Concrete Analysis | Why London can’t take Chinese investors for granted

At the end of last year, the UK has hosted two of the most influential leaders of the global economy, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi. Several billions of dollars have been agreed in investment deals, with Indian and Chinese capital boosting a number of British industries.

President Xi’s visit in 2015 had been accompanied by landmark business deals and rhetoric at the highest level hailing a ‘golden era’ for relations between the two countries. As part of this, real estate and infrastructure are clearly a key focus for Chinese investment but what will this mean in practice over the coming years? What do investors need to consider in order to maximise opportunities on the ground?

The future certainly looks bright as Anglo-Chinese deals and joint ventures continue to roll in. By way of example, Chinese investment group SinoFortone is putting £100 million into the £3.2 billion London Paramount Entertainment Resort theme park, opening in 2021. It was also announced recently that Citic Construction would build the first phase of ABP’s £1.7 billion Royal Albert Docks development in London.

Some have questioned the outlook for investment in light of the slowdown of the Chinese economy. However, macroeconomic headwinds can actually work in favour of the property industry. Already, Chinese investment into UK real estate has proved something of a lifeline for both parties. Chinese players have provided welcome investment to the UK-built environment sector during hard times for the British economy.

For Chinese capital on the other hand, UK cities have been a much-valued safe haven, particularly given the recent stock market volatility and devaluation of the yuan. As a result, even with UK commercial property yields back down to 2007 levels, the country remains well placed to attract renminbi from those in search of a safe and liquid investment.

However, Chinese investors will also be looking for a more diverse range of assets. Traditionally, investors have focused heavily on ‘trophy’ assets, often prime London office blocks, but research indicates that leisure and industrial investments are increasingly on the agenda.