The Middle East’s outbound capital flows into global commercial real estate reached $10.1 billion between Q2 2016 and Q2 2017, according to CBRE Middle East. This compares to $21.2 billion in the previous year. Despite a slowdown in outbound investment, Middle East investors still remain a major source of capital globally, representing eight per cent of total cross-regional investments.
While international investors remain largely focused on the traditional commercial real estate sectors such as offices, retail and logistics, Middle East investors typically have a strong appetite for alternative asset classes such as hotels, residential, student housing, healthcare and infrastructure. Investors from the Middle East continue to target core assets with long leases in safe haven locations. The UAE, for example, has made major investments in large-scale infrastructure projects in the UK, such as Gatwick Airport.
London was the top destination for Middle Eastern investment at $1.68 billion and New York ranks a distant second at $820 million. Washington and Frankfurt received $469 million and $348 million respectively.
Several investors have been taking advantage of Brexit to secure opportunistic acquisitions in the UK capital, most notably family wealth from ultra-high net worth individuals and certain sovereign wealth funds (SWFs). While this was partly driven by a correction in yield levels and a favourable currency effect due to the depreciation of the sterling, it reaffirms London’s status as global gateway market.
While the US remains the top destination for Middle East investors as measured by total investment volume, US inbound capital flows have retreated to $3.9 billion in the year to Q2 2017 from $10.3 billion in the same period previous year. The little anticipated result of the US presidential election was initially received by Middle Eastern investors with calm and reason, although the first months after inauguration proved to be politically sensitive.