4th May 2023

The dominance of Asia in commercial property

James Letchford

Partner

I'm always interested in what's happening in the City. Not just because I work in London but also because what is happening in the London commercial property market reveals trends that may apply to the wider national property market.

What I hadn't appreciated was the scale of the current trend for Asian investors investing in commercial property in London. Allsop's recent market update reveals a whopping 82% of total transaction volumes including the five largest deals of the last quarter.

But perhaps this is not a surprise.

I'm sure those with a few more grey hairs will recall the timeline but the melting pot that is London has welcomed overseas investors since the 1970s from the US, Japan, Europe (especially Germany), the Middle East and now Asia.

We can point to a number of factors:

Transparent pricing
A liquid and open market
The rule of law in London (of course I would say that)
The professional services
The culture and history of London
The resilience of the market, given that London has survived economic crises, recessions, terrorism, COVID-19 and (dare I say?) Brexit

Another way to look it is simply to look at the maths. If overseas institutional money needs to find a home, a change of a percentage point here to provide more allocation to property compared to bonds or equities can potentially have a material effect on London if they choose to use some of that money for London property.

For example, the Japanese Government Pension Investment Fund currently has over a trillion pounds under management. Back in 2020, it was reported that it was increasing its allocation to real estate from 0.07% to 0.25%. That's a big number spread across all real estate; but combine that with similar funds, the effect can seismic.

So the real question is this: which part of the world will want a piece of London next?