As oil prices ebb, Middle East investors double down on real estate

As oil prices continue to tank, Middle East investors are focusing on real estate outside their home to prop up their balance sheets.

According to recent data from CBRE, the value of Middle East investments in real estate outside the region spiked 64 percent to $11.5 billion in the first half of 2015, although two deals by sovereign funds accounted for nearly half this year's total, consultants CBRE wrote on Wednesday.

As Reuters points out, the splurge came despite a 44-percent drop in U.S. light crude oil prices in the 12 months to June 30.


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CBRE said sovereign wealth funds were the largest spenders, accounting  accounted for $8.3 billion of the spending in the first six months of this year—almost four times their outlay of $2.27 billion in the prior-year period.

"The size of the region's foreign investment makes the Middle East the third-largest source of cross-regional capital globally as Arab investors look for brighter investment prospects internationally," Nick Maclean, CBRE Middle East managing director, said in the statement.

Two of the bigger deals were Qatar's $2.5 billion investment in Maybourne Hotels and Abu Dhabi Investment Authority's (ADIA) $2.4-billion purchase of a 50-percent stake in three Hong Kong hotels.

In light of these deals, London, with $2.75 billion, and Hong Kong, with $2.4 billion, were the top destinations for Middle Eastern property investors. New York was third with $1.1 billion and Milan's $990 million placed it fourth.

There's no doubt that hotels top the list for Middle East investors. Hotel investments rose a whopping 437 percent to $6.75 billion—or 59 percent of total Middle East spending. By comparison, office acquisitions fell by nearly half to $1.99 billion and retail purchases dropped 40 percent to $708 million.

Other buys, which include residential property, jumped 144 percent to $1.66 billion.

"Hotels (are) growing in importance as sovereign wealth funds and high-net-worth individuals focus on real assets that generate long-term revenue," said Iryna Pylypchuk of CBRE Global Research.

Property purchases by non-sovereign wealth funds fell to $3.2 billion in the first half of 2015, from $4.7 billion a year earlier, according to Reuters calculations based on CBRE data.

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