Outbound real estate investments by sovereign wealth funds from the Middle East picked up pace in 2015 with an estimated $13.6 billion worth of global acquisitions, according to research from property consultancy CBRE. In comparison outflows in 2014 were estimated to be much lesser at $4.8 billion.
Increased volume of real estate investments has come even as the governments across the Gulf have been impacted by the drop in oil prices. In its latest Middle East In and Out report, CBRE said the SWFs have been increasing their portfolio weighting to real estate even amid falling AUMs.
The report cites data from the Sovereign Wealth Fund Institute that has estimated the total AUM of Middle East SWFs to have dropped by 4 percent between March, 2015 and March, 2016. At the same time, an Invesco survey has found the proportion of sovereign investors intending to increase their real estate allocation to have increased to 67 percent at the start of 2016 from 63 percent in early 2015.
In a notable change from previous years the UK saw muted inflows from the Middle Eastern state funds. According to CBRE only $200 million worth of acquisitions were made in the country last year. Uncertainty around the eventual outcome of the EU referendum was thought to be one factor. The report cites other contributing factors including falling economic growth in the UK and portfolio rebalancing after very high UK investment in 2013-14.
A significant portion of the capital was routed to the US and Asia, particularly Hong Kong. Two major transactions totaling $5 billion were announced in US last year – Qatar Investment Authority’s purchase of a 44 percent share in Manhattan West and ADIA’s acquisition of a US industrial portfolio jointly with CPPIB. The Abu Dhabi state fund was also active in Asia with the mega acquisition of a 50 percent stake in three major Hong Kong hotels.
Total volume of outbound investments by non-SWF Middle Eastern sources of capital was also higher in comparison to 2014. After a pause in 2014, purchases by Middle Eastern investors in 2015 jumped to nearly $24 billion in 2015 across 20 different countries, the report noted. High net worth individuals and private capital were also active in 2015 acquiring another $4 billion after the $4.6 billion in 2014.