MENA’s Global Real Estate sector and geographical diversification trends

MENA’s Global Real Estate investments

Global Investors CBRE Group, one of the world’s largest real estate investment management firms with $87.1 billion in assets under management, in a recent report predicted that in the short term, and pushed by weakening oil prices, an average of $15 billion per year will flow out of the Middle East.

In the first quarter of 2015, $5 billion were invested in Europe and America in equal shares whereas during 2014, the Middle East was the third largest source of capital globally, thus continuing to be one of the most important sources of capital with $14 billion invested outside of the MENA region.

This therefore is currently leading towards relatively important shifts in global investment thinking in terms of geographic and sector diversification, and is lately targeting the US.  Hotels, office buildings were relatively easy acquisitions up to 2008 in Europe with preference for London.  More recently, Middle East property investors are turning their attention towards the United States as London’s prime property markets generally show signs of saturation.

CBRE said New York, Washington, Los Angeles and Atlanta were all becoming favoured locations for investment. Although London is still the city that attracts the most funds, its importance is  however waning.

CBRE 's

It is, however with a 32% share of all Middle East outbound investment in 2014, from 45% in 2013 whilst remaining at the top, not the prevailing destination anymore.  Paris and New York, with 15.8% and 9.6% respectively of the total outbound Middle East investment follow London.

Sector wise, Middle Eastern investors are at the same time, turning to more active areas across a wider range of property types.  Competition from Chinese investors and other global capital sources means that these investors are increasingly seeking alternatives.

The seemingly oil prices permanent slump tend to lessen the sovereign wealth funds spending, whilst at the same time strengthening a strong growth in overseas investment from families and other institutions in many cases, for the first time as a new trend to be reckon with.

In effect, private buyers such as companies, equity funds and certain individuals went actually on a shopping spree last year, buying a higher amount of property in Europe than the major Middle East funds last year. They were responsible for the purchase of close to 60% of European purchases.  This was a 56% increase over the previous year.  Sovereign wealth funds, though, driven by Qatar, spent $4.9bn of the $14bn invested in 2014.  Saudi Arabia is also playing a much more significant role with $2.3bn of global property assets bought last year.

In conclusion, these market dynamics will expand naturally the new trend of 2015 of a more diverse investment strategy into a more pronounced characterisation during the next short to long term with a greater allocation to real estate and more concentration on geographical diversification away from the home region.

Sources :

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