Middle Eastern investors favour London for property investment over global cities, having spent £1.2bn there over the past 12 months, according to research from CBRE.
The firm’s In and Out 2017 report reveals that London is the top city destination for Middle Eastern money, followed by New York and Washington DC.
In total, Middle Eastern investors were responsible for $1.68bn (£1.2bn) of deals in the UK capital during the 12 months from Q2 2016. New York ranked second with $820m of deals, while Washington DC was third with $469m (£358m) of investment.
More widely, investment from the Middle East has waned due to aggressive demand from Asian investors – total outbound investment from the Middle East reached $10.1bn in the 12 months, which is down from previous years.
The Middle East currently represents 8% of total cross-regional investment, with outbound investment by sovereign wealth funds declining by 17% year-on-year. According to CBRE, individual high-net-worth investors were less active compared with previous years, indicating that this group might be affected by adverse market conditions.
CBRE said that the slowdown in total investment was the result of a decline in the total number of deals involving Middle East capital as well as a lack of large transactions, the majority of which over the last 12 months have involved Asian investors.
Middle Eastern investment demand has diversified to include asset classes such as hotels, housing, student housing, healthcare and infrastructure.
Nick Maclean, managing director, CBRE Middle East, said: “In spite of fluctuating oil prices, capital leaving the Middle East region has continued to target global real estate markets. Investors have expressed their intention to increase global real estate spending, as a proportion of all investment asset allocations. This is driven by a perceived need to diversify income streams by asset class and geography.”
Chris Brett, head of international capital markets at CBRE UK said: “London and the UK remain a pre-eminent market for global capital despite ongoing political uncertainties. In the past year we have seen Middle East investors securing opportunistic acquisitions in the capital, most notably family wealth from ultra-high net worth individuals and sovereign wealth funds. While this has partly been driven by a correction in yield levels and a favourable currency effect due to the depreciation of sterling, it reaffirms London’s status as a global gateway market.”
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