Asian investors pivot to commercial real estate in London: a market analysis 

We’re noticing a significant shift in the UK property market and London especially with Asian investors who had traditionally tended to focus on acquiring residential property, often in London, have increasing been turning their attention to commercial real estate. This trend may be driven by a few factors including evolving market dynamics in the post-Brexit and post-pandemic era, attractive yield differentials, and strategic repositioning by investors from key Asian markets.  

With the London commercial property market forecasting total returns of 8.0-8.4% for 2026, the sector is offering an alternative to the more modest growth projected for residential property. Here we analyse the key drivers behind this pivot, examine the performance of different investor groups, and provides an outlook for the future of Asian investment in London’s property market. 

The shifting landscape of Asian investment 

Recent data and market analysis reveal a clear trend of Asian investors diversifying their portfolios away from the London residential market and into commercial properties. This strategic shift is not uniform across all investor groups, with distinct patterns emerging from Japan, China (including Hong Kong), Singapore, and South Korea. 

Japanese investors lead the charge 

Japanese investors have emerged as the most active Asian buyers in London’s commercial real estate market. This surge in activity is fuelled by a favourable economic environment in Japan, characterised by low borrowing costs, which makes the yields on London office properties particularly attractive. Prime office yields in London stand at approximately 5.25% in the City of London and 3.75% in the West End, a significant premium compared to domestic opportunities in Japan. This aligns with the broader commercial property market, where rental yields contribute 4-5% to the total return. 

Chinese and Hong Kong investors: a strategic repositioning 

Investment from China has more than tripled in London’s commercial property sector since before the Brexit referendum. Hong Kong investors have been at the forefront of this wave, acquiring iconic London skyscrapers such as the “Walkie Talkie” and the “Cheesegrater”. This shift is motivated by several factors, including the relative weakness of the pound sterling, which offers a discount for investors with dollar-pegged currencies, and the search for higher yields compared to the Hong Kong market. However, while investment volumes have increased, the number of transactions has fallen, indicating a more selective and strategic approach being taken. Some ultra-wealthy Chinese investors are even adopting a “wait-and-see” stance, with some preferring luxury rentals over outright purchases in the residential sector. 

Singaporean and South Korean investors: a divergence 

Singaporean investors have been quick to adapt to the new market realities, repositioning their portfolios to capitalise on repricing opportunities in the office and logistics sectors. Their strategy is characterized by a move towards “living” assets, such as student accommodation and build-to-rent properties, as well as alternative sectors like healthcare and data centres. The focus on data centres is particularly timely, as it is an emerging growth sector with significant expansion generally expected by the market. This reflects a sophisticated, agile approach that blends core income-generating assets with opportunistic, value-add strategies.  

In contrast, South Korean investors, who were previously major players in the London office market, have significantly slowed their activity. This is largely due to domestic factors, including refinancing pressures and currency volatility.  

The waning allure of residential property 

The pivot to commercial real estate is not only driven by the opportunities in that sector but also by the increasing challenges in the London residential market. Prime central London residential prices have been on a downward trend, with values in some of the most exclusive neighbourhoods now 24.5% below their 2014 peak. The market for homes priced above £5 million has hit a five-year low in 2025, with transaction volumes down 11% from the previous year. 

Several factors contribute to this decline: 

• Taxation and regulation: Uncertainty around potential tax changes, including the introduction of a “mansion tax,” created a sense of caution among high-net-worth buyers. While the final tax changes were less severe than feared, the period of uncertainty had a chilling effect on the market. The Renters’ Rights Act, which became law in October 2025, is also expected to constrain supply, some moves towards this we are already seeing, which may impact rental growth and also add to the regulatory burden on landlords. 

• Slowing price growth: Forecasts for 2026 project London residential property values to grow at a modest 3.5%, and while cumulative gains are expected to reach 21.6% by 2029, the immediate outlook is less compelling than in previous years. The commercial property forecast suggests total returns around 8.0-8.4% in 2026, implying price growth of about 3-4%, similar to residential but with stronger and potentially more dependable rental income.  

• Falling rental yields: Even the prime rental market is showing signs of weakness, with rental values in London’s most affluent postcodes falling for the first time in four years. However, this is contrasted by rising gross rental yields, which have reached their highest level since 2006 in Prime Central London (4.5%) and are even higher in Prime Outer London (5.6%). This is driven by strong tenant demand and supply constraints, with new rental listings 8% below the five-year average in Q3 2025.  

The compelling case for commercial real estate 

The key attractions of the commercial market include: 

• Attractive yields: As mentioned, the yields on prime London office and other commercial properties are significantly higher than those available in the residential sector or in many Asian domestic markets. The total return of 8.0-8.4% for commercial property is comprised of a 4-5% rental yield and 3-4% capital appreciation, offering a balanced return profile. 

• Strategic opportunities: The current market allows for more disciplined underwriting, with a focus on properties with strong tenant covenants and clear rental growth potential. Investors are increasingly targeting assets with strong ESG (Environmental, Social, and Governance) credentials, which are seen as more resilient and future-proof. 

• Structural growth drivers: The logistics and industrial sectors are benefiting from the continued growth of e-commerce, with demand expected to exceed 25.5 million square feet in 2026, the highest year on record outside the Covid peak. The life sciences sector is booming in the London-Oxford-Cambridge golden triangle. The residential rental sector also offers stable, long-term income streams due to the UK’s structural housing undersupply. 

Outlook for 2026  

The trend of Asian investors pivoting from residential to commercial real estate in London is not a temporary phenomenon, but a strategic realignment driven by a confluence of market forces. While the appetite for UK property remains strong, it has become more discerning and sophisticated. The dominant theme is one of reallocation rather than retreat, with investors focusing on long-term structural growth themes and assets that offer attractive, risk-adjusted returns. The indication that as many as 87% of investors are planning to increase their allocations to commercial real estate underscores this trend. 

Looking ahead, the London commercial property market is expected to remain a key destination for Asian capital. The City’s fundamental strengths including its transparency, liquidity, and stable legal and political environment continue to make it a haven for international investors. As interest rates stabilise and the economic outlook becomes clearer, this trend is likely to gather further momentum. However, selectivity will remain crucial, with a growing emphasis on high-quality, ESG-compliant assets in growth sectors. 

In conclusion, the shift from residential to commercial property marks a new chapter in the story of Asian investment in London. It is a story of strategic adaptation, sophisticated portfolio management, and a nuanced understanding of the evolving global real estate landscape. 

For more advice on planned or existing property ownership or to discuss your options further, you can contact So Yung Wong (Hong Kong and Asia), Kamran Rahman (London) or Hannah Beko (London and Manchester.