JLL highlights the themes and trends of outbound Middle Eastern real estate investment
With oil prices above USD 70 per barrel for the first time since 2014, overseas real estate transaction volumes by Middle Eastern buyers are set to pick up, reflecting adjustment in investors' strategies, according to a new report by JLL titled Top Themes Driving Middle East Outbound Real Estate Flows in 2018.
According to JLL, Middle East investment flows into global commercial real estate decreased from USD 12.2 billion in 2016 to USD 9.1 billion in 2017, however, Middle Eastern buyers are expected to regain their competitiveness and dive deeper into established real estate markets of continental Europe, contributing to the recovery of outbound investment volumes in the future.
The report reveals that investors from the region are looking beyond mainstream asset classes and are following the global trend of investing into alternative assets such as student housing, hospitals and senior housing. Historically, offices and hotels have represented their 'comfort zone' and accounted for 85% of commercial real estate investment flows from the region each year. “This change in mentality suggests that in their permanent quest for higher yield, investors are now more willing to move up the risk curve,” said Fadi Moussalli, Head of International Capital Group, MENA at JLL.
JLL notes that as the conventional asset classes become more expensive, investors are becoming more creative not only with diversifying their portfolio by sector but also by geography. The report highlights that Middle Eastern buyers are looking towards more “exotic” destinations such as South America and Eastern Europe. Within more familiar markets, activity of Middle Eastern buyers is spreading across from gateway markets to second-tier locations.
The report also looks at updates from specific investor types and analyses how will they respond to changing macroeconomic conditions. With recent recovery of oil prices, Sovereign Wealth Funds are taking a more active management approach to their real estate stock. Their activity is expected to pick up although for country-specific reasons some will be more active than others.
For JLL, syndicating platforms emerge as a major and ever increasing source of outbound capital from the region.
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