Real Estate

Investment from Gulf Cooperation Council (GCC) investors into the UK commercial property market is projected to surpass $4 billion (£3.1 billion) annually, according to new research from the Bank of London and The Middle East (BLME), a Sharia-compliant bank based in London.

The report highlights that the UK is poised for a rare economic alignment with anticipated cuts to interest rates later this year, a newly established government, falling inflation, and lower property prices in certain market segments. These factors are expected to create a favorable environment for GCC investors looking to deploy their capital. The study found that 87% of interviewees believe falling interest rates will significantly drive GCC investor appetite over the next 12 months.

After a period of uncertainty where capital remained on the sidelines, BLME anticipates a substantial surge in demand from GCC investors. The report, titled "Opening the Door: Is the UK’s property sector about to get an influx of investment from the Gulf?", identifies three key factors fueling this growth:

1. Economic Alignment: Expected interest rate cuts, falling inflation, and lower property prices increase the UK’s investment appeal.
2. Green Premium: Opportunities to enhance asset value by upgrading properties to meet environmental standards.
3. Living Sector Opportunities: Demographic shifts and a persistent undersupply of residential properties.

Rashid Khan-Gandapur, Director of Real Estate Finance at BLME, commented, “We anticipate GCC investors will diversify their portfolios by seizing profitable opportunities in the UK, including enhancing ESG credentials of existing properties. Investment in UK commercial properties is expected to grow to over $4 billion annually, further boosted by large-scale living sector investments.”

Andy Thomson, Head of Real Estate Finance and Private Banking at BLME, added, “With a stable government, the Brexit decision behind us, and a relatively stable economic and political landscape, the UK is well-positioned to attract increased investment from the GCC. Forecasted interest rate reductions and lower commercial property prices further enhance the UK’s attractiveness.”

The report also underscores the growing importance of optimizing assets, including their environmental, social, and governance (ESG) credentials, as market and regulatory pressures increase the value of sustainable buildings. Currently, there is a sales price premium of 8-18% for green-rated buildings compared to non-rated equivalents.

Looking ahead, BLME predicts that demographic trends and supply shortages will make the living sector increasingly popular with GCC investors. Purpose-built student accommodation (PBSA) is particularly attractive, with 68% of respondents indicating their clients’ focus on this sector. The UK remains a favored destination for GCC students, with a record number of UAE residents applying to British universities. According to the Higher Education Statistics Agency (HESA), over 8,000 UAE students are currently studying in the UK, nearly double the number from five years ago.

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