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China

Asian investors snap up UK property, defying Brexit jitters


​​​Hong Kong investors were the biggest spenders in the UK in Q1 2017 

Shanghai, 8 May 2017 - Asian investors remain confident in the UK, despite many unanswered questions about Brexit, according to a new report from JLL. The property consultancy reveals that real estate transaction volumes in the UK for the first quarter of 2017 are at their highest level since 2015, in local currency terms.

The research shows that the UK led the way as the most active real estate market in Europe and became the world's most traded city, compared to third place last year.

"With the sterling depreciation and slight drop in capital values, Asian investors – particularly private buyers from Hong Kong and China – have been the most active in London since last year's Brexit vote," says David Green-Morgan, Head of Research, Global Capital Markets at JLL. "The depreciation and capital values drop means that UK commercial real estate is now discounted by 16 per cent on average to overseas capital since the June 2016 referendum. The net yield of City prime buildings is also very attractive."

Hong Kong buyers spent nearly US$3 billion exclusively on UK properties in Q1 2017, compared to only US$842 million in Q1 2016, snapping up offices in London's City and West End, outspending global funds and all other foreign groups combined by nearly US$1.3 billion.

What's more, Asian buyers continue to seek properties in the US, despite broader political and economic uncertainties.

"In line with recent trends, Asian buyers were among the most active investors in the US, with investors from Singapore, Japan and China driving most activity," says Mr Green-Morgan. "Investors from Singapore and Japan acquired offices in New York, Boston and Washington D.C., as they renewed their focus on core assets in global gateway cities."

Impact of China's capital controls

Despite increased government scrutiny, Chinese outbound capital increased by 84 per cent in Q1 2017 to US$7.5 billion, compared to US$4 billion in Q1 2016. Chinese buyers continued investing in Hong Kong, Chicago, Los Angeles and San Francisco.

However, overall outbound real estate transaction volumes were down by 36 per cent compared to Q4 2016.The shortfall in outbound capital was confined to investments in Australia and Hong Kong, with cross-border buyers focusing mainly on core CBD office  assets, retail malls and properties in niche sectors such as senior housing.

"The new outbound capital control measures are likely to slow down overseas investments, as Chinese corporates and individuals will find it harder to invest outside of China. This is driving an increase in demand for domestic real estate investment going forward," says Dave Chiou, Director of Capital Markets Research, China at JLL. "However, for Chinese companies with established overseas presence, the impact could be limited as they can use funds regenerated from overseas branches for investments."

Japan posts strongest quarter since 2015 to lead the region in capital flows

Outbound investment from Japan increased by 63 per cent year-on-year in Q1, driven primarily by real estate companies, J-REITs and asset managers.

Investors are motivated by a stronger yen and several other factors: the expectation that a declining population could lead to lower demand for real estate in Japan in the long-term, greater need for geographical diversification of assets, as well as increased competition in the domestic real estate investment market.

Overall, global transactional volumes for Q1 2017 were US$136 billion, one per cent below the same period last year. Asia Pacific investment volumes remained consistent from 2016, rising by one per cent. Europe saw a strong increase activity as volumes climbed three per cent, while the Americas fell by five per cent.

For more information, download the latest "Global Capital Flows – Q1 2017" here.

 

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At the end of the first quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 78,000. As of March 31, 2017, LaSalle Investment Management had $58.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com

JLL has over 50 years of experience in Asia Pacific, with 36,800 employees operating in 95 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics.​​ www.jll.com/asiapacific  

In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country​.  www.joneslanglasalle.com.cn​​​​​​