Hong Kong firm buys London skyscraper for record $1.7bn

LONDON: A Hong Kong firm is buying up a London skyscraper for £1.3 billion ($1.7 billion), the highest price ever paid for a single building in Britain, the property agents said on Thursday.
The iconic 34-story building known as the “Walkie Talkie” is in the City of London’s insurance district and hit the headlines when it was blamed for damaging a parked car by reflecting the sun’s rays.
“Since the vote to leave the EU, capital targeting London from the Asia-Pacific region has increased to record levels,” said James Beckham of commercial property giant Cushman & Wakefield which advised on the deal.
“This is partly due to currency fluctuations but is more indicated of longer-term confidence in London and investment strategies which are not derailed by short-term political uncertainty,” he said.
The property agent said: “This is the UK’s largest ever office deal.”
Lee Kum Kee, a food and health products conglomerate, is buying the two 50-percent stakes in the building owned by Canary Wharf Group and Land Securities.
The building, which is fully let, includes a three-tiered sky garden with a restaurant.
The deal comes months after Chinese property magnate Cheung Chung Kiu bought another London landmark — the “Cheesegrater” building — for £1.15 billion.
The previous highest price for a single piece of British commercial property was the HSBC tower in Canary Wharf which was bought by the Qatar Investment Authority in December 2014 for £1.175 billion.
UK commercial property demand at low
Despite the high-profile deal in the London, overall demand for British commercial property levelled off for the first time in almost five years, figures released on Thursday showed.
The decline during the past three months came as online shopping hurt high-street retailers and Brexit and election worries unsettled other potential tenants.
The Royal Institution of Chartered Surveyors said on Thursday that its gauge of commercial tenants’ demand for property fell to -2 for the second quarter of 2017, its lowest reading since the third quarter of 2012.
“The commercial property market has enjoyed a good run and it is hardly surprising that we are now seeing a flatter trend emerge ... which chimes both with recent economic news-flow and the political environment,” RICS’s chief economist Simon Rubinsohn said.
Britain’s vote to leave the EU has led banks to start to move some staff from offices in London to elsewhere in the EU. And Prime Minister Theresa May’s failure to win an outright majority in June’s election has cast doubt on whether her government will be able to negotiate a smooth transition.
“Anecdotally, political uncertainty is cited as a factor weighing on occupier and investor decisions, with hesitancy now extending to some areas beyond London,” RICS said.
The economy grew just 0.3 percent in the second quarter after 0.2 percent growth in the first three months of this year, official figures showed on Wednesday, the weakest start to any year since 2012.
Consumers have been squeezed by rising inflation since last year’s Brexit vote, hurting many retailers.
The British Retail Consortium (BRC) said on Thursday that employment in the retail sector had fallen by more than 3 percent over the past year, in contrast to jobs growth of 1 percent in the economy as a whole. “With consumers seeing inflation squeezing their spending power, the challenges facing retailers will only increase in coming months,” said BRC chief executive Helen Dickinson.
However, RICS said growth in online shopping had boosted demand for industrial space used for warehouses.
British commercial property suffered in the immediate aftermath of the referendum, with some commercial real estate funds forced to temporarily suspend investors’ access as they tried to pull their cash out.
An accompanying drop in the value of the pound has since helped buoy the sector with foreign demand, but in London in particular respondents were downbeat.
RICS said that more than two thirds of respondents in London believed the commercial property cycle was in the early stages of a downturn.