June 2007 VOL. 2

Foreign Exchange

Middle Eastern investors were among the most active buyers and sellers of commercial real estate in 2006. Investors from Gulf Cooperation Council (GCC) countries invested $13 billion across the globe, a 14 percent increase over 2005, according to Jones Lang LaSalle's latest Global Real Estate Capital Report.

"Gulf economies are now voracious real estate investors," says Padraig Brown, global strategy and research director at Jones Lang LaSalle. "Funds are currently investing 5 percent of the regions' current account surpluses in global real estate markets." Middle Eastern economies are buoyed by sustained high energy price levels and are estimated to achieve current account surpluses approaching $260 billion in 2007.

Additionally, Middle Eastern investors are funding almost all of the development activity taking place in their home markets, which accounts for approximately 25 percent of development activity globally, Brown notes.

Investors from United Arab Emirates, Israel and Bahrain were particularly active, and GCC investors made their largest investments in the U.S., buying $7 billion worth of commercial real estate assets including a portfolio of 21,000 apartments across the Sun Belt. These investors were also active in the UK ($4 billion), Germany ($1 billion) and South Africa ($1 billion). Additionally, investments were made in France and Sweden.

Middle Eastern investors are looking in emerging markets and searching for value-added opportunities, says Tony Horrell, CEO of Jones Lang LaSalle's International Capital Group. "GCC funds are focusing less on trophy assets and are making significant purchases in emerging markets, including the entire Cape Town waterfront development and Europe's largest shopping centre in Istanbul," he points out.

In 2006, GCC funds sold more assets than they have in the past, divesting $2 billion of real estate in both the US and the UK, a 50 percent increase over 2005.