Since the global financial crisis, Far Eastern investors have accounted for almost £40bn of real estate transactions in London, a market share of almost a third – equal to that of domestic investors over the same period.
Overseas investors are far from a new phenomenon in London, in fact various regions have dominated previous cycles. Although, none quite as prevalent and prolonged as the current dominance of Asian capital. This trend is encouraging advisors wishing to attract and retain top talent, and continue to set themselves apart as market leading, to reflect the changes in the market place with how they operate.
We have all observed a shift in sources of demand. Where once US, German and Middle Eastern investors dominated overseas purchases in London, recent years have seen those from the Far East rise to prominence. Their focus on London in recent years has intensified, as they have become the most acquisitive region since the EU referendum, spending £18bn and accruing double the market share of domestic investors. We anticipate that this will continue for the foreseeable future,given economic indicators such as comparatively cheap sterling and low yields, as well as recent changes in sentiment following socio-political events.
Previously, given the shorter periods of dominance, primary efforts were focused on targeting investment from international investors however these clients are now appropriately being considered as significant London landlords. As their properties move through the asset management cycle and opportunities to interact with the wider industry arise, greater interaction is required, from property and asset management to leasing and valuations. Far Eastern clients have become owners of some of London’s trophy assets, acquiring three £1bn+ assets within the last year or so, illustrating the importance of understanding and building relationships with these key players.
It is crucial that companies invest time into aligning themselves with the trends in capital flows, ensuring greater communication between the Far East and the UK, and equipping their employees with the tools necessary to provide efficient expert advice to their clients.
Consequently, the importance of secondments, outbound investment desks and regular travel to understand different markets has never been more essential. Last year, I took advantage of Knight Frank’s ‘Broadening Horizons’ programme, which enabled me to spend six weeks working alongside our capital markets team in Hong Kong, strengthened by a follow-up trip in June. Whilst there, I gained considerable insight into Asian outbound capital, whilst offering clients specialist advice on the London market to supplement their understanding of cross-border investment into the city.
The benefit of improved international experience was profound, both personally and professionally. The placement allowed me to expand my understanding of the opportunities and differences between the Hong Kong and UK markets, as well as the perceived risks of London real estate.
This experience has helped me to benchmark London commercial property within a global context. In addition, I was able to broaden my understanding of client requirements in Asia and significantly increase my network of Hong Kong-based investors. The opportunity for junior advisors to establish and develop relationships with overseas investors, in line with current market demands, is key to a successful future, both, for Knight Frank and the individuals.
Property is becoming an increasingly global business. Ensuring future success lies in providing specialist market knowledge within a global understanding of real estate, and continuing to recognise and reflect the shifts in cross-border investment trends.