By Staff writer
New CBRE report says New York is most popular destination for investment, overtaking London
Middle East outbound capital flows into global commercial real estate reached $10 billion in the first half of 2016, with international market destinations becoming more diverse, according to CBRE.
The consultancy said in a new report that investors from the Middle East have remained active buyers despite a slowdown in global investment turnover in the first six months of this year.
Since the bottom of the market in 2009, Middle East investment has grown much faster than the market as a whole and faster than other cross-regional investment, it said.
CBRE noted that the sharp increase in investment was driven by sovereign wealth funds (SWFs), in particular those from Qatar and the UAE.
Capital flows from the Middle East are expected to remain high as SWFs increase the weighting of their portfolios and include a higher proportion of real estate, the report added.
New York ($6.5 billion) was the top destination for Middle Eastern investment in the 18-month period from 2015 to H1 2016, overtaking London, which now ranks second place at ($4.7 billion), Singapore ($2.5 billion), Hong Kong ($2.4 billion), Paris ($2.2 billion), and Milan ($1.3 billion).
CBRE said the targeted destinations show a departure from recent history, with substantial activity in the US and greater flows to Asia. Both of these destinations had previously been under-represented in Middle East investment.
"This suggests a move to a more balanced distribution of assets in order to achieve greater diversification. With substantial ground still to make up, this trend is expected to continue," the report noted.
Nick Maclean, managing director, CBRE Middle East, said: "In spite of oil pricing of between $40 and $50 per barrel, capital leaving the Middle East region has continued to target global real estate markets from H2 2015 to H1 2016.
"SWFs have increased their allocation to real estate and family offices and High Net Worth Individuals have increased their overseas spending to achieve greater diversity. London is a key target for this latter group and the combination of a favourable exchange rate and economic growth has led to theinstitutions looking very closely again at the US."
CBRE said that between 2008 and H1 2016, Middle East accounted for 22.6 percent of cross-regional investment in the world's 25 most popular cities for foreign acquisitions. In absolute terms, London ($28.5 billion) has seen by far the most investment from the Middle East.
It added that in terms of inward capital flow, the Middle East region sees only marginal investment volumes as compared to more developed marketplaces in Europe, Asia and the Americas, with just a small number of major institutional real estate investment transactions completed over the past year.