As some UK asset managers suffer big outflows from their property funds following Britain's vote to exit the EU, other firms seem to be benefiting from continued foreign interest in UK real estate, partly driven by a much-weakened pound.
One such company is London-based Select Property Group. The real estate developer and manager last month set up in Shanghai to tap demand for UK assets, having opened a Singapore office in April, its first in Asia. It would also consider putting a presence in Hong Kong, said Adam Price, managing director of global sales.
The Shanghai branch, the firm’s first in China, is headed by Asia managing director Sergey Grechishkin, who also set up the Singapore office. He will be joined by five staff members, a number that will probably double in a year, Price told AsianInvestor.
Select Property may also put a presence in Hong Kong, he noted, but was attracted to Shanghai due to its population of 30 million and the huge demand there for UK real estate.
Dubai-based Price said 18% of client flows now come from Asia – mostly Greater China and Singapore – and investment from the region has grown by 835% since 2010. The firm largely targets private clients, although it does have a small, early-stage institutional business.
Select is seeing strong interest in property outside London, having sold four apartments in the past week in a new riverside development in Manchester, worth a total of around £1 million ($1.33 billion). It typically sells one or two units at a time, but yesterday it closed a deal for an entire floor of 10 flats in the Manchester with a buyer from Saudi Arabia.
Clients typically start out by asking about London real estate, said Price, “but once we have the conversation about where prices are now, most agree that London has reached an affordability ceiling, where prices are high and rental yields are just 1-3%”.
This compares to a typical annual rental yield of 6% for the Manchester apartments. There’s a “chronic undersupply” of such properties in the city, thanks to a trebling of the proportion of the population who are renting, said Price.
Given the rising interest from China, he added, it now makes sense to have Mandarin speakers on the ground to service existing customers and attract new ones. Select develops and manages three types of real estate in the UK: student accommodation, luxury serviced apartments and build-to-rent properties.
Asked if the Brexit decision had been negative for the company, Price said it was “business as usual really”. If anything, he noted, there had been a positive impact for Chinese investors, as sterling has plunged against the renminbi.
Indeed, foreign investors recently seem to have opportunistically upped their interest in UK real estate on the back of a weaker pound. For instance, a consortium of Saudi and British investors last week bid $1.3 billion for London’s Grosvenor House hotel, plus shares in the Plaza and Dream Downtown hotels in New York.
Select is not alone in sharpening its focus on Chinese clients. Another London-based property-focused firm, Savills Investment Management, is also opening an office in Shanghai, as reported in June. It would be safe to assume they will not be the last to do so.