Middle East investors are expected to return to the commercial property market in the United Kingdom, as the overall economic environment and investor sentiment improve on the back of the COVID-19 vaccine rollout.
“2021 will see a recovery in [investment] volumes to £1.6 billion ($2.2 billion), representing an annual rise of 14 percent,” said Alex James, head of private client advisory, private office – commercial at Knight Frank.
High-net-worth individuals from the Middle East are some of the biggest buyers of UK real estate. Last year, Qatari businessman Abdulhadi Mana Al-Hajri paid £700 million for the iconic London Ritz Hotel.
However, due to the coronavirus pandemic and low oil prices, Middle East capital flows into the United Kingdom were estimated to have fallen by 6 percent to £1.4 billion in 2020.
The worst period was during the second quarter in 2020, when commercial real estate investment volumes from the region reached £32 million ($43.5 million), the lowest level since the third quarter of 2010, according to Knight Frank.
Despite the challenging environment, investors from the region are still interested in British assets, and over the last few months, there have been an improvement in sentiment.
Middle East investors are not just keen on making acquisitions in London, but in other regional cities as well, and they’re looking at opportunities in retail warehouses, office spaces, as well as hotels, data centres, healthcare and student and residential accommodations.
“Long-term office income from globally recognised tenants will continue to be the main focus for most our clients, but we are seeing a growth in demand for new sectors too,” James said in an analysis shared with Zawya.
“The rise of the logistics market has not been unnoticed. There has been an upsurge in demand for UK logistics from both Middle Eastern private investors and institutional capital seeking to increase their exposure. Retail warehouses will be back on investors’ lists in 2021,” he added.
Recovery in volumes
James noted that the recent uptick in real estate demand from investors in the region is fuelled by the opening of the UK-UAE/Bahrain travel corridors.
“Travellers arriving into the UK from these countries will no longer have to quarantine for two weeks, promoting opportunities for investors for when the current UK lockdown restrictions are removed in 2021,” James noted.
The recovery in volumes predicted for 2021, James added, “reflects the anticipated improving environment” as vaccines are being administered and investors are expected to deploy unutilised funds last year.
“Investor sentiment will increase towards transacting internationally with virtual viewings and video tours becoming the new norm,” said James.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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