The London office real estate market is increasingly attractive as prices drop and the pound sterling remains weak by historical standards.
Investment in sites that can accommodate large companies dried up due to years of Brexit uncertainty, leading to Singaporean sovereign wealth fund GIC finding opportunities in a potential supply squeeze.
GIC has joined a partnership with BlackRock Alternative Real Estate and British Airways’ New Airways Pensions Scheme to develop Tribeca King’s Cross, a life sciences development.
Located in London’s “Knowledge Quarter”, it will include 830,000 square feet of life sciences offices, including laboratories, as well as retail, restaurants and apartments across five buildings.
GIC has preferred to work with local partners in the UK real estate market, focusing on mixed use developments in prime London locations as well as logistics properties in other parts of the country.
Last April, GIC snapped up a 75% stake in Paddington Central assets from British Land, creating a joint venture with the UK landowner, for a total consideration of GBP694 million. Paddington Central is a mixed-use development comprising retail, leisure and office space.
It was not the first JV between GIC and British Land. In February 2021, the City of London Corporation approved plans by British Land and GIC for a 38-story development at 2 Finsbury Avenue, providing about 890,000 square feet of new office space in London’s main financial district. In June 2018, British Land and GIC sold 5 Broadgate – which hosts UBS’s global investment banking business – to a wholly-owned indirect subsidiary of CK Asset Holdings Limited for GBP1 billion. They formed the JV in 2012 and completed construction in 2015, chalking up an annual return of 18%.
Outside London, GIC has targeted other market segments. Last July, it acquired a majority stake in Northeast England industrial estates owner UK Land Estates in a GBP425 million deal. GIC is likely to use the platform of 28 estates to grow its exposure to the region’s industrial real estate sector, focusing on brownfield regeneration. The deal came after GIC made one of the largest European industrial estate transactions ever when it acquired 132 logistics properties across Europe from EQT Exeter for EUR3 billion.
In the life sciences sector, it bought a 40% stake in Oxford Science Park, for GBP160 million in October 2021, riding on the tide of interest sparked by pandemic as well as the reliability of tenancy income. The UK life sciences sector produces GBP80 billion per annum and employs more than 250,000 people, mostly in the golden triangle between London, Cambridge and Oxford.
The other sector targeted in GIC’s aggressive play into British real estate is student accommodation. Last May, GIC made another of its massive transactions, acquiring Student Roost from one of Brookfield’s real estate private funds in a 50:50 joint venture with Greystar. Student Roost is the UK’s third largest purpose-built student accommodation provider with over 23,000 beds and a development pipeline of approximately 3,000 further beds.
GIC’s strategy in British real estate is likely to continue with prime mixed use developments in London and multi-asset platforms targeting regional markets and segments outside the capital. In most cases, it will be forging alliances with local partners to capitalize on their origination skills and market knowledge.
Source: Tribeca King's Cross
