Europe ‘to gain 80% of Middle East $US180b property investment’
Over the next 10 years, Middle East investors are set to invest US$180billion in overseas commercial markets, with 80% going to the UK and Europe, says leading agent CBRE
Middle Eastern investors are expected to spend US$180billion in overseas commercial real estate markets over the next decade, with most of it going to the UK and Europe, says top international consultancy, CBRE.
Europe is expected to gain 80% (around US$145 billion) targeted for the region over the next 10 years. Close to US$85billion will flow into the UK, with US$60billion directed at continental Europe. France, Germany, Italy and Spain are among the key target markets.
The major increase in Middle Eastern capital into global markets results in a mismatch between the lack of institutional real estate in domestic markets and the huge spending power concentrated in the region, the leading commercial real estate services and investment firm explains.
Global real estate markets have seen significant gains in Middle Eastern capital with US$45billion invested between 2007 and the end of 2013 – seven times the reported activity in its home market. With US$20billion invested outside their home region in the last two years alone, there is strong evidence that Middle Eastern players are increasing their interest and investment in direct real estate.
Nick Maclean, Managing Director, CBRE Middle East, says, “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.
“Since the Global Financial Crisis, Sovereign Wealth Funds from the Middle East have become one of the most significant sources of capital in the global real estate landscape. The demand from these institutions has evolved during the last few years into a sophisticated source of liquidity for many of the mature real estate markets around the world.”
Close to 90% of all Middle Eastern commercial real estate investment outside of the home region in 2013 was in Europe. This is in sharp contrast to Asian capital that has become increasingly diverse geographically in the last 18 months. While there will be an increase in allocations towards the Americas and Asia Pacific regions, the majority (80%) of direct Middle Eastern investment will target Europe as it offers diversification, cultural acceptance, high liquidity and market transparency.
Continental Europe is expected to receive around US$60billion – almost five times the level of direct investment by Middle Eastern investors in the previous decade. Germany and Italy are key targets with Spain, particularly the hotel sector, now a strategic destination. France has developed close ties with Middle Eastern investors in recent years and offers a vast choice of trophy assets, so will continue to attract strong demand for core product and sectors.
Jonathan Hull, Managing Director, EMEA Capital Markets, CBRE, adds, “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.”