FDI vital for GCC real estate

GCC Real Estate

The Arab world must tap into the available global investment funds if its real estate sector is to get back on its feet, according to the world's leading commercial property services adviser, CB Richard Ellis.

The global financial crisis has hit the region's real estate industry hard, with a number of large construction projects across the Middle East - particularly in Dubai and Abu Dahbi - being put on hold or even cancelled all together. Now it appears the only way for the sector to recover fully is to attract foreign direct investment.

Dh42 billion of invested

Nicholas Maclean, Executive Director of CB Richard Ellis, Middle East, told Emirates Business that Dh42 billion of invested capital had flown into the real estate sector worldwide.

"However, for the past quarter the single most beneficial recipient was East Asia. Europe is catching up quickly and we expect by the end of this year it will be a primary recipient of this new capital flowing into real estate."

He added the investment market was far from dead and that some markets around the globe are starting to gather momentum to begin investing in the real estate industry once more.

"There is a significant demand for real estate in the Arab World. However, there isn't sufficient stock to satiate that demand," said Maclean.

Cross-border investments

According to CB Richard Ellis, about one-third of all real estate investments is cross-border: "It is down by half but it still accounts for one-third. If you look at the GCC share of international real estate market in 2007 it was about 11 percent. That is income from outside of the GCC,'' said Maclean.

"In other words, the Arab World has received only about 20 percent of the total global cash flow for investments into real estate. That is not a problem but a tremendous opportunity for us.

"If we are clever about it, we can manipulate what is happening in the rest of the world to benefit for the real estate in the Arab world."

The lack of current real estate projects in the GCC region is down to a serious lack of investment, and at present this lack of investment is coupled with a shortage of end users - both vital to creating a stable real estate market.

"Investors are determined they want to invest into real estate market but they have not decided what asset class they want to invest into," said Maclean.

He added, "People are going to be flexible about the type of assets they want to buy. Also geographically they are much more flexible with respect to what they want to invest into. This is very important for the Arab World."

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