JEDDAH — Saudi Arabia was the fastest growing source of outbound Middle Eastern investment, CBRE's “Middle East In and Out 2015” report revealed. Capital outflows from the Kingdom grew rapidly in 2014, with $2.3 billion invested. Qatar was the largest source of Middle Eastern capital in 2014, with $4.9 billion invested globally. Middle Eastern buyers invested a total of $14.1 billion outside their home region in 2014, making the Middle East the third largest source of cross-regional capital globally. Europe remains the preferred market for Middle Eastern investors, receiving $10.2 billion in 2014. In line with other investor groups, the year saw a major shift in investment strategies, with activity growing across second-tier European locations, including Amsterdam, Frankfurt, Budapest and Madrid. While still the most popular market, London received 32% of spend in 2014 compared to 45% in 2013, with Paris and New York growing their shares in 2014 to 16% and 10% respectively. London and Paris were the only two markets to retain a top five ranking in 2014. “There has been a fall in outbound capital from the region from $16.1 billion invested globally in 2013 to $14.1 billion last year. In part, this is a function of difficulty in accessing product, and the large lot sizes these buyers tend to invest in. However, looking ahead and in light of weaker oil pricing, real estate acquisitions by sovereign wealth funds are expected to slow further in 2015 and beyond.” Historically sovereign wealth funds have dominated Middle Eastern investor league tables – accounting for around 50% of international commercial real estate acquisitions in 2013. While still the largest single investor group, Middle Eastern high net worth individuals, the private sector and other collective vehicles played a more significant role in role in global markets 2014. Nick MacLean, Managing Director, CBRE Middle East, said, “Middle East investors overseas real estate spending is increasing in importance, particularly among private and family offices and particularly from Saudi investors, as geographical diversification has become more important. We feel that this trend will accelerate over the next few years.” Pylypchuk added: “In contrast to SWFs, lower oil prices may have triggered private capital to increase international allocations and speed up deployment faster than would have been the case otherwise. Our research clearly shows a greater allocation of investment to real estate and desire to diversify away from the home region. This has had a significant impact on Europe, where the combined investments of private wealth and equity funds from the Middle East grew by 49% year-on-year to $5.5 billion.” In terms of inward capital flow, while no significant impact is likely in the short-term, some segments of the market are worth watching carefully. Asian investors have keen interest in income producing real estate and developments, looking to establish their footprint across major global geographies. These intentions may well include the Middle East – and there are initial tentative signs of this sentiment coming through from CBRE's 2014 Asian Investor Intentions Survey, where a handful of investors expressed interest in diversifying into the region. Brett Schafer, Chief Executive Officer, DIFC Properties, said “the Middle Eastern region has diversified its economy to curtail dependence on hydrocarbons and contain the growing demand of travel, trade and tourism. Sustained investor interest to expand their global outreach in the fast-emerging Middle Eastern market has predominately steered the growth engine of the real estate sector too. With strengths in tourism, logistics, healthcare, connectivity and transport, Dubai's commercial real estate market is one of the most lucrative markets for foreign investment. Removing more barriers, such as foreign ownership restrictions, has made Dubai an even more attractive trade and real estate investment destination.” Schafer added “as the sector continues to remain a significant contributor of the emirate's economic growth, DIFC aims to support the development vision further. Celebrating a decade-long foray in the region, we are accelerating expansion plans and developing retail and office facilities across the hub to facilitate more businesses in the vicinity.” “The number of commercial transactions involving foreign investors does not adequately reflect the interest in real estate in the GCC and if the relative illiquidity could be solved here, the UAE in particular would see substantial inbound capital flows,” MacLean added. — SG
