Historically there has been a relatively prevalent theme to the types of deals most South Korean investors would look at: £100 million plus office assets in gateway cities, let to recognisable and financeable tenants, producing cash on cash returns of 6 per cent or above. However we are now seeing some move away from this.Today, investors are considering new locations and new sectors, are more comfortable with multi-let assets, and there is a growing acceptance of smaller lot sizes.

In the past couple of years South Korean money targeting Europe has focused on key gateway cities including the top five in Germany (Berlin, Munich, Hamburg, Frankfurt and Stuttgart) and Paris, largely due to the highly positive financing environment. London has not been high on the list, a result in part of the uncertainty (political and economic), caused by the result of the EU referendum. In 2016 no South Korean investment was seen in the UK at all.

Now, with yields in a number of the top European cities low in a historic context, we are seeing signs of a renewed interest in the UK generally, and London in particular, as it looks to be relative value in a wider European context. Both the return to London and the new flexibility is exemplified in Samsung SRA’s £300 million plus acquisition of 200 Aldersgate in January 2018 in which it was represented by Savills Investment Management. The total sum of Samsung’s acquisition is greater than all the known Korean money deployed into the UK in 2017 and has lead the way for other investors who have been monitoring London to start spending once again.

The hunt to find assets that offer their target return is creating an interest in a wider group of cities and we have seen South Korean investors buying in Vienna and showing interest in Dublin, Brussels, Budapest, Oslo, Rotterdam and Warsaw. In the UK there is interest in Birmingham, Edinburgh and Manchester and we have seen examples of Korean money steering towards smaller cities. In November last year Savills saw a South Korean group buy a landmark Bristol office asset (10 Canons Way, Harbourside) for £95.5 million and another group acquiring an industrial unit in Crewe occupied by BAE systems for £56 million.

There is also an increasing appetite to explore alternative sectors such as multi-family, education, healthcare, student housing and retail warehousing.

As South Korean investors, who have gained confidence and experience investing in Europe, look to diversify, we are likely to see a spread of appetite across geographies and sectors. Countries, including the UK, where there is an attractive financial environment that can provide relative value for investors, can expect to see an uptick in buying activity in the year ahead.

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