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 second 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

MIDDLE EAST

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.
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

Focusing on the developments in the region, there is

little doubt that weaker oil pricing is having a negative
economic impact.
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 of investors expressing interest in
diversifying into the region.

WIDER GEOGRAPHIC SPREAD

LONDON 4,442

Cross-regional capital flows into global commercial real estate

increased to $125 billion in 2014, up 39% year-on-year. The Middle
East was the third largest source of capital in 2014, with $14
billion invested outside the region.

The top destinations for Middle Eastern Capital in 2014 were very 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. 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

NORTH AMERICA

66

ASIA

MIDDLE
EAST

28

US$ BILLION

US$ BILLION

WASHINGTON 481
SEOUL 472

14

MOSCOW 390

US$ BILLION

$US MILLION

LOS ANGELES 230

ATLANTA 199
MILAN 145

WHO IS INVESTING

ROME 133
AMSTERDAM 129

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

FRANKFURT 111
BARCELONA 107

$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

RISE IN SAUDI ARABIAN

CAPITAL ON GLOBAL MAP

SECTOR PREFERENCES

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

116

QATAR 4,873

In pursuit of higher returns Middle Eastern

investors are becoming more active across
a wider mix of sectors. Hotels look 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 CBREs latest 2015 Global Investor
Intentions Survey.

US$ 16.3 BILLION

8,453

1,697

SAUDI ARABIA

2,300

573

1,010

Property Company
Private

2,516

Other Collective Vehicle

1,238
1,539
1,349
1,134

Other
2015, CBRE Inc.

7,377

2,281

Sovereign Wealth Funds

Institutional Other

$US MILLION

UAE 1,626

$US MILLION

INDUSTRIAL

RESIDENTIAL

RETAIL

HOTEL

OFFICE
2015, CBRE Inc.

IN AND OUT | MIDDLE EAST

IN AND OUT | MIDDLE EAST

INCREASE IN CROSS-REGIONAL CAPITAL AND ITS 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: iryna.pylypchuk@cbre.com

Nicholas Maclean
Managing Director, Middle East
t: +971 4 437 7232
e: nicholas.maclean@cbre.com

Disclaimer
CBRE Ltd confirms that information contained herein, including projections, has been obtained from sources believed to be reliable.
While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your
responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients
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2015, CBRE Inc.