Gulf investors set to spend as UK enters ‘once-in-a-decade economic alignment’

Investment into UK commercial property by Gulf investors is expected to grow to more than $4bn (£3.1bn) annually, according to new research from Bank of London and the Middle East.  BLME reckons that the UK market is heading for a “once-in-a-decade economic alignment”, with cuts to interest rates expected later in the year, a new government in place, falling inflation and lower property prices in some segments of the market creating an opportunity for Gulf Cooperation Council investors ready to deploy their capital. According to its research, some 87% of interviewees said falling interest rates would be a key driver of GCC investor appetite over the next 12 months. Following an extended period of uncertainty when capital was kept on the sidelines, BLME said that significant pent-up demand from investors is about to be unleashed. BLME’s third annual report tracking GCC investment into UK real estate, Opening the Door: Is the UK’s property sector about to get an influx of investment from the Gulf?, suggests that three key factors are driving the increase: Economic alignment with cuts to interest rates expected later in the year, falling inflation and lower property prices combining to increase the UK’s attractiveness. The opportunity to release a lucrative “green premium” by upgrading assets which fall below new or anticipated environmental requirements. Living sector opportunities being driven by demographic shifts, as well as a long-standing undersupply of residential properties. Rashid Khan-Gandapur, director of real estate finance at BLME, said: “We anticipate that investors from the GCC will look to the UK to diversify their portfolios, and they will see profitable opportunities to invest and improve existing building stock including enhancing the ESG credentials as a driver of value. “Investment in UK commercial properties as a whole is expected to grow to over $4bn annually. This figure will be boosted further by investment in the residential sector, with GCC investors showing a growing appetite for undertaking large-scale living sector investments.” BLME said demographic trends and supply shortages would make the living sector a more popular option for investors in the future – particularly those from the GCC. Purpose-built student accommodation in particular is a popular asset for investors, with 68% of respondents saying their clients were focused on the sector, because of the structural shortfall and low tenant failure rates. Click here to read the report in full. Photo © Gerd Altmann/Pixabay