World leading property consulting and research firm CBRE have revealed that investors from the Middle East are expected to spend €135bn in overseas commercial real estate over the next decade. Out of this figure, €110bn is expected to target Europe with €60bn making its way to the UK and the balance to other key markets such as Germany, Spain, France and Italy.
From 2007 through to the end of 2013, Middle Eastern investors spent around €35bn in overseas real estate, excluding investment in domestic markets. A new report from CBRE indicates that this trend is gaining momentum and is set to continue in coming years, with an increasing interest towards direct real estate.
Middle East markets continuously face supply issues due to the buy-and-hold property strategy adopted by the majority of investors in that region. Consequently, domestic investors have increasingly looked abroad for suitable investments to meet the unsatisfied demand.
€110bn Investment in European Assets Expected in 2014
According to CBRE Middle East, there has also been a significant growth in overseas investments due to the need for diversification along with the increased confidence that investors have in the global market. The trend is expected to continue over the next two years, possibly into 2020.
After the financial crisis, Sovereign Wealth Funds (SWFs) from the Middle East have become one of the most significant sources of capital in the global real estate market. In 2013 alone, investment from Middle Eastern investors poured in to the tune of €10bn, a significant jump from €1.5bn in 2009 and €6bn in the peak year of 2007.
In 2013, almost 90% of the investment in commercial real estate outside of the Middle East was directed towards Europe. Of all investments from the Middle East, just 10% is expected to flow into the US real estate market as investors diversify outside of dollar-denominated assets.
Middle Eastern Investors Looking Outside Dollar-Denominated Assets
Increased activity in the European commercial real estate market has been driven largely by investment from the Middle East. The key area of interest is in high income-yielding commercial assets on a long-term basis as they are not concerned with short term gains at all.
This strategy targets prime properties and big structures in core capital city markets such as the retail sector, hospitality sector, offices, etc. According to CBRE, transactions from Middle Eastern buyers during 2013 projected an affiliation towards offices. However, several large retail properties were also purchased by investors over 2013.
Middle Eastern investors are also set to increase their commercial assets in regions such as the Americas and the Asia Pacific. However, the bulk of investment - almost 80% - will be making its way to Europe due to key advantages of investing in the region such as diversification, cultural affinity, high liquidity and market transparency.
- Friday 04 July 2014