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Mideast investors active players in global real estate markets: Report

Friday, 09 March 2012 06:27
DOHA: Middle Eastern investors were increasingly active players in the global real estate markets in 2011. As in 2010, Qatar was the main exporter of capital from the region in 2011.

A notable trend in last year was a changed mind-set, from one of buy and hold to a more active trading mentality, the Jones Lang LaSalle data on cross border investment in commercial real estate said. The research note by Alan Robertson, CEO, Jones Lang LaSalle MENA, shows that Middle Eastern investors have been strong net purchasers in overseas markets in recent years.

In terms of capital transactions across the world's commercial real estate markets, 2011 was a significantly more active year than 2010, with the total recorded value of some $410bn being 28 percent higher than 2010.

The proportion of cross-border transactions, where the buyer is based in a different country to the property they are buying, also rose, to 31 percent. At the heart of this change was an increased focus on core, mature markets at the expense of potential opportunities in developing countries.

During 2011, Middle Eastern investors were able to take advantage of continued demand for real estate in many global markets to dispose of assets they had acquired in recent years and repatriate capital to their local economies. While Middle Eastern investors remain net buyers with $4.5bn worth of cross-border purchases, there was however a significant increase in their sales activity in 2011, as both sovereign wealth funds (SWF's) and private investment offices took the opportunity of selling overseas real estate assets.

This reflects the increased importance of private investment houses over the past few years, with these groups being more active traders of real estate.

The other driving force behind the increased sales activity is the decision of some of the region's largest SWF's to more actively manage their portfolios (including the sale of non-core assets), as opposed to their previous "buy & hold" attitude.

Notable sales by Middle Eastern investors included the Swisshotel Kunshan in China, which was sold by Kingdom Hotel Investments for a price in excess of $60m and the sale by Arab Investments Ltd of an office in Stratton Street London at a price of around $95m. On the buy side, there remained a strong appetite for overseas real estate, with total cross border purchasers by Middle Eastern investors increasing 12% from 2010 levels to more than $4.5bn in 2011.
Mature markets
Investors from the Middle East still preferred the mature markets of Europe and the Americas with very little investment into Asia Pacific real estate in 2011. Within these more mature markets there has however been a broadening interest, with purchases in Canada and Argentina (as well as the US) and in 10 different countries across Europe.

The UK in general, and London in particular remained the number one destination for Middle Eastern investment in 2011, but investment into this market actually fell by 8 percent to $2.4bn in 2011, as investments were secured in other European markets such as France, Germany, Spain, Hungary, Italy and Holland.

The office sector continues to be the favourite asset class and attracted 42% of cross-border investments by Arab investors in 2011, including KIA (the sovereign wealth fund of Kuwait) investing $485 m into an office building in Manhattan, NY. There were a number of large hotel portfolio transactions, which boosted this sector's share of total cross border purchases by Middle Eastern investors to 39 percent in 2011.

The largest of these was the Intercontinental Portfolio bought by Lebanese private investor Toufic Abou Khater for $652m. Other major hotel acquisitions included the W Hotel in London acquired by a Qatari buyer for $180m and the Marriott Champs Elysee in Paris that ADIA secured for almost $340m. The retail sector accounted for 12 percent of total Middle Eastern transactions in 2011, with St Martins, the London-based vehicle of Kuwait's sovereign wealth fund investing more than $570m in retail properties all over the UK.

Qatar was the main exporter of capital from the Middle East in 2011. Other active investors included the Kuwaiti and Abu Dhabi SWF's along with Saudi and Lebanese private offices (including Continental Property Investments, Corporate Finance House and Toufic Abou Khater).

The consistent weight of capital for commercial property over the last two years demonstrates that, despite the financial crisis, it remains a core asset class for many investors. For 2012 Jones Lang LaSalle expects transaction volumes to keep pace with the level of activity recorded in 2011, and we believe that Middle East investors will continue to play an active role as investors in the global real estate markets

© The Peninsula 2012

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