Qatar tops Middle East outbound property investment

by  — 5 November 2015

Capital worth USD11.5 billion (QAR42 billion) flowed out of the Middle East into direct real estate purchases globally, driven by large-scale acquisitions by Qatar Investment Authority in the first half of the year, writes Syed Ameen Kader.

Qatar’s Constellation Hotels bought a 64 percent stake in Coroin, the holding company, which owns the Maybourne Hotel Group that runs Claridge’s London (pictured here).

Weakening oil prices have had no significant impact on foreign real estate acquisitions by the Middle East sovereign wealth funds (SWF) as the capital outflow reached a record high in the first half of 2015 (H1). According to latest research report by property advisor CBRE, USD11.5 billion (QAR42 billion) of the capital that flowed out of the Middle East into direct real estate globally includes Qatar Investment Authority’s (QIA) acquisition of USD2.47 billion (QAR9 billion) Maybourne Hotels in London and USD1 billion (QAR3.64 billion) Porta Nuova mixed-use property in Milan. When compared with 2014, this is 83 percent of last year’s entire investments, which indicates that the numbers are expected to exceed 2014’s total substantially by the end of 2015.  Iryna Pylypchuk, director, global research, CBRE, said, “We expect an average of USD15 billion (QAR55 billion) to be invested by Middle eastern investors per year in the next five years, with 2015 well on target to bypass that by a significant amount – potentially reaching as much as USD20 billion (QAR73 billion).”

Regional sovereign funds’ enthusiasm to invest heavily in real estate properties abroad, primarily in Europe and Americas, is not something new, but the current trend once again highlights the deep-pocket buying capacity of some of these resource-rich countries even when the oil prices are low. The sovereign spending stood at USD8.3 billion (QAR30 billion), representing more than 72 percent of total spend in H1.

Nick Maclean, managing director, CBRE Middle East, said, “The size of the region’s foreign investment makes the Middle East the third-largest source of cross regional capital globally as Arab investors look for brighter investment prospects internationally. Qatar remains the largest source of outbound capital investing a total of USD9.83 billion (QAR36 billion), while the UAE invested USD6.64 billion (QAR24 billion) in global assets during the 2014 and the first half of 2015 combined.”

However, it is not just the sovereign funds, there has been growth in non-institutional capital flows as well from the Middle East. The CBRE research suggests that private and non-institutional investors that include property firms, high net worth individuals (HNWI), equity and private funds are increasingly becoming major source of outbound capital from the Middle East.

“Weaker oil prices are a strong contributing factor to the growth of non-institutional investment from the Middle East, triggering and accelerating global deployment of capital, with value-add investments in high demand,” said Pylypchuk.

CBRE forecasts that global real estate investment by non-institutional capital from the Middle East will range from USD6 billion to USD7 billion (QAR22-25 billion) per annum in the near-term, if not higher, increasing from approximately USD5 billion (QAR18 billion) per year during 2010 to 2013.

London continues to be the most attractive destination for the Middle East investors who pumped in close to USD2.8 billion (QAR10 billion) in the H1.

Nick Witty, director, Real Estate Advisory at Deloitte Corporate Finance Limited (DCFL), said, “Investment in the United Kingdom (UK) has historically focused on London. However, compared with the past, there has been a noticeable shift to investing in secondary, gateway cities, such as Manchester, Birmingham, Edinburgh and Leeds where higher yields are achievable.  Outside of the UK, Brussels has topped the European rankings followed by Dublin, Warsaw, Amsterdam and Frankfurt.”

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