Middle East Investors To Spend $180bn On Global Real Estate Over Next 10 Years – Report

Middle Eastern investors are expected to spend $180 billion on buying commercial property outside their own region over the next 10 years, according to new research from property advisor CBRE.

A significant chunk of that investment – roughly $130-$140 billion – is expected to come from regional sovereign wealth funds, while investors, property companies and developers will account for the remaining amount, said CBRE.

Europe is the preferred target and is expected to receive 80 per cent of the $180 billion (around $145 billion) as it offers “diversification, cultural acceptance, high liquidity and market transparency,” said the report. While close to $85 billion will flow into the UK, $60 billion will be invested in continental Europe, with France, Germany, Italy and Spain among the key target markets.

Iryna Pylypchuk, EMEA Research and Consulting, CBRE, said: “Culture, openness and favorable taxation laws are significant push factors for Middle Eastern buyers towards Europe, and the UK in particular.

“Close historical, political and economic relations, as well as Britain’s recent decision to become the first non-Muslim nation to issue Sharia-compliant Islamic bonds, confirm Europe as the favoured destination for Middle Eastern capital.”

CBRE estimates that about 10 per cent of the capital (around $18 billion) will flow into the Americas. This represents an average annual investment of around $1.8 billion, above the $1.2 billion invested in 2013.

“While some increase in interest towards the Americas is expected, the need for Middle East investors to diversify away from US dollar-dominated investments will counteract the fundamental attractiveness of real estate as an asset choice,” the report said.

The remaining 10 per cent of the $180 billion will be intended for allocation towards Asia Pacific, it estimated.

“The major increase in flows of Middle Eastern capital into global markets is emerging from the extraordinary mismatch between the lack of institutional real estate in domestic markets and the huge spending power concentrated in the region,” the report said.

Regional investors spent $45 billion between 2007 and the end of 2013 on global real estate outside the Middle East, including $20 billion invested in commercial property in the last two years alone.

Nick Maclean, managing director, CBRE Middle East, said: “The ‘buy and hold’ strategy adopted by many Middle Eastern investors within their home region and the resultant lack of deal flow opportunities leaves much unsatisfied demand here.

“Coupled with increased confidence in global markets and the need for diversification, overseas investment has grown strongly. This trend is set to continue and with new sources of Middle Eastern capital, particularly from Saudi, set to enter the market over the next couple of years, the demand for real estate is increasing strongly,” he said.

Jonathan Hull, managing director, EMEA Capital Markets, CBRE, added: “The vast majority of Middle Eastern investors are long-term players looking for wealth preservation and strong high income-producing assets, rather than opportunistic investors playing the cycle for short-term gains.

“This strategy favours prime buildings in core markets and often very large lot sizes. Offices feature heavily in their acquisitions, while in the last couple of years there has been greater interest shown in retail, as illustrated by a string of high street acquisitions in London and Paris, as well as provincial cities in the UK and France. Interest in hotels is also noticeable and extends from a historic interest in the hospitality sector in home markets.”