Is the next wave of Hong Kong cash on the horizon?

In the past 12 months, Hong Kong investors have sold £17.5bn of property locally, providing a potentially sizeable pot of cash for them to spend in London. In the same period these investors spent almost £3.3bn on UK property, according to Cushman & Wakefield –  £1bn of that by CK Asset Holdings on its acquisition of UBS’s 700,000 sq ft central London HQ at 5 Broadgate, EC2, in June. CK Asset Holdings has been on the prowl for other UK property since, and was runner-up in the bidding war to acquire Network Rail’s £1.5bn Arches portfolio, losing out to Blackstone and Telereal Trillium. Meanwhile, other Hong Kong investors such as Gaw Capital and CC Land – both of which have been active in London over the past few years, buying trophy buildings such as 123 and 151 Buckingham Palace Road, SW1, for £500m and the Cheesegrater at 122 Leadenhall Street, EC3 – are keeping a close eye on the market as the weak pound and softening prices bring more opportunity. Can anything stop the flurry of capital out of Hong Kong? Peng Han Lee, senior director for capital markets at Gaw Capital, said: “We always view the UK as a place where you store wealth as a generational type investment, so as a result the level today is quite attractive, particularly with yields coming off a bit. It’s starting to look a lot more attractive again.” He added: “The investors here in Hong Kong are opportunistic, savvy and can act pretty quickly so are always watching out for the right asset coming to market.” Dickie Wong, deputy chairman of CC Land, agreed: “Most of the HK real estate investors are international investors looking for opportunities globally. “If the UK offers better real estate investment opportunities, I am sure the interest to invest there will continue to be strong.” Fergus Keane, international partner, London capital markets at Cushman & Wakefield, said: “There has been a great deal of activity in Hong Kong this year and the key investors there are sitting on significant amounts of cash off the back of disposals,. “The London market has been relatively quiet this year, but given the war chests in Hong Kong we are expecting much more activity in the coming months from Hong Kong investors.” Chris Brett, executive director and head of international capital markets at CBRE, agreed: “There is as much capital from Hong Kong waiting to invest offshore today as we have seen for a couple of years since the referendum. “If you look at the City of London market there has been a movement in pricing, along with the currency advantage, while the Hong Kong local market is trading at very high pricing, meaning the UK and London remain of relative value.” Nick Braybrock, head of city capital markets at Knight Frank, points out that prime office yields are below 3% in Hong Kong and falling further. Leases are generally shorter than those in the UK too, so despite the uncertainty around Brexit and a reduced currency advantage slowing the flow of capital from Hong Kong at the start of this year, the UK is still an attractive place to invest. Hong Kong investors are also long-term holders focused on creating income. Of the £9.1bn invested in central London real estate by the region since 2016, only £650m has been divested. Of that, 85% has involved Hong Kong to Hong Kong transactions, including the £260m sale of the Ampersand Building, W1, from Peterson Group to Emperor Group. To send feedback, e-mail Louise.Dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette