Real estate consultancy group CBRE has released a new report
examining Middle Eastern investment in European real estate. Over the past two
years, buyers from the region invested $5.22 billion in Europe's hotels. The UK
saw £2.72 billion of Middle Eastern money go to its hotels, followed by Italy
and France with €570 million and €566 million, respectively.
Overall, these numbers in 2015 were triple those from the same period in 2007, and and it seems likely that the trend will continue, Trade Arabia noted. In the past 24 months, notable European properties to come under Middle Eastern control include Claridge’s, The Connaught and the Berkeley in London’s Knightsbridge, as well as the Intercontinental Paris Le Grand. Qatar, meanwhile, invested $2.5 billion in Maybourne Hotels.
“While many predicted that the fall in global oil prices
would dampen the heady tempo of investment flow from net exporting regions,
Middle Eastern interest to acquire hotel assets has not abated,” the report
claimed. “This is partly due to the region’s substantial oil reserves, allowing
the respective nations to confidently continue with their allocations into
overseas real estate—at least for the short term. Medium- to long-term
investment into the aforementioned top-tier hotel assets generally rewards
owners with a high level of stability in an increasingly volatile world of
commodities and equities,” Nick Maclean, managing director, CBRE Middle East,
said.
Is Central Europe next?
Middle Eastern investors are still seeking new hotel
markets, and Central Europe may be the next region to conquer. In late 2014,
Khalaf Ahmad Al Habtoor, the chairman of the Al Habtoor Group, purchased the
InterContinental Budapest, and recently opened direct flight routes from Dubai
and Doha to Budapest may bring a new demographic to the area.
“The Parisian market is experiencing an influx of
international capital," Catherine Rawanduz, CBRE's head of hotels France,
Belgium, Luxembourg, Switzerland added. "As part of the Eurozone, Paris is
seen as a secure place for investment and is the second priority, behind
London, for international capital. We’re seeing a steady increase in interest
from Middle Eastern investors in upscale and trophy assets, with a number of
transactions taking place over the last 18 months. High net worth families and
sovereign funds from Qatar are leading the pack.”
In March 2015, Qatar Airways purchased the Sheraton Skyline
at London’s Heathrow Airport; this was followed by the purchase of the Novotel
Edinburgh Park—a mid-market operation located in close proximity from
Scotland’s busiest gateway. This may suggest that some Middle Eastern investors
are now willing to consider opportunities further along the risk curve.
And as Gulf News notes, these investors are in for the long
term. “Hotel trades achieving in excess of 700,000 per room are commonplace at
the top tier of the market and yields are eye-wateringly sharp, often too sharp
for most real estate investors to realise their required IRR (internal rate of
return. However, Middle Eastern purchasers, be it ultra high networth
individuals or sovereign wealth funds (SWF) are notoriously liquid and thus
benefit from an enviably low cost of capital combined with a long-term,
multi-generational perspective. This enables them to deploy vast swathes of
capital into the world’s most robust hotel markets and acquire assets where the
timeless appeal will almost guarantee income in perpetuity.”
