November 7, 2017—Middle East investment in global commercial real estate reached US$10.1 billion in the 12 months leading up to Q2 2017, with the United States the top country target, while New York City and Washington are among the leading cities, according to the latest research from global property advisor CBRE.
After a period of exceptionally strong investment activity, outbound investments from the Middle East eased and returned to similar levels as recorded in 2013 and 2014. The Middle East nevertheless remains a major source of capital globally, representing 8 percent of total cross-regional investments between Q2 2016 and Q2 2017.
The U.S. is the top country destination for Middle East investment volume, reaching US$3.9 billion in the year to Q2 2017, slightly down from US$10.3 billion during the same period in the previous year. London (US$1.68 billion) was the leading city target for Middle Eastern investors, followed by New York (US$820 million) and Washington, D.C. (US$469 million).
“Investors from the Middle East remain active buyers in the global real estate market and continue to target core assets with long leases in safe-haven locations. The recent decline in oil price only strengthened the case for investors to diversify their income streams, both in terms of asset classes and geographies; they are taking a long-term view,” said Chris Ludeman, Global President, Capital Markets, CBRE.
“While investors from other global regions are largely focused on the traditional commercial real estate sectors such as offices, retail and logistics, Middle Eastern buyers typically have a strong appetite for alternative asset classes such as hotels, residential, student housing and healthcare, as well as infrastructure,” added Mr. Ludeman.
In line with previous years, Sovereign Wealth Funds remain the largest source of Middle Eastern capital, acquiring US$5.4 billion in real estate assets globally between Q2 2016 and Q2 2017, although this represents a decline of 17 percent year-over-year. High net worth individuals and private investors from the region were less active compared to previous years, which indicates that this group might be more susceptible to adverse market conditions.
“It is becoming increasingly challenging to secure core assets with long leases in the current market environment, particularly with Asian buyers raising exposure to this segment, meaning investors need to be aggressive to win deals. Despite the impact on short-term outflows, the Middle East region remains an important source of global capital with buying activity likely to increase over time,” added Mr. Ludeman.