Property experts have played down excitement over the first Chinese takeover of a major city office block, and believe the US will remain the special relationship for the coming years.
The Birmingham Post reported last week that Quayside Tower on Broad Street was set for a refurbishment after it was bought by Chinese investor Peng Global Holdings for about £7 million.
With the Chinese economy slowing and its government encouraging outward investment for the first time, there is a lot of excitement about new funding sources.
But some of the region’s most prolific property deal-makers say calls from the Far East are still few and far between and it remains the city’s traditional partners investing most.
Of the £270 million-worth of deals set to go through in Birmingham, interest is largely from Europe, with One Snowhill under offer to German fund manager Union Investment and Irish firm Ardstone Capital in for the £40 million Victoria Square House.
David Smeeton, head of Colliers International in Birmingham, said while there were numerous reasons to invest in Birmingham, the Chinese were still looking elsewhere.
He said: “I think the majority of overseas investors generally go to what I’d call core cities – New York, London, Tokyo – but as time has ticked by and as prices get more and more expensive in these cities people are forced up the risk curve and not of the things we forget in the UK is all of the reasons why we are so active.
“We have an active exchange rate, we are not in the euro, we have got a transparent tax and legal system, a highly skilled workforce, security of tenure and long leases.
“There are a lot of reasons to invest in Birmingham, just like London, but I don’t think a lot know where Birmingham is.”
The Post revealed recently the West Midlands, led by Jaguar Land Rover, has had great success in exporting to China, and is on course for a £1 billion-plus export surplus this year.
However, when it comes to property investments the focus from the Far East is often in more prestigious locations, which often dictates it is focused on the capital, or ploughed into infrastructure.
The state-owned China National Nuclear Corporation and China General Nuclear Power Corporation have become key backers of the planned £16 billion Hinkley Point nuclear power station in Somerset. Elsewhere, insurance giant Ping An has paid £260 million for the futuristic Lloyd’s of London building.
Ed Gamble, a senior director in the capital markets team at the Birmingham office of CBRE, said that while interest from the Far East had increased, it was from a low ebb.
He said: “We are seeing a rise in interest, but its a little bit of interest compared to zero a year ago.
“Do I see them as the dominant buyer of the future? I don’t know, but at the moment they are being outpriced by American private equity and some UK institutions.”
Richard Divall, head of cross border capital markets at Colliers, said the Chinese invested £6.6 billion in eurozone in 2011. They expect to invest £330 billion by 2020.
He said: “The Chinese are here and investment volumes will increase year on year as they become educated in investing outside. They are in a rush and with China’s slowing economy, highly regulated government, lack of investment opportunities in China, the UK is an appealing location for outward investment.
“Their developers and investors are following Chinese trade and student flows. They also take a longer term view when investing which is changing the way the UK look at opportunities.”
Asia Fact File
* 69 per cent of Asian investors plan to increase their property portfolio during the next six months, similar to 2012 when 70 per cent planned to expand.
* Asian investors regard property fundamentals as the most important factors in their investment decisions, followed by economic expectations (especially economic growth) and property yields.
* 77 per cent of Asian respondents considered Asia to be their primary investment focus during the next 12 months. There is a growing trend of Chinese investors looking overseas for growth and diversification opportunities in gateway cities like New York, London, Sydney and Melbourne.
* Office developments in CBDs were the most popular among Asian investors.
* Most Asian investors agreed strongly that good investment opportunities existed in the market, but they were increasingly difficult to find. One private equity fund based in China mentioned that, when the opportunity arises, they will be willing to take on more risk in foreign markets, such as Europe, in order to acquire quality assets in key cities where yields above seven per cent a year can be achieved.
* China has become the second largest international buyer of UK property (the US is the first). London is typically the gateway for Asian capital coming into the UK and, often, the continental market. The attraction of London to Asian investors is not simply its ‘safe haven’ status and liquidity, but a wide range of factors such as education, culture, tourism and a degree of familiarity.