Lon­don build­ings selling fast

China Daily (Hong Kong) - - FRONT PAGE - By CECILY LIU in Lon­don cecily.liu@ mail.chi­nadai­lyuk.com

First, it was The Cheeseg­rater; then, The Walkie-Talkie. Now, in­dus­try an­a­lysts are ask­ing what will be next as Chi­nese com­mer­cial prop­erty in­vestors snap up Lon­don land­marks. The Gherkin? The Shard?

The build­ings are all high­rise tow­ers in and around the City, Lon­don’s main fi­nan­cial district.

China’s LKK Health Prod­ucts Group paid 1.28 bil­lion pounds ($1.68 bil­lion) last week, the big­gest-ever price tag for a UK build­ing, when it bought 20 Fenchurch Street, which is col­lo­qui­ally known as The Walkie-Talkie.

The mas­sive pur­chase fol­lowed the sale of the Lead­en­hall Build­ing ear­lier this year, which is known as The Cheeseg­rater.

The other two build­ings, also nick­named for their unique shapes, are not for sale, but nei­ther was The WalkieTalkie be­fore LKK made its own­ers an of­fer they could not refuse.

The pur­chase of com­mer­cial prop­erty in Lon­don by Chi­nese buy­ers has been ac­cel­er­at­ing at an un­prece­dented rate.

The lat­est fig­ures from real es­tate agent CBRE show Chi­nese in­vestors bought UK com­mer­cial prop­erty worth 4.5 bil­lion pounds in the sec­ond quar­ter of 2017, a six-fold in­crease year-on-year.

Mean­while, statis­tics from real es­tate agent JLL show Chi­nese buy­ers in­vested 3.4 bil­lion pounds in Lon­don prop­er­ties over­all in the first half of this year, which was 42 per­cent of all pur­chases.

Eric Pang, head of the China Desk at JLL, said, “We con­tinue to wit­ness the emer­gence of Chi­nese cap­i­tal glob­ally.”

He said he ex­pects China’s share of in­vest­ment in the UK to con­tinue to rise.

De­pre­ci­a­tion of the pound be­cause of un­cer­tain­ties around the UK’s exit from the Euro­pean Union is a key con­tribut­ing fac­tor, help­ing Chi­nese in­vestors buy ster­ling as­sets at a dis­count.

Re­cent trans­ac­tions also demon­strate the pop­u­lar­ity of safe as­sets in prime lo­ca­tions.

The Walkie-Talkie, for ex­am­ple, is con­sid­ered a safe as­set be­cause the build­ing’s space is fully leased to in­vest­ment-grade-rated com­mer­cial ten­ants. The short­est lease in the build­ing is for 13 years, mean­ing LKK has a guar­an­teed in­come for many years to come.

CC Land bought The Cheeseg­rater for 1.15 bil­lion pounds in March, and China Re­sources Land bought 20 Gre­sham Street in May for 315 mil­lion pounds.

Crit­ics have ques­tioned whether Chi­nese i nvestors have been buy­ing tro­phy as­sets at in­flated prices, es­pe­cially in light of the fact that the sell­ers of both The Walkie-Talkie and Cheeseg­rater said t hey sold for ex­cep­tion­ally good prices.

But James Beck­ham, head of Lon­don cap­i­tal mar­kets at real es­tate agent Cush­man & Wake­field, said Chi­nese in­vestors can still en­joy good re­turns, de­spite the high prices they paid.

“The Bri­tish devel­op­ers have done a lot of work in the prop­erty de­vel­op­ment process, so their profit mar­gins are jus­ti­fied. For the Chi­nese in­vestors, they are look­ing for very safe, long-term as­sets, and they are get­ting that,” Beck­ham said.

Rental yields for both The Walkie-Talkie and Cheeseg­rater are around 3.4 per­cent, which is fa­vor­able com­pared to sim­i­lar as­sets in other ge­o­graph­i­cal re­gions, Beck­ham said.

Sammy Lee, LKK’s chair­man, said he was “de­lighted” with the Walkie-Talkie deal. The com­pany said it paid a rea­son­able price for a longterm in­vest­ment.

Mean­while, the City’s lo­cal gov­ern­ment team has in­vested heav­ily in strength­en­ing re­la­tion­ships with land­lords, devel­op­ers and oc­cu­piers, to make prop­er­ties in Lon­don’s fi­nan­cial district more at­trac­tive, as part of a cam­paign to up­hold the im­age of Lon­don as a global fi­nan­cial cen­ter, de­spite Brexit un­cer­tain­ties.

Ef­forts are fo­cused on em­brac­ing “co-work­ing, flex­i­ble of­fice spa­ces, and the new wave of tech­nol­ogy, me­dia and tele­coms com­pa­nies at­tracted to the City”, said Chris Hay­ward, chair­man of the plan­ning and trans­porta­tion com­mit­tee at the City of Lon­don Corp.

For the Chi­nese in­vestors, they are look­ing for very safe, long-term as­sets, and they are get­ting that.” James Beck­ham, head of Lon­don cap­i­tal mar­kets at real es­tate agent Cush­man & Wake­field

BLOOMBERG

Tourists use their smart­phones to take selfie pho­to­graphs as sky­scrapers in­clud­ing Tower 42, the Heron Tower, the Lead­en­hall build­ing, also known as the Cheeseg­rater, 30 St Mary Axe, also known as the Gherkin, and 20 Fenchurch Street, also known as the Walkie-Talkie, stand be­yond, in Lon­don.

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