Gulf investors drawn to UK's commercial property

Dubai: Gulf-based investors are making their presence felt in the UK's property market this summer. They were behind the acquisition of BT's regional headquarters in Leeds through a £40.1 million (Dh224 million) deal based on Sharia.

Trowers & Hamlins had advised Gatehouse Bank, the UK-based Sharia-compliant investment bank, on the transaction. The property was purchased from LaSalle Investment Management on behalf of the Royal Mail Pension Fund, while the Sharia-compliant financing was provided by Helaba, the German bank.

"There is a real appetite among investors from the Middle East for investments in UK commercial property at the moment," said Jeremy Joiner, head of Trowers & Hamlins' commercial property department.

Student accommodation

"We recently reported that the proportion of international investment in UK commercial property from the Middle East has trebled over the last five years to £1.5 billion in 2009."

Trowers & Hamlins had earlier advised Gatehouse on two other commercial property purchases in the UK, which were two student accommodation properties bought in April for £29 million and a £32 million deal in December 2009 for Procter & Gamble's UK headquarters.

"Deals like this show that Gulf investors are increasingly interested in properties outside London and the south-east if the deal is well structured and provides an attractive return," said Joiner.

This is a view corroborated by Jonathan Hull, executive director of EMEA (Europe, Middle East and Africa) capital markets at CB Richard Ellis.

"Middle Eastern and overseas investors have been particularly prominent this year, concluding a number of large deals, including the purchase of Knightsbridge Estate in London for close to 660 million euros [Dh3.08 billion]," he said.

In fact, the real estate consultancy has recorded a 15 per cent gain in investments in commercial property across European markets during the second quarter compared to the first three months. In value terms, the second quarter totalled 23.5 billion euros against 20.3 billion euros the quarter earlier.

"Investment turnover rose despite the stress factors emerging in the broader capital markets, such as the sovereign debt crisis and the introduction of austerity measures by many European governments," CBRE said in the report.

The top end of the market recorded significant transactional activity — "As property investors' concerns over issues of sovereign debt grew during the second quarter of 2010, the flight to quality seems to have intensified even further."

The UK, France and Germany were the biggest beneficiaries of this sentiment, with France recording the highest growth among the three by pulling out a quarter-on-quarter increase of 46 per cent.

Nordic region in demand

Of the 27 markets covered by CB Richard Ellis, some of the smaller European countries — such as Austria, Ireland and the Czech Republic, reported the highest quarterly increases, though from a lower base. Also, while not yet fully reflected in the level of the actual deals closed, Poland and the Nordic region — Sweden in particular, are starting to emerge as a focus of strong investor demand.