Mideast Funds to Boost Property Buys Fivefold Over Decade

Middle East investors, including some of the world’s largest sovereign-wealth funds, may increase commercial real estate purchases to $180 billion over the next decade, broker CBRE Group projected.

Investment in Europe will rise fivefold as the continent attracts about 80 percent of the spending, Nick Maclean, CBRE’s managing director for the Middle East region, said today in Dubai. The Asia Pacific and Americas regions will each get about 10 percent.

The increase is emerging from the “extraordinary mismatch” between the lack of institutional real estate in the funds’ domestic markets and the spending power concentrated in those countries, CBRE said in a report today.

Middle East sovereign funds are increasingly targeting European real estate as they seek to diversify their holdings. Little of the investment goes to property in the region because few assets are for sale, there’s little transparency and markets and institutions aren’t mature, according to CBRE.

Investors from the region are expected to increase the proportion of spending allocated to real estate to 7 percent to 8 percent from 5 percent or 6 percent now, CBRE said. Saudi Arabia, which recently announced plans to create a sovereign-wealth fund, will probably invest 8 percent of it in real estate outside its borders, according to Maclean.

London Leads

London and the rest of the U.K. will receive about $85 billion of the investment over the next decade. Another $60 billion will go to continental Europe, especially cities such as Paris, Madrid, Barcelona and Amsterdam, Maclean said.

The U.K. capital attracted 44 percent of all Mideast property investments last year and Paris came in a distant second with 15 percent, according to the broker. Foreign demand for investments in Middle East property is also on the rise, with funds from the U.S. and Far East leading the way. Most of those investors are interested in properties in Dubai and Abu Dhabi, Maclean said.

Investors from the Middle East spent $13 billion last year buying commercial real estate globally, up from $7 billion in 2012, according to the report.

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