South Korean Investment in City to Hit Record High

South Koreans are expected to become the largest foreign investors in the City of London commercial property market by the end of 2018, according to new research from Savills.

Analysts say that South Korean buyers have been “busy and active” in making medium to long-term investments in London’s commercial property market, investing £1.95bn so far this year. The amount of South Korean investment into City of London office blocks is projected to reach £3bn this year – marking a record high.

Stephen Down, Savills head of central London investment, says that the figures testify to the fact that Brexit is not shaking off overseas investors, stating: “They wouldn’t be here if they were worried.”

The property market in London’s commercial centre has remained robust this year, with overall transactions totalling £4.77bn so far in 2018. Korea’s national pension fund made the single largest property transaction of any buyer this year, when it purchased the freehold of Goldman Sachs’ new Holborn headquarters for £1.16bn.

The deal stands as the second-highest sum ever to be paid for a UK property, after the £1.3bn purchase of London’s ‘Walkie Talkie’ building – 20 Fenchurch Street – by Hong Kong group Lee Kum Kee last year.

Asian investors account for 60% of City property transactions

As a whole, Asian investors currently account for approximately 60% of City property investment.

While UK investors have purchased a greater number of commercial properties in London this year with a total of 38 acquisitions, these transactions from UK buyers have on the whole been lower value than the investments made by their Asian counterparts.

Nine out of the seventeen property transactions to reach above £100m in the City this year involved Asian buyers, while only eight transactions involving UK investors reached over £50m.

Key investors in the UK property market from the Asia region include Singapore, Malaysia, Hong Kong, mainland China and Japan. Analysts say that foreign buyers are attracted to the UK commercial property market for its high potential for rent yields. Average yield on investment in commercial property in the City of London stands at 4.25%, compared to 3.25% in Frankfurt.

In addition, the fall in value of the pound and the strength of Britain’s property laws make the City’s property market an attractive and safe bet.

Korean bank offers £182m for No 1 Poultry

The latest major transaction in the surge of Korean investment in the City of London could come from the Industrial Bank of Korea (IBK), which has reportedly made a £182m bid to acquire the landmark No 1 Poultry offices.

IBK’s investment arm IBK Securities is working on the deal with Hana Financial Group, to comply with Korean laws which require real estate fund assets to be held by an asset management company. The iconic building – which polarises public opinion with its distinctive, pink and yellow design – is currently owned by Aermont Capital.

Built in 1997 by architect James Stirling, the office has been listed amongst ‘London’s Worst Buildings’ by Time Out in multiple yearly rankings for its “odd angles and incongruous candy-coloured, striped cladding.’

However, its design has been lauded as an “unsurpassed example of commercial postmodernism” by others, and in 2016 achieved grade II* listed status – a legal protection meaning that the building cannot be demolished, extended or altered without special planning permission.

Last year, 80% of the 150,000 square foot premises was leased to US flexible office space provider WeWork.

A number of City buildings leased by WeWork have been sold this year, with analysts speculating that buyers are attracted by the security of longer term leases which flexible office groups tend to sign.

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