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M’sian investors boost Central London office property

KUALA LUMPUR (July 13): Institutional investors from the Far East are poised to become the biggest buyers of Central London office properties in terms of volume as their total investments in the area more than doubled this year, said international real estate advisory CBRE.

While North Americans have historically been the top investor investing £3.53 billion (RM17.4 billion) in Central London offices from 2010 to 2012, buyers from the Far East led by Malaysians are becoming the main investors in Central London’s commercial property investment market, boosting their market share to 22% this year from 9% a year ago.

In contrast, the market share held by North American investors dropped to 10% from 14% a year ago.

“The push into London by Far Eastern investors has been led by Malaysian buyers who have transacted over £2 billion this year, boosted by the purchase of the Battersea Power Station by S P Setia Bhd and Sime Darby Property Bhd,” said CBRE.

The top five investors by country ranked by CBRE based on total investment volume from 2010 to the second quarter of 2012 saw Malaysia in second spot after the US with £3.53 billion and £2.35 billion worth of investments respectively. Third was Germany at £1.29 billion followed by Saudi Arabia (£969 million) and Qatar (£750 million).

Office workers walking through the London business district in central London. Institutional investors from the Far East are poised to become the biggest buyers of Central London office properties in terms of volume as their total investments in the area more than doubled this year. Photo: Reuters

CBRE Malaysia research and consultancy vice-president Nabeel Hussain said Malaysian investors are attracted by the structure of UK property leases, which are long-term and offer only upward rent reviews, coupled with the strong liquidity in the market.

“There are also strong historical ties between the UK and Malaysia, and it is a market where Malaysian investors are very comfortable and feel that their investment will be protected, especially as uncertainties in other investment destinations such as the eurozone have heightened,” Nabeel said.

CBRE attributed this “seismic shift” by Far East investors to the strong and young population as well as the rapid economic growth of countries such as Malaysia and South Korea compared with the reverse scenario in the more established nations. “Developing countries tend to have large quantities of cash to invest as the young working population contributes to pension funds such as Malaysia’s EPF,” CBRE said.

CBRE executive director for central London capital markets Simon Barrowcliff noted that institutional funds from Asia that are flush with cash, such as the EPF, which had tied up with S P Setia and Sime Darby Property to acquire the Battersea power station, and South Korea’s National Pensions Service as well as China’s state-sponsored investment funds, have been making their presence felt since 2010.

“We expect this trend to continue as Far Eastern investors look outside their domestic markets to acquire commercial real estate in the coming months and years in much the same way as other overseas funds have done.

“In both emerging and mature markets, once the domestic investible universe becomes too limited in terms of opportunities, these investors are inevitably pushed to look overseas to find the right product to invest in and London is traditionally the first port of call when they do go abroad,” he said.

This article appeared in The Edge Financial Daily on July 13, 2012.

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