Real estate capital flows from Middle East investors steady despite drop in oil prices
JLL has highlighted the impact of the drop in oil prices on Middle East investors, as per a recent study launched by the Global Capital Markets Research team.
Investors from the Middle East continue to have a strong appetite for real estate investment globally, with a couple of major deals involving investors from the region closing at the end of 2014, despite the significant drop in oil prices in the second half of 2014 and the start of 2015. The flow of capital from the Middle East into global real estate markets did not see a collapse in the final quarter of 2014.
Alan Robertson, CEO of JLL MENA, said “Investors from the region allocated almost as much in the final quarter as they had in the previous three, with US$4.5 billion spent in the final three months. Although overall spending in 2014 was slightly lower than spending in 2013, investment into commercial real estate has continued.”
Middle East Sovereign Wealth Funds have maintained allocations, at differing levels, to global real estate during periods of lower oil prices and economic recessions. While global investment volumes downturned in 2009 to slightly more than US$200 billion and many cross-border investors retreated back to their domestic markets, Middle Eastern investors continued to spend globally.
The Middle East also boasts some of the richest people in the world, many of whom have a deep appreciation for the wealth preservation and generational qualities of commercial real estate. Dubai, Abu Dhabi and Kuwait are highlighted as cities that are home to a significant number of ultra high net worth individuals (UHNW), defined as individual wealth greater than US$30 million.
Fadi Moussalli, Head of International Capital Group at JLL MENA, commented: “Over the course of the last few years, JLL has seen an increasing number of private individuals and family groups from the Middle East allocate more money to direct real estate. The majority of the billionaire, private wealth in the Middle East is concentrated in Saudi Arabia, with greater than US$204 billion across 64 individuals. Middle Eastern capital is expected to remain one of the most significant cross-border sources of global commercial real estate investment.”
Sharia compliant investing has been an increasingly popular trend in recent years, with wealthy individuals looking to invest through sharia compliant clubs, funds or syndicates. Syndicating platforms that support Sharia compliant investing gather money from a diverse range of UHNW individuals and invest in income generating sharia compliant opportunities, allowing a large number of people to come together in relative anonymity to secure potentially large properties.