OUR REVIEW OF CAPITAL FLOWS IN AND OUT OF
GLOBAL COMMERCIAL REAL ESTATE MARKETS
Increase in cross-regional capital and its impact on the Middle East
Cross-regional capital flows into global commercial real estate accelerated to $125 billion in 2014,a 39% increase
year-on-year. In terms of the top sources of capital. North America was in a league of its own, accounting for almost a half
of all cross-regional flows. Asian investors took third position with $28 billion, while Middle Eastern buyers featured third,
with $14 billion invested outside their home region in 2014.
What is the impact on the Middle East as a destination and a source of capital from the increase of cross-regional capital
flows and weaker oil pricing? See inside to discover.
2015 | CBRE Research
2
MIDDLE EAST
IN AND OUT | MIDDLE EAST
INCREASE IN CROSS-REGIONAL CAPITAL AND ITS IMPACT
2014 saw a major shift in Middle Eastern international
investment strategies towards greater geographic and
sector diversification, with activity spreading across more
second-tier locations in Europe and in the Americas also.
There has been a slight dip in outbound capital flows
from the region, from $16.3 billion in 2013 to $14.1
billion in 2014. This reflects more cautious behaviour
from natural resource based Sovereign Wealth Funds
(SWFs), in light of weaker oil pricing.
In contrast to SWFs, Private Wealth and Equity Funds
took off as a major new source of outbound capital from
the Middle East. 2014 data and research show both,
a greater allocation of investment to real estate, and
more concentration on geographical diversification away
from the home region. This has had a significant impact
on Europe, where their combined real estate investments
grew by 49% year-on-year to $5.5 billion.
GLOBALISATION OF INVESTMENT MARKET
Cross-regional capital flows into global commercial real estate
increased to $125 billion in 2014, up 39% year-on-year. Middle East
was the third largest source of capital in 2014, with $14 billion
invested outside the region.
NORTH AMERICA
66
ASIA
MIDDLE
EAST
28
US$ BILLION
US$ BILLION
14
US$ BILLION
WHO IS INVESTING
Private Wealth and Equity Funds took off as a major new source of outbound
capital from the Middle East. In light of weaker oil pricing, direct real estate
acquisitions by SWFs slowed in 2014, but the effect might be even stronger in
2015 and the following couple of years.
2014
$US MILLION
Sovereign Wealth Funds
US$ 14.1BILLION
2013
13%
Institutional Other
5,835
Property Company
1,012
Private
2,893
Other Collective Vehicle
2,518
Other
1,693
116
Sovereign Wealth Funds
Institutional Other
US$ 16.3 BILLION
Property Company
Private
2,516
Other Collective Vehicle
1,238
1,539
1,349
1,134
Other
© 2015, CBRE Inc.
8,453
3
There is, however, some positive news resulting from a
weaker Euro, which is expected to benefit the consumer,
considering that as much as 20% of retail goods imports
come from Europe. While this is not expected to fully
offset the negative impacts, the discretionary retail
spending will increase.
Furthermore, the remarkable increase in cross-regional
capital flows into commercial real estate is likely to affect
the Middle Eastern markets before long, due to intense
competition for assets elsewhere. While no significant
impact is likely in the short-term, some segments of the
market are worth watching carefully. These are income
producing offices, development opportunities, and hotels.
The latest CBRE Asia Pacific Investor Intentions Survey
2015 reported a handful number of investors expressing
interest in diversifying into the region.
WIDER GEOGRAPHIC SPREAD
LONDON 4,442
The top destinations for Middle Eastern Capital in 2014 were as diverse
with London no longer as dominant (32% share in 2014 v 45%
in 2013). Activity spread across more second-tier locations in Europe
and in the Americas also. This closely follows the predictions that CBRE
made in the original Middle East: IN and OUT report back in 2014.
PARIS 2,223
NEW YORK 1,345
GERMANY OTHER 802
UK OTHER 702
WASHINGTON 481
SEOUL 472
MOSCOW 390
$US MILLION
LOS ANGELES 230
ATLANTA 199
MILAN 145
ROME 133
AMSTERDAM 129
FRANKFURT 111
BARCELONA 107
RISE IN SAUDI ARABIAN
CAPITAL ON A GLOBAL MAP
Saudi Arabia has emerged as a significant source of capital,
from investing close to nothing in 2013 to being the fastest
growing source of Middle Eastern capital outbound in 2014,
with $2.3 billion invested. Qatar was by far the largest source
of Middle Eastern capital in 2014, with $4.9 billion invested.
KUWAIT 665
QATAR 4,873
SECTOR PREFERENCES
In pursuit of higher returns – Middle Eastern
investors are becoming more active across
a wider mix of sectors. Hotels took strong
second position in 2014, with 16% share of
outbound investment from the Middle East.
This follows a wider investor interest towards
the alternative real estate sectors – confirmed
by the CBRE’s latest 2015 Global Investor
Intentions Survey.
$US MILLION
7,377
2,281
1,697
SAUDI ARABIA
2,300
573
1,010
UAE 1,626
$US MILLION
INDUSTRIAL
RESIDENTIAL
RETAIL
HOTEL
OFFICE
© 2015, CBRE Inc.
IN AND OUT | MIDDLE EAST
Focusing on the developments in the region, there is
little doubt that weaker oil pricing is having a negative
economic impact.
CONTACTS
For more information regarding this report please contact:
Iryna Pylypchuk
Director, Global Capital Markets Research
t: +49 69 17 00 77 92 e: [email protected]
Nicholas Maclean
Managing Director, Middle East
t: +971 4 437 7232
e: [email protected]
Disclaimer
CBRE Ltd confirms that information contained herein, including projections, has been obtained from sources believed to be reliable.
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© 2015, CBRE Inc.