(Bloomberg) -- From Hong Kong's central bank to China's largest property developer, Asian investors have a lot riding on London's real estate market.
Britain's decision to leave the European Union has clouded the outlook for property, prompting asset managers to freeze withdrawals from real estate funds as investors rushed to redeem their money. Commercial property values could fall about 10 percent over the next year, led by declines in oversupplied central London, BlackRock Inc. said after the vote.
Investors from Asia accounted for 12 percent of the 10.7 billion pound ($13.9 billion) of direct real estate investment in the U.K. in the first quarter, making them the largest international group, according to Jones Lang LaSalle Inc. The country has been among the top five global real estate investment destinations for decades, especially for buyers from Singapore, China and Hong Kong.
“It's a confidence crisis,” said Reid Mackay, Singapore-based managing director of EastGate Asia Pte, a real estate brokerage and advisory firm. “It will very much affect transactions that are pending.” Deals that are pending “are virtually put on hold. The transactions volume will probably fall,” said Mackay, who previously was executive director of Asia Capital Markets at CBRE Group Inc. for 15 years.
Finding Opportunities
Still, some developers see Brexit as an opportunity. Guo Guangchang, the Chinese billionaire chairman of conglomerate Fosun Group, said his company is increasingly eyeing development opportunities in Europe and particularly in the U.K. amid the current volatility. Singapore's second-largest developer City Developments Ltd. is also looking for bargains in the London property market and is ready to pounce in a fire sale, Chairman Kwek Leng Beng said.
Shares of Dalian Wanda Commercial Properties Company Ltd., which is building homes in London's Nine Elms district, have fallen 7.2 percent in Hong Kong since June 23, while those of Malaysian company SP Setia Berhad have lost 9.5 percent. China's largest developer China Vanke Co., whose shares started trading in Shenzhen on July 4 after being halted for more than six months, plunged almost 20 percent this week amid a tussle for control with shareholders. Here's a list of select projects in London under development and some of the Asian backers whose money is riding on them.
| Hong Kong Monetary Authority | Hong Kong | Bought a 50% stake in a project in London's luxury-shopping district Hanover Square Estate site |
| Oxley Holdings Ltd. | Singapore | Bought former Royal Wharf site in east London where it plans to build 3,400 homes |
| Eco World Investment Co. | Malaysia | Jointly developing three London residential projects with U.K.'s Ballymore Group near Battersea Power Station |
| Knight Dragon | Hong Kong | Bought the remaining 40% in a mixed-use project in London's Greenwich Peninsula |
| Dalian Wanda | China | Building 436 homes in Nine Elms and a hotel |
| SP Setia, Sime Darby, Employees Provident Fund | Malaysia | Former Battersea Power Station; plans to build more than 4,000 apartments |
| Greenland Group | China | Former Ram Brewery site and building tallest residential tower at Hertsmere House at Canary Wharf |
| China Vanke | China | Owns a 20% stake at the The Stage project in Shoreditch |
| Mitsui Fudosan Co. | Japan | Owns 25% in U.K. developer Stanhope Plc., which is developing 3 mixed-use projects including Whity City Place, the BBC Television Centre and One Angel Court |
| Advanced Business Park and Citic Construction | China | Developing former London Royal Albert Dock site |
| AustralianSuper | Australia | 67.5% stake in 67-acre Kings Cross Central development project |
| Citic Capital, Cindat Capital | China | JV with U.K.'s Brockton Capital for 60 Curzon Street |
| City Developments Ltd. | Singapore | Residential project on former Stag Brewery site |
| Hotel Properties Ltd. | Singapore | Mixed-use project on former Royal Mail delivery office |
| Temasek, Hotel Properties, Amcorp Properties | Singapore, Malaysia | Bankside Quarter on the former Sampson House, Ludgate House site will be developed by U.K.'s Native Land with the Asian investors. |
Source: Cushman & Wakefield, Bloomberg
--With assistance from Emma Dong and Frederik Balfour To contact the reporters on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net, Kathleen Chu in Tokyo at kchu2@bloomberg.net. To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Neil Callanan at ncallanan@bloomberg.net, Andreea Papuc
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