Chinese investors build up expertise in London

For global capital on the hunt for a home, the solidity of bricks and mortar in a mercurial monetary environment has been irresistible. These days of course, bricks and mortar are more likely to be "glass and steel", but tangible assets with cash flows attached continue to be highly attractive to institutional investors.

London, like other global gateway cities, has pulled in waves of international investors who like the depth of its investment stock, ease of transacting, and liquidity.

Hong Kong families have been significant traders in London property for generations. The mainland Chinese aspect to this, however, is relatively recent.

Early Chinese investment from sovereign capital and banks buying assets for occupation has been followed by developers acquiring prominent sites in Vauxhall, Greenwich Peninsula, Royal London Docks and Wandsworth.

Their expertise lends itself to fringe areas with the potential to become core, but in need of a transformational investment approach. Their timing has also been good, capitalising on London's growing economy, housing shortage and more open-minded approach of tenants.

Now it is the turn of Chinese institutions to take significant stakes in London real estate. Simplified foreign exchange administration procedures and permission from the Chinese government to allow intermediate holding companies to be established for the purposes of overseas investments have suddenly opened up global real estate to Chinese institutions, and their enormous firepower is interesting market observers.

The investors themselves will be acutely aware that while they are prepared to make some big investments, they must not "become" the market and destroy liquidity. The consensus view is that asset values in London are currently very high, but for an institutional investor with long-term horizons, demand remains.