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The US commercial real estate market has become one of the most significant targets for the Middle East investors very recently. The Americas Head of Research CBRE, Spencer Levy, stated,

“The capital inflow from Middle Eastern regions sees a continuous growth, strengthening and diversifying in nature. The US is becoming a safe haven for big sovereigns; this Middle East capital flow will become stronger in the coming days.”

CBRE group also stated, around $15 billion per year at an average will be flowing out of Middle Eastern countries directly into the property market, with US being an increasing target. In the first half of 2016, $10 billion has already been pumped out into global real estate market. There has been a sharp escalation in US Investment by Sovereign Wealth Funds (SWF) especially from Qatar, UAE and few other groups.

From 2015 to 2016 (first half) – over this span of 18 months, the top destination of Middle East investment was New York City at $6.5 billion. The figure surpassed other major global markets like London ($4.7 billion), Hong Kong ($2.4 billion) and Milan ($1.3 billion). Chicago stands as the 6th largest US market for Middle East investors receiving around $364 million.

Few facts and data:

There is also diversification in the type of property that investors are purchasing over the years.

  1. 2010 – 2014: Middle Eastern investors made 53% purchases in the office sector
  2. 17% of purchases were made on hotels
  3. 2015 – Both offices and hotels were tied up. In individual sectors, purchases totalled at $8.2 billion (35%).
  4. 2015 – Industrial purchase rose from 3% (over last 5 years) to 9%. In case this strong flow of capital continues, industrial investment is likely to continue with this

Joint ventures by Middle Eastern investors:

Lower profile joint ventures have drawn investors from the Middle East in Los Angeles for tapping local expertise from partners in the US. The recent purchase of 1.7 million square foot Westside L.A. for $1.34 billion is an example of a joint venture investment. The deal was between REIT Douglas Emmett Inc. and Qatar Investment Authority; it was the largest capital expenditures from that region.

Again, this very partnership has also bought a high profile real estate for $225 million in Los Angeles. This trend of investment from the Middle East is expected to continue in the near future.

What makes the US, a major target amongst the Middle East investors are economic growth and favourable exchange rates. Recently, QIA (Qatar Investment Authority) has purchased around 10% stake in REIT that presently owns the iconic Empire State Building in New York for $622 million.

The real estate market of the United States got exposure after two notable deals –

  1. 44% of share was purchased by QIA in Manhattan West
  2. S. industrial portfolio was acquired jointly by Abu Dhabi Investment Authority and Canada Pension Plan Investment Board

Both these transactions summed up stood at more than $5 billion.

Investors are choosing different destinations in America to purchase real estate. The US cities gaining popularity in this aspect are New York, Chicago, Los Angeles, Washington D.C., Miami and Atlanta. This was declared in a statement from Global President of CBRE Capital Markets, Chris Ludeman. Hence, with all these notable reasons, the United States is indeed a leading destination for Middle East investors in the real estate sector presently.