Investors from Far East Asia have been involved in some of the largest commercial property market deals across the Central Belt in the last 12 months.
Capital from this part of the world has long found its way across the globe to be invested in the UK, and recently Scotland has started to turn heads of investors from Hong Kong, Singapore and South Korea. There are four key contributing factors to this.
A weaker pound is making the UK and Scotland look more alluring, and while London has always been an attractive prospect, investors are now looking for additional value outside of the UK’s Capital.
Thanks to Scotland’s growing reputation for a healthy mix of assets and strong concentration of corporate occupiers, it presents relative stability and value.
Unlike developed US and European capital markets, those in Asia are generally less mature.
The UK and, indeed, Scotland has a very well-established and transparent real estate market, backed up by a strong legal system – a secure and attractive proposition for investors.
Finally, considerable wealth is being generated in many Asian countries, which is fuelling the search for suitable investment returns across various sectors, particularly office and industrial opportunities.
In the past few years, there have been a number of landmark investments in Scotland involving Asian capital.
In Glasgow, Hillington Industrial Park changed hands for circa £100 million in 2017. The mixed business and industrial site was acquired by the Singaporean publicly listed real estate investment trust Frasers Centrepoint.
In the same year, Capella, a prime city-centre office building in Glasgow, was sold for circa £45m to Wirefox, a UK-based property company, but with equity from Hong Kong.
And, most recently, Gyle Square, an office building in Edinburgh’s South Gyle, was purchased for close to £55m by South Korean Hyundai Asset Management.
Using an investment manager, Hyundai source the stock and debt before selling down the equity to individual private investors.
And there are still other significant examples – Bothwell Exchange, E-Sure Building and 110 St Vincent Street – all prime Glasgow offices totalling about £120m, which have either been sold or are under offer to South Korean investors.
So what does all of this mean for UK institutional capital? It’s fair to say that British institutions will continue to be net sellers in the short term, although those fronting for overseas mandates will be active in the prime and long lease sectors.
Asian investors will continue to target the acquisition of larger office space opportunities in Scotland, especially those involving well-known global corporate occupiers with long leases.
So long as Scotland remains a stable environment with good occupational fundamentals, we should expect more Asian investment.
Chris Macfarlane is a director at JLL in Edinburgh