Fall in Middle East outwards property investment

15 April 2015

GCC fails to capture global real estate inflows

  • Real estate investment outflows from Middle East fell 13 per cent in 2014 to $14.2bn
  • GCC did not attract significant proportion of inwards property investment due to lack of prime investment opportunities
  • Qatar was largest source of spending at $4.9bn, followed by Saudi Arabia at $2.3bn

Cross-regional real estate investment from the Middle East fell 13 per cent in 2014 to $14.2bn, according to US-based CBRE’s global real estate report.

CBRE attributed the decline to the difficulty in accessing products and weaker oil prices, trends that are set to continue through 2015.

The volume of global cross-regional real estate investment grew more than 39 per cent in 2014 to reach $125bn. The Middle East failed to capture a significant portion of these inflows despite high interest, due to a lack of high-end properties available.

“The GCC has the opportunity to attract these new volumes and scouting parties come to Dubai and Abu Dhabi, but leave frustrated,” says Nicholas Maclean, managing director of CBRE Middle East. “Asian capital is already here and waiting. The government has a great opportunity as the largest occupier to release the capital tied up in buildings.

“We need to be more creative between leaseholds and freeholds to increase the liquidity of the market and capture foreign capital.”

The Middle East remained the third-largest source of capital after North America and Asia.

Europe was the main beneficiary, receiving $10.2bn of commercial real estate investment from the region.

Qatar is the largest source of real estate spending, with $4.9bn invested. Saudi Arabia’s investment grew enormously from $150m in 2013 to $2.3bn in 2014, according to CBRE, which predicts the kingdom will maintain this momentum.

For the first time, private investors, including high net-worth individuals, families and equity funds, overtook sovereign wealth funds as the main Middle Eastern investors in real estate. This is due to the high competition for investible properties in prime markets as volumes of investment rise.

“More than half of the investment is now by private funds as they are smaller and more fleet of foot,” says Maclean. “Sovereign wealth funds move slower, but will dominate again in the future.”

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