Who’s Buying In The London Market Right Now?
Central London investment volumes were £2.5B in the first quarter, a drop of 44% on the same period in 2017.
So who is in the market buying today? Data from Real Capital Analytics for the year to 22 May lifts the lid on where buyers are coming from.
1. The U.K. is back
In 2017 Asian buyers, particularly from Hong Kong, dominated the market, accounting for more than half of all Central London deals, according to JLL.
But in 2018 U.K. buyers are back, at £2.5B by far the largest buyer group, accounting for 47% of the £5.7B invested so far this year, according to RCA. In many cases they are forming joint ventures with overseas investors or targeting assets that need redevelopment or refurbishment.
The City of London Corp. boosted the figures, buying the freehold of two sites for potential future development for £265M.
2. Trophy deals drive U.S. numbers
Big U.S. private equity buyers have been sellers rather than buyers in 2018 — Blackstone is the biggest seller so far this year, having disposed on £828M, according to RCA. But the major deal by a consortium including TIAA-owned TH Real Estate and WeWork to buy Devonshire Square from Blackstone for £580M put U.S. investors in second place for acquisitions, with £1.2B deployed. Other significant buyers include Brookfield, which has bought student accommodation and serviced apartments.
3. Hong Kong — still there
Hong Kong investors bought a mammoth £6B in 2017, but much of that was driven by two large deals, the Cheesegrater and the Walkie Talkie, which totalled almost £2.5B alone. Investors from the island are unlikely to hit those levels again, but they have spent £462M in London so far in 2018, the headline deal being Nan Fung’s £303M acquisition of Regents Quarter in King’s Cross.
4. South Africa — capital flight
Capital is heading out of South Africa into global real estate at record rates, but the vast majority of that has gone into Central and Eastern European retail assets. London is starting to get its share, with the primary example being Zeno Capital teaming up with Robert Houston’s Oxygen Asset Management to buy the 320K SF Riverbank House from Evans Randall for £400M. The total South African investment to date was £412M.
5. South Koreans start to arrive from Europe
At Bisnow’s Capital Markets event in February, Savills Head of Cross Border Investment Rasheed Hassan predicted that South Korean investors would begin to move from Continental Europe to London. So far this cycle they have been big buyers in Paris and Germany because those cities have higher yields than London. But at the same time as yields in those markets haven fallen sharply in the past 18 months, yields in London have risen, making the U.K. capital relatively more attractive.
Hassan's prediction has come to pass, with South Korean investors buying assets like Cannon Bridge House from Blackstone for £248M, and, since RCA crunched the numbers for Bisnow, 70 Mark Lane from Mitsui Fudosan for £200M.
