Middle Eastern investor sentiment towards indirect real estate is waning as sovereign wealth funds look to prioritize direct transactions instead, according property services firm Jones Lang LaSalle.
Fadi Moussali, regional director in the firm’s capital markets team, told PERE at the MIPIM conference in Cannes today, that going forward, general partners should expect fewer and smaller commitments from Middle Eastern investors towards property funds, seeking instead to manage their own capital outlays.
Moussali said Qatar, Abu Dhabi and Kuwait were among those countries expected to reduce their commitments following the decline in petro dollar surpluses coupled with the wider global economic turmoil. Moussali said: “They are saying ‘why should I give my money to someone else to loose it. I’d rather loose it myself.”
Moussali said that both direct and indirect investor sentiment has been severely hit by factors including the collapse of Lehman Brothers, the deflation of prices of real estate in Dubai (by 50 percent on average in the past six months) and falling currency valuations. As a result Middle Eastern governments have requested that their fund managers take more control on the investments they make.
He said funds managed by investment banks were most likely to see fewer commitments from Middle Eastern investors as these had not performed as well as they would have liked.
Chris Brett, European director of Jones Lang LaSalle, added: “We are feeling a sea change from the clients we are speaking to. They want to invest instead in joint ventures and portfolios as opposed to writing a check for a fund.”