Commercial property in the UK is receiving a boost from Hong Kong. Whilst there has been much talk of residents of the semi-autonomous Chinese city buying up London homes, it is in fact within commercial real estate that purchasers have been eyeing up some of the biggest deals.
For example, the recent acquisition by CK Asset Holdings of the UK pubs and brewery group Green King for £4.6bn is likely to have been supported by the £3.5bn Green King property portfolio. With CK Asset Holdings seen as a leader for other investors, many should follow suit.
Also, in November 2019 the Mayfair flagship store for Crombie (a high-end British fashion company) was sold to a Hong Kong financier, whilst there are several Hong Kong based investors bringing forward plans for major new buildings in the City. We are also seeing significant Hong Kong based investment into UK regional cities.
Turmoil in the former UK colony, stemming from anti-government protests, has revived some longstanding links with the UK, as investors are turning to the country as a safe haven. As a result, the number of Hong Kong investors seeking property in London as well as the main regional cities across the UK has increased in the past three to four months. Buyers from Hong Kong are able to defy a broad drop in outbound capital from mainland China, partly because the mainland’s tighter capital controls do not apply in the territory. While difficulties in the UK still exist, it offers a more stable option when compared to the current turbulence in the US or China. The competitiveness of sterling is also a key factor contributing to the country’s appeal.
In addition, the UK is also seen as a potential base for investors due to thriving communities from Hong Kong already living here, including the children of wealthy and middle-class Asians at the UK’s highest rated schools and universities.
Brexit woes quelled
However, a key concern for many in Hong Kong when it comes to commercial property has been Brexit worries — not least because sellers fear exposing properties to an uncertain market. A run of big purchases by Hong Kong and Chinese buyers two years ago has been therefore followed by a quieter market.
Yet, with the results of the recent UK election and potentially a Brexit endgame on the horizon, there is now more certainty about the UK’s direction, putting some investors at ease and positioning UK commercial property as a more stable option once more.
Going beyond London
Whilst interest in London’s office sector is particularly strong, with many investors only interested in looking at London’s assets, regional city offices are still active investment hotspots. We manage multi-let offices investments for a number of Hong Kong based investors within both London and the main UK regional cities. The move towards the regional cities is relatively recent, but these assets are performing strongly with significant rental growth and there remains plenty of excellent opportunities for repositioning poorly managed properties.
The key to these opportunities remains attention to detail on the ground alongside the right advisors who are used to acting in a collaborative manner with Hong Kong based investors.
By Jonathan Marwood, Partner at Hartnell Taylor Cook