Middle East funds pick up $14.1b in overseas realty

THIS YEAR AND NEXT COULD SET OFF A BUYING SPREE AS SAUDI FUNDS GET MORE ACTIVE

After taking a bit of a dip in 2014, private, institutional and sovereign wealth from the Gulf is all set to pick off the choicest real estate assets outside of the region.

Last year, regional investors channelled $14.1 billion into global commercial realty, while North American funds topped the league in cross-border realty deals with $66 billion and followed by investors in Asia, with $28 billion. Those from the UAE made up an estimated $1.62 billion, behind Qatar’s $4.87 billion and Saudi Arabia’s $2.3 billion. Kuwait had $665 million deployed in global realty, while those of Oman and Bahrain have not been recorded.

The overall cross-border funding in property assets totalled $125 billion in 2014, up 39 per cent year-on-year.

The $14 billion spread around by Middle East based investors represents a decline compared with the $16.3 billion recorded by them in 2013, according to a report issued by the global property consultancy CBRE on Tuesday. Of the overall 2014 spend by Middle East investors, sovereign wealth funds (SWFs) contributed $5.83 billion, but down from 2013’s $8.45 billion.

“This should not be translated as a lack of interest on their part — the decline in value terms stems only from the fewer deployment opportunities that were there last year as against what transpired in 2013,” said Nick Maclean, regional Managing Director at CBRE.

Private wealth

But where SWFs showed caution, the region’s private wealth were ramping up their buying activity, and especially in European property, which benefited to the tune of $5.5 billion from a 49 per cent year-on-year gain.

“So, Middle East funds are not about to get inactive in global real estate exposures because of the oil price situation,” said Maclean. “We believe there is a clear sentiment on their part to extend higher levels of commitment on European realty.”

But a clear scale up will have to wait until next year — the Saudi government has publicly stated its intent to deploy public/sovereign funds outside of the kingdom effective from January next.

“In many ways, Saudi Arabia is still the sleeping giant in terms of how they use the sovereign funds at their call,” said Maclean. “But even without that, private Saudi money will still be a significant presence in real estate transactions this year. We are already seeing evidence of that in the deals that London properties have recorded during Q1-15.”