LOS ANGELES—For Middle Eastern investors in commercial real estate, the US has been the leading destination country over the past 12 months, with London the top city, CBRE said Tuesday. While outbound investment from the region has tapered somewhat compared to the 2015-2016 period, nonetheless it represents 8% of the global total for cross-border sales.
In all, Middle Eastern buyers put US$10.1 billion into commercial property investments outside their home countries between the second quarter of 2016 and Q2 of this year. One-sixth of that total, or US$1.68 billion, went to London acquisitions. New York City and Washington, DC, with tallies of US$820 million and US$469 million, respectively, are also leading city markets. The US itself represented US$3.9 billion of the trailing 12-month total, or more than a third.
“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,” says Chris Ludeman, CBRE's global president, capital markets. “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.”
They're also taking a somewhat contrarian view in terms of where they put their money. “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,” Ludeman says.
Sovereign wealth funds remain the largest source of Middle Eastern capital, acquiring US$5.4 billion in real estate assets globally over the 12-month period. However, CBRE notes that this figure represents a year-over-year decline of 17%. Similarly, high-net worth individuals and private investors from the region were less active between Q2 '16 and Q2 of this year compared to years past, suggesting 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,” Ludeman says. “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.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
