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Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

LONDON-Asian property investors, including sovereign wealth funds, are on a shopping spree for choice office buildings in global capitals, and so far have set their sights on central business districts or prime retail streets in London, New York, Sydney and Tokyo.

A Reuters round-up said South Korea’s National Pension Service, managing $200 billion in assets, wants to invest up to $3 billion in real estate this year in those four cities, said locally based Rockspring Property Investment Managers, which it mandated to locate assets.

China Investment Corporation and Qatar Holding agreed in August to take a stake in Songbird Estates, the majority owner of London’s Canary Wharf Financial hub. In June, AIG agreed to sell two downtown Manhattan buildings, including its headquarters, to a consortium led by South Korea’s Kumho Investment Bank. Meanwhile, Lancer Square in London’s West End was bought recently by private Malaysian group Belworth for around £40 million.

Asian buyers want Grade-A office buildings in London’s City and the West End, as well as commercial buildings in midtown and downtown Manhattan, industry analysts say. Sung Heun-do, head of real estate at Woori Investment & Securities in Singapore, said Asian institutions expect annual returns of 8% to 10% from overseas property, plus possible capital gains.

Added Shaun Gorvin, investment director at BNP Paribas Real Estate in London: “With property yields in places like Hong Kong and Singapore relatively low, investors have spotted a chance to make double-digit returns and harness good capital growth from UK real estate.” Office prices in London and Manhattan were down 14% and 18% respectively in January-June, according to Investment Property Databank, and average capital values in Sydney’s CBD have fallen 22% over the last 12 months.

According to Real Capital Analytics, the UK and US alone accounted for around a quarter of the $116 billion invested in global real estate in the first half. Frank-Rainer Vaessen, president of Singapore-based property investor Pacific Star, said gearing of real estate deals is down to 40%-50% from 60% or above before the global credit crisis. Recovering property yields are also a plus point for investment.

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