North American divestment in the UK hits 10-year high

By Erin Amon - Wednesday, August 08, 2018 14:30

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North Americans continued to offload UK commercial property in Q2 2018, according to CoStar’s latest investment report, as disposals for US investors totalled £3.15bn over the three-month period.

The net negative capital flow – the balance between acquisitions and disposals - of £2.9bn in Q2 2018 marked a 10-year quarterly high. This was largely due to some big disposals in London, while the quarter was also the weakest for US spending since Q1 2009.

Large disposals in Q2 2018 included Blackstone’s June sale of 20 Old Bailey for £341m, as well as two large hotel portfolios, which were among the three largest deals of the quarter. In June, Starwood Capital completed the sale of 14 hotels (2,638 rooms) across the UK as part of the Principal Hotel Company for £858m. In May, Apollo Global Management sold the 20-property, 4,840-room Ribbon Hotel portfolio for £657m. The selling has continued into Q3 2018, with Blackstone’s sale of the Adelphi building in Covent Garden for £550m in August and Goldman Sachs having agreed terms to sell and lease back its Midtown headquarters for circa £1.2bn.

Despite the disinvestment from across the pond, foreign investment in general was propped up by some large acquisitions from the Far East. In Q2 2018, £3.3bn of the £6.3bn of inbound foreign capital came from the Far East, 85% of which was spent on City offices. South Korean investment continued to pick up traction, growing 73% Q-o-Q to more than £540m, the highest quarterly volume from this country since Q4 2009.

The £1.3bn invested over the past year was more than the total South Korean expenditure in the UK in the previous seven years combined. Supporting this volume were large deals in the City, including the purchases of 70 Mark Lane for £200m and 20 Old Bailey for £341m.

The largest deal of the quarter, the £1bn sale of the UBS Building in June, was an acquisition by Hong Kong’s CK Asset Holdings. The deal followed a quiet Q1 2018 for Chinese and Hong Kong spending but indicates continued interest from the country.

CoStar’s Q2 2018 UK Commercial Property Investment Review can be accessed here.

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