Middle Eastern investors spent $13bn on commercial real estate abroad, a yearly increase of 79 per cent, according to research by global property adviser CBRE.

The majority – 64 per cent – was used to purchase offices, while 19 per cent was allocated to hotels.

Nearly two-third of the figure ($8bn) was spent by sovereign wealth funds, marking a significant increase in activity compared to previous years. Around 90 per cent of the outflows went to Europe, with London forming the most popular destination. The UK’s capital was the target of 44 per cent of investments, followed by Paris (15 per cent), Milan (4 per cent), Lyon (3 per cent) and Los Angeles (2 per cent).

Over the past five years, $45bn in Middle Eastern capital has gone abroad – seven times the reported activity in its home market.

The amount of overseas investment is set to further increase in 2014, Nick Maclean, managing director of CBRE Middle East told reporters during a media briefing on 17 June.

“Property purchases in foreign markets have not been as strong as expected in the first quarter of 2014, though we still expect the amount over the full year to exceed that of 2013. A lot of stock will be coming onto the market in the coming months,” he said.

In total, CBRE expects $170bn to $180bn in capital to be allocated to foreign regions over the next 10 years. It believes sovereign wealth funds (SWFs) will continue to account for the majority of these transactions – they are forecast to spend around $140bn to $150bn. The rest will likely be taken up by high net worth individuals, property companies and developers.

Continental Europe is expected to remain the primary beneficiary of Middle Eastern investment, especially major cities in the UK, France, Spain, Germany. But the United States and Asia Pacific are also attracting more interest, and could each form 10 per cent of future allocations, with Europe covering 80 per cent.

According to Maclean, the coming years could see more interest from Saudi investors, which have typically predominantly focused on their home market.

“There seems to be a willingness to look at diversifying and consider new assets overseas. This may not happen immediately, but perhaps in the coming years, from 2016, 2017 and 2018 onwards. If that happens, the volume will be very significant indeed, given the size of SWFs such as Sama [the Saudi Arabian Monetary Agency].”

In contrast, the volume of inbound investments – from foreigners purchasing commercial real estate in the Middle East – shows that regional markets are still in their infancy.

A total of $6.5bn has been invested in commercial real estate in the region between 2007 and 2013, averaging less than $1bn per year. That is due to a lack of available investment-grade product, according to the CBRE.

“There is a frustration among investors that there is nothing to buy except for individual units or strata titles [ownership for multi-level apartment blocks and horizontal subdivisions with shared areas]. There is opportunity to create more sophisticated instruments in future, which would allow families or institutions to monetise their assets while retaining freehold value,” said Maclean.