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Strong growth of GCC economies fuels global real estate investments

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With economies in the Gulf Cooperation Council (GCC) expected to be relative global outperformers in 2022 and 2023, regional investors' appetite for global real estate investment opportunities is likely to grow, according to JLL’s latest ‘The Resurgence of Outbound Real Estate Investment from the GCC’ report.

The challenges posed by spiraling inflation, elevated energy costs, and hawkish monetary policy are impacting investor sentiment globally. This is not only triggering delayed decision-making but also weakening liquidity in international real estate markets, further painting an uncertain global outlook.

However, the Middle East, in particular the GCC, is bucking this trend, as the region's relatively robust economic conditions have helped strengthen market confidence as well as enhance appetite for discounted investment opportunities abroad.

In addition, the strong recovery in oil prices from mid-2020 has also served as an impetus for increased consumer confidence and buoyant investor sentiment in the region, leading to higher levels of capital being deployed into international real estate.

Fadi Moussalli, Executive Director, International Capital Coverage (ICC), said: “While the healthy momentum of global real estate investment by GCC’s state-owned entities and sovereign wealth funds will continue in the near-term, in all probability, they will proceed with caution and selectivity. Although oil prices have seen a partial reversal in recent months, they remain elevated in comparison to recent history and are unlikely to significantly impact investor confidence in the region. Therefore, the willingness of investors to take advantage of discounted buying opportunities will continue to emerge in the face of the uncertain economic outlook in Europe and the U.S. and moderated competition in bidding.” Looking ahead, shifts to portfolio strategies in favor of new economic sectors are anticipated. While the office and hotel sectors have governed preferences in the past in cities such as London, Paris, and New York, there has been a shift to higher-growth sectors such as living and logistics. These, in aggregate, account for more than 40% of global investments over the past two years. Investors are also increasingly focused on alternative sectors such as data centers and healthcare assets, a sign of a departure from last-decade strategies. Recent efforts to diversify portfolios are in line with broader themes which were also amplified during the pandemic.

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