North American investors have acquired a taste for British commercial property, and are venturing outside of the traditional hotspot of London in their hunt for acquisitions.

New data from property intelligence firm Datscha shows U.S. and Canadian investors have invested £2.7 billion ($3.55 billion) into the U.K. market so far this year.

Datscha says it analysed all commercial property transactions in the U.K. worth over £3 million.

While Asian buyers remain the biggest investors, with £4 billion spent in 2018 so far, the vast majority of their money has been concentrated in London, where they have bought some of the City of London’s most iconic buildings.

In contrast, North American investors have been the most widespread commercial property buyers across the U.K. so far this year.

“Over the past two years we’ve seen North American buyers opt for greater value and lower risk –hence the diversified portfolio purchases around the country, rather than the City of London’s expensive trophy buildings,” said Lesley Males, head of research at Datscha.

Just over one third of their investments have been into the capital, compared with 90% of Asian money. While almost all the Asian inflows have gone into office blocks, North American investors have only put only 35% into offices, with 29% of their cash going into the residential market, and 21% into industrial property.

Recent transactions have included the £320 million purchases of 40 light industrial units in the North West and Midlands of England by real estate funds managed by Blackstone and M7 Real Estate, and Northamptonshire County Council’s sale and leaseback of its headquarters to Canada Life Investments for £64 million.

The data shows a commercial property market which has remained largely resilient in the wake of the 2016 vote to leave the European Union, and subsequent political and economic uncertainty.

Overall, there were £26.9 billion of commercial property transactions in the U.K. in the first half of the year, according to separate figures from Savills. That data includes all transactions including domestic investment, and is above the long term average of £20.4 billion. One thing in the market’s favor is the cheap pound, which is currently trading at a 9% discount against the U.S. dollar to before the Brexit vote.

Asian buyers in particular have been drawn to some of London’s most expensive buildings, where they have made a number of billion dollar plus investments.

5 Broadgate, UBS’s headquarters in the City of London, was sold to the property firm founded by Hong Kong billionaire Li Ka-shing for £1 billion earlier this year, while Singapore’s Ho Bee Land paid £650 million for a development at 20 Ropemaker Place.

In 2017 Chinese buyers bought two of London’s most recognisable high-rise office blocks, known locally as the ‘walkie talkie’ and ‘cheesegrater’ for their distinctive shapes. “Although Asian investors might rank highest in terms of total investment for the UK, those figures are skewered by their interest in the City of London on a number of expensive trophy buildings,” said Ms. Males.

Read more in The Wall Street Journal here

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July 27, 2018