Middle Eastern Investors To Invest 145 Billion Usd In European Assets
News Posted On: 04 July 2014
CBRE, a reputed property consulting and research firm, recently confirmed that investors from the Middle East are expected to spend $180 billion in overseas commercial real estate over the next decade. This is over and beyond the investments in domestic markets. Of the $180 billion earmarked for overseas investment, around $145 billion is expected to target Europe, of which $85 billion will make its way to UK and the rest into other key target markets such as Germany, Spain, France and Italy.
Over the last few years between, 2007 and 2013, Middle Eastern investors have spent around $45 billion in overseas real estate. Research suggests that this trend is gaining momentum and is set to continue. Additionally, there is a rising interest towards direct real estate.
Middle East's buy-hold strategy makes domestic investors look elsewhere
There is a slow growing dearth of real estate properties in the domestic market, owing to the Middle East’s buy-hold property strategy, forcing domestic investors to look abroad for suitable investments. Nick Maclean, Managing Director of CBRE Middle East, stated that the ‘buy and hold’ strategy that has been adopted by many investors in the Middle East, in their home land, has resulted in unsatisfied demand in the region. However, there has been a significant growth in overseas investments due to the need of diversification along with the increased confidence that investors have in the global market. Maclean added that the said trend is expected to continue over the next couple of years.
Post the economic recession, Sovereign Wealth Funds (SWFs) from the Middle East have become one of the most significant sources of capital in the real estate market, globally. The spending on real estate abroad by Middle Eastern investors was around $13 billion in 2013, $2 billion in 2009 and $8 billion in 2007.
In the year 2013 alone, nearly 90 percent of the investments in commercial real estate, outside of the Middle East was directed towards Europe. Of the Middle East investments, only 10 percent is expected to flow into the US real estate market as investors are tending to diversify away from dollar- denominated assets.
Office spaces lead Middle Eastern investors' commercial property acquisitions
Middle East investors are one of the key drivers resulting in increased activity in the European commercial real estate market. Majority of the Middle Eastern investors are looking at high income yielding commercial assets on a long-term basis and are not in it for short term gains. This strategy targets prime properties and big buildings in the core capital markets such as the retail sector, hospitality sector, offices and likewise. According to CBRE, transactions from Middle Eastern buyers during the year 2013 project an affiliation towards offices. However, several large retail properties have also been purchased by investors over 2013.
Middle Eastern investors are also set to increase their commercial investments in regions such as the Americas and the Asia Pacific. However, a large portion of their direct investments i.e. nearly 80 percent targets Europe, owing to certain key advantages the region possesses such as diversification, cultural affinity, high liquidity and market transparency.
Written by Les Calvert
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