Trowers & Hamlins

• 16 % of foreign investment in 2009 from the Middle East
• Gulf investors invest nearly £3bn in UK commercial property in two years following the credit crunch

The proportion of international investment in the UK commercial property market from the Middle East has trebled over the last five years, says international law firm Trowers & Hamlins LLP.

According to data produced for Trowers & Hamlins by DTZ, the international property consultancy, the Middle East accounted for 16% of all foreign investment in UK commercial property last year (to Dec 31), three times more than five years ago when it was only 5%.

Middle East investors invested £1,476m in UK commercial property last year, more than twice as much as five years ago (£723m).  Total foreign investment in 2009 was £9,459m. (full results below)

Trowers & Hamlins says that Gulf based investors used the fall in commercial property prices following the credit crunch to increase their exposure to UK commercial property.

Nicholas Edmondes, Partner at Trowers & Hamlins, comments: “Gulf based investors have already made some really attractive profits from investments made at the bottom of the market.  Unlike investment funds, most of them have not faced significant problems with redemptions or, like property companies, needed to sell their assets to pay down debt.”

“Because they have more cash behind them, Gulf based investors have been able to buy when others have been frozen out of the market by their inability to get funding from their banks.”

Trowers & Hamlins points out that the Middle East has benefited from recovering oil prices which means they have a renewed surge in petrodollars to invest.  The UK is particularly attractive because sterling has devalued significantly against the dollar, falling from pre credit crunch highs of over $2 to lows of below $1.4 in 2009.

Nicholas Edmondes comments: “The UK has always been an important market for Middle East investors, so when the fundamentals are right, investors from the region are often keen to buy attractive properties.”

Nicholas Edmondes points out that the UK property market is attractive to Middle East investors because it is liquid, secure, carries few political risks and it is very easy to set up Shari’ah compliant investment funds.”

“We have received a lot of enquiries from the Gulf recently about investing in the UK and many new funds are being set up.  If the UK’s economy shows continued signs of recovery and avoids a double dip recession the UK commercial property market could see more Gulf investment.”

Examples of deals

Trowers & Hamlins explains that investors from the Middle East include both sovereign wealth funds and private investors.  Some of the major deals from last year include:

• State of Oman bought a 75% stake in Bishops Square development in the City of London for £334m
• Gulf based investors Cavendish bought a £200m stake in Meadowhall shopping centre in Yorkshire
• Middle East investor acquired a Moor Lane office in the City of London for £127m

* Trowers & Hamlins/DTZ Research, Property Data