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Commercial real estate investments around the world reached $407 billion (Dh1.49 trillion) in the first half of the year, the strongest first half since 2007, and up 14 per cent year-on-year, according to property advisor CBRE.
Although rapid growth has been maintained for several years, the rate of growth slowed in the first half and was vastly different at a regional and country level. The Americas experienced growth of 31 per cent year-on-year, while a strong dollar impacted activity in Europe, Middle East and Africa (EMEA) and Asia Pacific (Apac). In dollar terms, EMEA was up just 5 per cent from last year, with Apac down 19 per cent year-on year. When measured in local currency EMEA grew by 25 per cent, while a decline in Apac was more muted at 9 per cent year-on-year.
Despite the low oil prices Middle Eastern purchasers remain very active, collectively investing $11.5 billion outside their home markets in the first half. Around $5.24 billion and $4.54 billion flowed out of Qatar and the UAE respectively into direct real estate globally.
While recent activity was boosted by a few large sovereign wealth fund deals, the investor base is growing and so is their investment strategy towards greater geographic and sector diversification, with activity spreading beyond gateway markets to second-tier locations in Europe and the Americas, and more recently towards core Apac.
''Data from H1 2015 shows a continuing acceleration in the flow of capital out of the Middle East by private offices and high-net-worth individuals,'' said Nick Maclean, Managing Director of CBRE Middle East. ''This, to some extent, is compensating for a decline in sovereign wealth capital going overseas, naturally perhaps as a consequence of reduced revenue allocations because of recent oil repricing. The interest in overseas investments, particularly from the UAE, is also being influenced by some uncertainties in the local real estate markets.''
According to Iryna Pylypchuk, Director of Global Research at CBRE, capital flows into real estate are well supported. ''Even ignoring rental value growth, real estate offers a spread over bond rates of between 200-300 bps across global markets and capital will continue to be attracted to the sector,'' said Pylypchuk. ''The influx of new sources of capital targeting real estate as part of longterm liability-matching allocation strategies is helping to extend the investment cycle. At the same time, this pushes the old capital into niche sectors, prompting expansion of the investment universe.''
At a regional level, the influence of global investors varies from as little as 10 per cent in the Americas, to almost 50 per cent in EMEA.
Source: Property Weekly