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01 October 2023

Asia buyers seen doing a fifth of London office deals

By Reuters

Asian investors will account for over 20 per cent of central London office property deals this year, attracted by the British capital's safe-haven allure, transparency and high returns, property consultancy Jones Lang LaSalle said.

Data from JLL showed Asian investment in central London offices jumped 150 per cent to 1.7 billion pounds ($2.6 billion) last year and made up 16 per cent of the total 10.8 billion pounds invested in the market, a figure likely to top 20 per cent this year, it said on Friday.

Andrew Hawkins, a director in JLL's office investment team, said Asian buyers were the fastest growing investor class, ahead of others such as Canadian pension funds, Middle Eastern investors and German spezialfonds, mirroring a trend seen in London's residential market.

Buyers were attracted by the London market's transparency, relatively long leases and higher yield over rival investments, like government bonds, he said.

European investors, who have been knocked by cutbacks in bank lending and concerns over the euro zone debt crisis, have been much less active, he added.

Asian buyers active last year include Wilmar International's Martua Sitorus, who bought the Aviva Tower for 288 million pounds, and sovereign wealth fund Korea Investment Corporation which acquired 1 Bartholomew Lane for 75 million pounds.

South Korean pension fund NPS and Malaysia's Permodalan Nasional Berhad are among other Asian investors that are now circling the estimated 5.75 billion pounds of London offices on the market.

JLL said Asian buyers were particularly active in the City financial district last year, accounting for 23 per cent of annual investment volumes.

The data also showed there was strong appetite from Asian investors for bigger deals. JLL said that 40 per cent of the 3.5 billion pounds traded in the City in lot sizes of over 100 million pounds was undertaken by Asian buyers

A series of high-profile City office properties came to market in the autumn months of 2011 as their owners looked to capitalise on prices that the IPD benchmark said rose 34 per cent between June 2009 and September 2011.

Some analysts, however, have pointed to a tempering of investor demand as the UK slides towards recession, which they said may see prices being cut by up to 15 per cent.