Chinese start to muscle in on London commercial real estate market

Chinese real estate investors are increasing looking to the commercial property market in London as they put money into UK companies and embark on new ventures, it is claimed.

‘An increasing number of Chinese investors and occupiers have firmly set their sights on the City and Chinese occupiers and investors are now starting to represent potentially the biggest opportunity for the City office market,’ said Deborah Hayward, senior research associate at property consultancy King Sturge.
While the City has seen waves of occupiers and investment emerging primarily from Europe or the US, the need for Chinese investors to diversify their huge commodity and production wealth, combined with lower rents and property values in the UK, have pushed them toward the City.
China Investment Corporation supported Songbird PLC, the main owner of Canary Wharf, in its equity raising to pay its GBP880 million loan from Citigroup and the Bank of China is increasing its profile as it tries to move into the UK residential mortgage business.
Bank of China has already more than doubled its space in the City, London’s financial district, moving into bigger 115,000 square feet offices and letting its smaller premises in Cannon Street.
One of the biggest Chinese banks, Industrial & Commercial Bank of China, is also looking to take up 100,000 square feet of new space, according to King Sturge.
‘We have heard of top Chinese banks providing funding for large real estate purchases in New York and at the same time increasing their office space in the City of London. Other major Chinese banks are rumoured to be considering similar moves,’ said Paul Johnston, real estate finance partner at law firm Reed Smith.
‘With many banks having either withdrawn from the real estate debt markets on both sides of the pond or having pulled in their horns, it’s clear that some of the leading Chinese players see this as their opportunity to enter markets desperate for new funding sources,’ he added.