_GCC outbound investment trends

Outbound investment trends

Given the current regional economic climate, volatility in financial sectors and general lack of institutional grade commercial assets available, Knight Frank has witnessed sustained levels of demand for cross-border commercial real estate investment. Whilst overall outbound investment volumes from the Middle East have fallen in recent years, this is mainly due to a general slowdown activity from the regional sovereign wealth funds. Private capital and the smaller institutions remain extremely active.

Despite concerns raised by Brexit, over two thirds of the capital tracked from GCC countries is actively seeking opportunities in UK real estate. Whilst a substantial proportion still show a preference for London, over the course of the last cycle we have witnessed more and more investors moving into the regional cities across the UK, searching for more attractive returns. 

Knight Frank’s Active Capital 2018 report showed that on a global level the UK has been the top destination for cross-border capital for six of the past ten years, and London the top global city destination for office investment for nine of the past ten years. For Middle Eastern investors the attraction to UK real estate remains strong, despite current political uncertainty. This trend is aided by the range of benefits that investors can take advantage of in the UK commercial market, from the size of the commercial market, large and high quality assets and good levels of transparency.

From the Middle East, the USA still sees the majority of outbound capital by absolute volume, though this is more consolidated, generally with larger transactions being completed by larger institutions, many of whom have a programmatic investment strategy to build up portfolios in this geography.

Continental Europe continues to grow as a key investment target for many GCC based investors. In June 2017, 81% of private investors were looking at the UK as their preferred investment location; by June 2018 this number had reduced to 67%. Current preferred target destinations include the Netherlands and Germany. In part investors have been attracted by stable real estate markets and an extremely competitive debt market, which can assist in generating heightened cash on cash returns from relatively suppressed property yields.

For more information on UAE real estate investment, read the Knight Frank UAE Real Estate Investment Market Report 2019

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