Hong Kong property investors trophy hunting in London despite Brexit

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Chinese investment in commercial property in London has more than trebled since before the UK voted to leave the European Union.

Most of it is channeled through Hong Kong at a time of heightened political uncertainty in the former British colony.

While others have pulled back from British property following last year's Brexit referendum, investors largely from Hong Kong are snapping up the British capital's best-known skyscrapers including the "Cheesegrater" and the "Walkie Talkie".

In the first six months of 2017, Chinese investors spent 3.96 billion pounds (5.10 billion US dollar) on commercial property in London according to data from the CBRE real estate group, the highest amount on record and outpacing the 2.69 billion pounds spent in the whole of 2016.

Reuters Photo

According to the Knight Frank agency, Hong Kong food conglomerate Lee Kum Kee is set to pay 1.28 billion pounds later this month for 20 Fenchurch Street, the 34 story skyscraper known as the Walkie Talkie, a record for an office building in Britain.

"Deals from mainland China already make up a smaller proportion of the activity from the region, with Hong Kong investors most active," said Anthony Duggan, head of capital markets research at Knight Frank.

"We expect that Chinese investors will still look to make strategic real estate purchases that fit within their business plans," he said.

Record Hong Kong commercial and residential property prices, along with the political concerns are pushing investors to turn to overseas markets where rental yields are higher.

Chinese pricing of UK commercial real estate has already established an "entry premium" of about 100 basis points on yields for platinum or top grade buildings, according to Prew.

Reuters Photo

Capital from China and Hong Kong accounted for a third of all investment in London commercial real estate this year, up from less than 10 percent before the referendum, according to CBRE.

Buildings in London are cheaper per square foot than in Hong Kong, Tokyo, New York and San Francisco, but they offer higher rents than most other global centers of their stature, according to Knight Frank data.

"(Chinese investors) want stable and good returns and trophy buildings generally look part of that," said Dan Norris, real estate head at Hogan Lovells, the second-largest law firm in China.

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Source(s): AP ,AFP ,Reuters