Where Middle East real estate investors see opportunities in Europe
As Middle East investors seek property investment opportunities in Europe, offices developments and office refurbishments continue to be among their best choices, according to the latest investor report by property advisor Savills.
Other asset classes attracting Middle East interest include hospitality, the private rented sector (PRS), student housing and care homes, as investors focus on rental growth, developing or re-positioning properties and locations, as well as long-term income from traditional property and alternatives.
Top cities for prime central business district (CBD) offices include Amsterdam, Athens, Brussels, Copenhagen, Lisbon, London, Luxembourg, Milan, Oslo, Paris, Prague and popular German, Polish, Swedish and Spanish cities, the report showed.
Investors looking for value-add opportunities could consider private rented sector and retail in regional cities in Austria and Dublin, as well as office refurbishments in the suburbs of Brussels, Paris and Prague, according to Lydia Brissy, director of European research at Savills.
Other opportunities exist in the care home sector in Denmark, in the logistics and retail parks in Poland and Sweden, in prime high street refurbishment in Milan and Oslo, in hospitality in Greece and in student housing in Amsterdam.
Brissy also recommends investment in redevelopment in cities with strong hubs of innovation, such as Lisbon, London, Paris, Amsterdam, Berlin, Bucharest, Frankfurt, Barcelona, Copenhagen, Stockholm and Dublin.
European real estate remains an attractive investment as the region boasts a growing economy, low unemployment and healthy occupier demand for traditional and alternative property.
The Savills report shows the spread between the average 10 year bond yield and the prime office yield standing at 248bps (Q2 18) compared to 180bps in 2008 and a 10-year average of 237bps.
Increase of 80%
In strong markets, the number of underbidders for large deals exceeding €500m generally range between three and five, and between 10 and 15 for smaller investments of €100m and under.
Savills expects Ireland, Poland, Portugal and Greece to achieve strong annual increases of around 80% from Q1-Q3 this year.
Despite a 2017 dip in global property investment from the Middle East, due to lower oil prices and less favourable exchange rates, regional investors are beginning to put their money back in Europe.
Saudi Arabian asset management firm SEDCO Capital acquired three properties worth $179.9m across France and the UK recently, while Sidra Capital invested in 17 UK real estate projects over the past six years, including the $121.4m purchase of Weston House office complex in London’s High Holborn area.
Moreover, since June 2017, Bahrain’s Investcorp acquired UK and European real estate assets totalling over $322 million, including the acquisition of five industrial units in Scotland worth $14.8 million and an office campus in Frankfurt valued at $100 million.
UAE capital is also flowing into the UK, where Abu Dhabi Islamic Bank in June structured a Sharia-compliant transaction on behalf of an Abu Dhabi-based private banking client to finance the $32.2 million acquisition of Lateral House in the English city of Leeds. Earlier this year, Gulf Islamic Investments bought commercial office space in Aberdeen totalling $60 million.