Why are all London’s big deals being done by overseas investors?
That was the question asked by Savills’ head of cross border investment Rasheed Hassan as he painted a picture of cross border capital flows into the UK to a room of Canadian and UK investors at an Estates Gazette investment mission in Toronto.
It is a fair question. Overseas investment is behind many of London’s most iconic assets.
The Gherkin, EC3, is owned by Brazilian billionaire Joseph Safra; a Malaysian consortium is redeveloping Battersea Power Station; 22 Bishopsgate, EC2, will be the tallest tower in the City of London with a helping of cash from Singaporean (Temasek Holdings), French (British Columbia Investment Management) and Canadian (PSP Investments) investors; and the Qatari sovereign wealth fund is backing the Shard.
So why is there relatively little showing on the London skyline from domestic investors?
“The UK just doesn’t have the investors with the capacity to do deals of this size,” said Hassan. “We don’t have 70 new billionaires a year like China, and our REITs are our biggest investment companies, but they tend to develop the buildings that the big pension funds end up buying.”
Between 2007 and 2015, the volume of non-EU investment into the UK has increased from £52.7bn to £82.5bn according to Real Capital Analytics research, presented by Hassan.
Asian money has snowballed “just because the region has become so incredibly wealthy”, says Hassan. “There are not enough opportunities in China or Asia for them to invest local.”
In 2016, China became the country with more billionaires than anywhere else in the world, with 70 new billionaires in this year alone. This compares with 540 in the US, 489 in Europe and just 72 in the Middle East.
But it’s not just a London picture. The Windsor Portfolio, bought by Singaporean investor Mapletree in 2015, including offices in Manchester, Aberdeen and Bristol to the tune of £365m, and Canadian pension fund CPPIB’s £325m play on the Birmingham shopping centre scheme Grand Central are just two examples. “Canadians have a long view on investment,” said Hassan.
Watch the video above to hear Hassan’s full view on overseas investment in the UK, including why the UK is so attractive to overseas investors and his forecast for overseas investment post-Brexit.
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