China's Passion For Giant UK Developments Will Endure Brexit
While Brexit has spooked some investors and derailed big projects, the Chinese are as ravenous as ever for quality UK investments.
In 2016 Chinese investors snapped up over £3.75B of property in the UK, and 2017 is on pace to do even better. Just since January, Chinese investors have splashed out nearly half a billion pounds on prime UK properties. Emperor International Holdings bought the Ampersand Building (shown), a mixed-use project in Soho, for £260M from Peterson Group. Two days later, CC Land Holdings snapped up an office building in Paddington for £292M from TH Real Estate.
Brexit certainly has not slowed down Chinese investment. ABP chief operating officer John Miu said Brexit is immaterial for his firm. In some respects, it is even good for development, Miu said. The sterling devaluation means entry prices are 15% to 20% cheaper than just six months ago. And prime buildings in the city are yielding 4% or 5%, which is more than investors can get elsewhere.
Many medium and large companies are seizing those opportunities, creating competition among Chinese firms for a slice of London. In the first large post-Brexit transaction that signaled perhaps Brexit wasn’t the end of the world, Sheffield sealed the largest Chinese investment excluding London when it inked a 60-year, £1B construction deal that promised to change the face of the steel city. Sichuan Guodong Construction Group made an initial investment of £220M that would pay for four or five city centre projects over the next three years and create hundreds, if not thousands, of jobs in South Yorkshire.
The long-term nature of the investment meant a whole range of projects was viable. That long-term thinking is the key strategy behind the Chinese mindset. “Our culture is slightly different,” Miu said. “China is able to plough ahead with these enormous projects because we work on a very long timeline.”
ABP’s £1.7B Royal Albert Dock is one of the largest projects in years — and one of the most ambitious. When complete, the new district will comprise over 4.7M SF of mixed-use space, including 3M SF of commercial space, 845 apartments, 250k SF of retail and a 200-key hotel. The goal is to create a “business platform” on an old East End dock that will act as a hub for Asian businesses, create deeper trading ties between the UK and Asia, and act as a launch pad into European markets.
Miu told us Phase 1 detailed planning is finished, and the piling is almost complete. The plan is to deliver 650k SF of high-quality office space by the end of next year. Miu said it will take eight years to complete the entire project.
While no city can claim to be impervious to all disasters, London comes pretty close. The city is always going to be a prime investment target, Miu said, because it has a good business environment, mature law, a talented workforce and solid infrastructure.
Join John Miu and other commercial property experts on Feb. 23 for Bisnow’s Financial Markets and Real Estate Investment event, at BFI Imax, right by Waterloo Station, where you will learn more about who is investing in what sectors and why.