This document discusses China's growing investment in London real estate and how it is poised to continue increasing in the coming years. It notes that Chinese investors purchased £1.2 billion of London property in 2013 alone. Stephen Clifton of Knight Frank expects Chinese investors will purchase more commercial real estate in London in the coming years, allowing them to benefit from predicted increases in London rents by 2018. An interview with Clifton explores how Chinese developers and investors are looking to invest over $100 million in overseas markets, with a large proportion going to London real estate. Clifton also discusses the opportunities this growing investment from China and Hong Kong is creating for Knight Frank's own businesses.

1. Westhill Property
on China's
Investment Boom
in London Real
Estate Is Poised To
Continue
Source: http://earlmorrison.over-blog.com/china-s-investment-boom-in-london-real-estate-is-poised-toSource: http://earlmorrison.over-blog.com/china-s-investment-boom-in-london-real-estate-is-poised-tocontinue.html
continue.html

2. FORBES | Growing Chinese interest in investing abroad was a top
global business trend in 2013. London, which has of late attracted
investors ranging from Greater China billionaires Wang Jianlin and
Henry Cheng to mainland government-run giant Greenland
Holding Group-, is poised to gain even more funds in the coming
years.
That’s according to Stephen Clifton, head of Central London for
Knight Frank, one of the world’s largest independent real estate
consultancies. Chinese investors purchased £1.2 billion of London
real estate last year alone, amid a revival in demand for office space
in central London, where take-up increased by 41% to 13.1 million
square feet in 2013. Overall investment volume for the central
London office market hit a record high of £19.6 billion last year, an
increase of 42% from 2012, and 14% greater than the next highest
year, which was 2007. Supply fell from 16.5 million square feet in
2012 to 16.1 million square feet at the end of 2013. This reflects a
vacancy rate of 7.0%, which is below the 10-year average figure of
8.5%, and the lowest level since 2008.

3. Related write ups on: http://www.westhill.info/FeeStructure.aspx
Clifton expects in the coming years Chinese investors will add more
commercial real estate in London. That would make them wellpoised to benefit from what Knight Frank predicts will be record
high rents in the city by 2018. I exchanged with Clifton last week
about the outlook.
Q. Knight Frank is predicting record levels of overseas investment in London
Q. Knight Frank is predicting record levels of overseas investment in London
commercial property in the coming years. Of late, U.S. companies such as Google and
commercial property in the coming years. Of late, U.S. companies such as Google and
Facebook have been expanding in London. How do you think China will figure in the
Facebook have been expanding in London. How do you think China will figure in the
market in the coming years?
market in the coming years?
A. Despite yield compression over the last 12 months, London remains
A. Despite yield compression over the last 12 months, London remains
good value in global terms. Factoring in currency fluctuations, prime City
good value in global terms. Factoring in currency fluctuations, prime City
of London capital values are 40% lower than the 2007 peak for investors
of London capital values are 40% lower than the 2007 peak for investors
buying in renminbi. Additionally, commercial lease lengths in Central
buying in renminbi. Additionally, commercial lease lengths in Central
London tend to be longer than in many of the major far eastern cities,
London tend to be longer than in many of the major far eastern cities,
with prime yields up to 125 basis points higher, making the city
with prime yields up to 125 basis points higher, making the city
particularly attractive. Our China office is currently tracking 40 Chinese
particularly attractive. Our China office is currently tracking 40 Chinese
institutions and property companies looking to invest up to $100 million
institutions and property companies looking to invest up to $100 million
overseas. We expect a large proportion of this to target London.
overseas. We expect a large proportion of this to target London.

4. Additionally, a growing number of Chinese
companies are acquiring occupational office
space in Central London. We are aware of
more than 30 Chinese companies or
institutions occupying space in London, the
largest being Bank of China, which
purchased its 110,000 square foot
headquarters building next to the Bank of
England in 2009, more than doubling its
London presence.

5. Q. Thinking only about real estate, to what extent has
mainland developers and investors figured into the growth
in investment in London property? Besides the big, wellpublicized Wanda project, what other commitments have
you seen in the past year?
A. There has already been significant Chinese investment
in London real estate; in 2013 alone £1.2 billion of Chinese
money flowed into London property. Chinese investors
have targeted Grade A, well-located buildings across
Central London, and not just large lot sizes. While
transactions such as Gingko Tree’s purchase of
Ropemaker Place for almost £500 million and Ping An’s
purchase of the Lloyds Building for more than £250 million
have made the headlines, we have also seen a number of
assets traded at £50 million or below.

6. Q. Looking to 2018, do you expect more mainland real estate
money to enter? How so — from real estate developers? financial
investors? Why type of projects are mainland investors likely to
be interested in the coming years and why?
A. We see property companies and institutions
targeting London and they will consider a wide range
of asset types and projects. The occupational market
has seen an exceptional recovery since the global
financial crisis. In 2013 alone, there was 13.6 million
square feet of office space acquired by Central
London tenants, a 41% increase on the previous year,
and we expect levels to continue to rise alongside the
ongoing economic recovery. At the same time, the
supply of office space is falling. We see opportunities
for Chinese investors in both the acquisition of welllocated, long-let, quality stock and also in joint
ventures.

7. Q. Hong Kong has long had relatively close ties to London,
and its entrepreneurs have been investing in real estate far
longer than the mainland’s. What’s ahead for Hong Kong’s
investment in London in the next few years?
A. Hong Kong investors have long been
comfortable with investing in London; we share
similar regulations and legal systems and Sterling
offers an important diversification from U.S. dollar
investments. Many Hong Kong property investors
are no longer first-time investors in Central
London, and we see good opportunities for the
more confident investor in assets other than the
traditional prime.

8. Q. How much opportunity is growing interest in London
real estate among Hong Kong and mainland investors
creating for your own businesses at Knight Frank?
A. Knight Frank employs 640 people in
Greater China and we are continuing to grow
our Shanghai, Beijing and Hong Kong offices.
We see Hong Kong and mainland investment
in London as an important part of our
business going forward.