Gulf Cooperation Council (GCC) investors are projected to invest over $4 billion annually in the UK commercial property market, driven by favorable economic conditions, according to a new report by the Bank of London and The Middle East (BLME).
Key Drivers:
- Falling Interest Rates: The Bank of England recently cut interest rates for the first time since 2020, reducing the base rate by 0.25 percentage points to 5%. BLME’s research indicates that 87% of interviewees see declining interest rates as a key factor for increased investment.
- Lower Property Prices: Reduced property prices are enhancing the attractiveness of UK assets.
- Stable Economic and Political Landscape: The UK’s political stability and a stable economic outlook post-Brexit are contributing to the investment appeal.
- Sustainability: There’s a growing opportunity to realize a “green premium” by upgrading assets to meet environmental standards. Green-rated properties can command a sales price premium of 8-18%.
Investment Trends:
- Increased Investment in 2023: GCC investors, primarily from the UAE and Saudi Arabia, invested $2.35 billion in UK real estate in 2023.
- Living Sector Appeal: Demographic shifts and an undersupply of residential properties make the living sector attractive. Investment in purpose-built student accommodation is particularly popular, with over 8,000 UAE residents currently studying in the UK, nearly double from five years ago.
Expert Insights:
Andy Thomson, Head of Real Estate Finance and Private Banking at BLME, highlighted that the UK’s stable political landscape, coupled with forecasted interest rate drops and lower property prices, positions the UK to attract more GCC investment.
Rashid Khan-Gandapur, Director of Real Estate Finance at BLME, noted that GCC investors are diversifying their portfolios and see significant opportunities in enhancing existing building stock, especially through improvements in environmental, social, and governance (ESG) credentials. He emphasized that investments in UK commercial properties are expected to grow, bolstered by investments in the residential sector.
The report’s findings are based on an online survey conducted between April 26 and June 5, involving 16 GCC investment experts, and in-depth virtual interviews with nine of these contacts.