[LONDON] Buyers from Singapore and other countries in the Asia-Pacific region have been busy snapping up dozens of commercial properties in London over the past year, according to data from two real estate firms.

CBRE and Savills said that buyers from the Asia-Pacific dominated foreign property investment in the British capital in 2023, with many looking out for bargains in the city’s depressed commercial property sector.

Ruth Hollies, the head of European forecasting at CBRE, said that Singapore buyers have formed the largest group among Asia-Pacific investors for the last five years. In 2023, they accounted for acquisitions worth a total of £1.1 billion (S$1.87 billion), with Japanese investors second on the list with £900 million.

Savills noted that one significant buyer last year was Singapore’s sovereign wealth fund GIC, which acquired a 75 per cent stake in Tribeca King’s Cross – an 830,000 square foot life-sciences development. This investment reflected a land value of £300 million, said Savills.

Tribeca – which comprises workspaces, homes, shops and a hotel – will also be the new headquarters for British high-street clothing retail company Ted Baker. The entire site is due to be completed in 2025.

There is growing interest among overseas investors in the central areas of London and the financial district, with many properties up for sale at a time of surging interest rates and the fallout from the Covid-19 pandemic, which led to many employees working from home and reducing their time spent at the office.

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CBRE data found that total investment in the City of London slumped to £3.6 billion in 2023, a shadow of the £12 billion annual levels prior to the pandemic.

In central London, local and foreign investment in offices tumbled from a peak of £15 billion in 2021 to £5.2 billion in 2023 – the lowest level since 1999.

Jamie McCombe, a partner at UK commercial property agent Cluttons, estimated that property capital values had fallen by an average of 18 per cent in the 12 months ended September 2023. Shopping centres were down by 10 per cent, while offices in outer London slumped by 27 per cent, he said.

The decline in values helped boost rental yields, said Savills. It estimated that the City’s prime-office yield now stands at 5.25 per cent and the West End at 4 per cent.

In contrast, the MSCI City average yield stands at 7.9 per cent. After maintenance and other expenses, its net yield is 4.9 per cent. Savills said these higher rental yields have encouraged Asian investors over the past year, as these buyers accounted for slightly over half (52 per cent) of the City’s total property investment.

There are plenty of opportunities for growth in the rental market, said CBRE, spurred by the relatively tight labour market and jobs growth in the UK.

“Post-pandemic hybrid working patterns appear to have settled down, and workers are favouring centrally located offices,” it said.

Guy Grantham, director of research at real estate services and investment manager Colliers, is also confident that the worst seems to be over. He said that solid rental demand has caused office vacancy levels in London to fall to 9.7 per cent, the lowest level in two years.

He noted that about a third of the 2.6 million sq ft of new office space under development across London’s South East area has already been pre-let.

As for retail and industrial properties in the UK, CBRE said that 2024 could be a challenging year, given that consumer demand is growing weaker.

A decline in inflation and expectations of lower interest rates in the coming months could help demand for logistics, food stores and other retail properties, it said.