RCA Insights

The Return of the Middle East Investor?

By on July 9th, 2019

Global commercial real estate investment by players headquartered in the Middle East is on the increase in 2019 after several years of lackluster activity.

According to preliminary Real Capital Analytics data, the volume of direct cross-border acquisitions reached $8.6 billion in the first six months of 2019, 59% higher than the same period during 2018. While this activity is far from the peak flow recorded during 2015, it could represent a trend to watch for the latter half of 2019.

The activity is across a broad base of investors, whose motivations will be varied. In the first half of this year United Arab Emirates and Bahrain-based investors have deployed more capital than they did for the whole of 2018; investors from Saudi Arabia and Israel punched well above their activity levels for the first half of last year.

1907 Middle East return MAIN-01

Of the $8.6 billion spent in the first six months of 2019, one-half was invested in the United States. This share is the second highest percentage the U.S. has received from Middle East investors since Real Capital Analytics records began.

The U.K., a regular recipient of Middle East capital, got 21% of the flow; this share is well below the U.K.’s long-term average portion, but still significant given the ongoing political uncertainties facing the country. China attracted capital from Middle Eastern investors for the first time since 2012. Investors from Israel and Bahrain were behind deals worth $1.3 billion.

Israel-headquartered investors have been the most acquisitive this year: a subsidiary of the Delek Group bought a portfolio of U.S. apartments from Lone Star in May 2019, Alony Hetz bought Waterside House in London for $287 million, and Migdal Insurance participated in the purchase of Philadelphia’s BNY Mellon Center for $452 million.

ADIA, one of the largest Mid-East owners of global real estate, was in action closing on I.Magnin, a retail property in San Francisco for $250 million. The Abu Dhabi-based player is also linked to the $900 million pending deal for 330 Madison Ave in New York. Meanwhile, Kuwait’s Wafra is tied to the proposed sale of the Coca-Cola Building on New York’s 5th Ave for approximately $900 million.

Historical trends suggest that volumes in the second half of a year largely match the first, signaling that 2019 could be the strongest year for cross-border investment by Middle Eastern players since 2016. However, the trend also suggests a strengthening of interest in global real estate from the region, so full-year activity could surprise to the upside.

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Simon Mallinson

Executive Managing Director, EMEA & APAC
smallinson@rcanalytics.com

Simon Mallinson joined Real Capital Analytics in January 2013. Based in London, Simon has board level responsibility for EMEA and APAC, with a particular passion for the continued development of RCA’s industry-leading client service and capital markets analytics.

Previously, Simon was Senior Director leading European Research at Invesco Real Estate. Prior to Invesco, Simon held a number of roles with IPD (now part of MSCI) in London and the United States. As Head of US Services, based in Chicago, he established IPD’s first North American office.

Simon is a Board Member of US association NCREIF, a member of RICS and is active across a number of other global real estate associations. He holds degrees from both Leeds and Manchester University, UK. Simon has set foot in 48 U.S. states and is looking for an excuse to visit Maine and Alaska.