globally.
With a total of US$10 billion transacted in 1H 2012, international buyers represented for 75 percent (US$7.5 billion) of total investment volumes with Asian investors accounting for approximately 20 percent (US$1.5 billion).
Alistair Meadows, Head of International Capital Group, Asia Pacific at Jones Lang LaSalle, said: “In the last 12 months we are seeing the emergence of ‘new’ sources of Asian capital attracted to London ranging from sovereign wealth funds like Employees’ Pension Funds from Malaysia, to High Net Worth investors from China and Indonesia and Thailand. We expect to see continued increase demand from Asian buyers in the Central London office market. We are also seeing an increase of Asian investors venturing into London’s hotel and residential markets as buyers of individual residential units through to residential investment blocs and major hotel deals in London West End.
He added: “We will continue to see a diverse range of Asian sources of capital being very active in London targeting the city for higher income returns. For 2011, Asian investors account for 16 percent in London’s commercial deals and we foresee they are likely to account for over 30 percent of investment volumes by year end.”
Longlom Bunnag, Chairman of Jones Lang LaSalle in Thailand, said “Like most other Asian countries, Thailand has been less affected by the 2007 global financial turmoil and the on-going debt crisis in the Eurozone, and thus has enjoyed its continued economic growth. This has also allowed Thai investors, both individuals and companies, to continue to build their financial strength over the past years.”
He said that some of these well-capitalised investors are now looking to diversify offshore by investing in world’s well established real estate markets, as reflected by a growing number of enquiries that Jones Lang LaSalle has received from ultra-high net worth Thai individuals and corporates looking for investment opportunities in the London real estate market.
“The recent announcement by the Thai government of an intention to encourage Thais to invest overseas in effort to prevent baht strength may fortify this trend further,” he added.
Jones Lang LaSalle Capital Markets cross-border highlights in London:
- Aviva Tower, 1 Undershaft, EC3 – sale of freehold office tower to two Indonesian HNW for £290 million
- Goldman Sachs EMEA HQ, EC4 – largest disposal in 2012
- The Cavendish London, SW1 – sale of hotel to Singapore hotel operator for £160 million
- 1 Berkeley Street, W1 – Attracted 47 percent of cross-border bidders and sold for £155.1 million
- 11-12 St James’s Square, SW1 – sale of office building to Employees’ Pension Funds from Malaysia for £147.5 million
- Draper Gardens, EC2 – sold to Chinese Capital for £285 million
- 1 Bunhill Row, EC1 – sale of office building for £184.5 million
- Battersea Power Station, SW8 – sale of freehold asset to SP Setia Group from Malaysia for £400 million
- 1 Sheldon Square, W2 – sold for £156 million to Asian investor
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