Global real estate market drew $225 billion+ investment last year: Savills

By Rahul Vaimal, Associate Editor
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Global real estate advisors, Savills has highlighted that on a global level, more than $225 billion worth of institutional capital was raised last year to invest in global real estate markets, with most of these funds having an inclination to procure assets across Asia, Europe and North America.

Savills was addressing some of the most prominent names in the real estate sector in the region during an exclusive webinar hosted by the industry expert to declare the launch of its Global Impacts study in the Middle East.

The third and latest edition of the report is devoted to the topic of tipping points which explores the key issues that will form the future of the real estate industry in the Middle East and beyond.

Savills took the opportunity to emphasize on key trends that will shape the future of real estate in the Middle East and beyond. It stated that modern methods of building and selection of smart building technologies will perform a pivotal role in increasing building performances in the COVID-19 era and will also decrease/assist in fighting climate change impacts.

Steven Morgan
CEO, Middle East – Savills

“Savills Impacts report is one of our flagship global studies. It comes at the right time following the global pandemic which impacted all the key sectors of the economy around the world.”

“Pandemic aside, there are other threats such as climate change, trade wars and embargoes to an ever-changing regulatory landscape that have been influencing the business landscape. Our research aims to look at how widespread economic, social, environmental and technological upheaval is changing the world of real estate,” asserted Morgan.

“As Middle East investors are navigating through a period of uncertainties, our thought leadership sheds light on asset classes that we believe will prove the most attractive opportunities for them,” he continued.

The opportunity for Middle East markets to capitalize on this ever-increasing appetite is enormous with currently $5.8 trillion worth of regional projects in the planning or in the construction phase, the Savills report stated.

Professional Services and Strategic Consultancy Head Richard Paul said: “Over the past decade, the Mena region has been a key source of capital into global real estate markets, and this trend is only set to accelerate.”

“A forecasted prolonged period of low oil price will require regional governments to continue to work on their diversification strategy, which will undoubtedly gather more momentum and see sovereign wealth and private institutions seek opportunities in other markets outside of their own,” noted Paul.

Challenges of climate change in real estate

Real estate can make a huge difference to overcome some of the concerns related to climate change. For instance, the building and construction sector contributed to 39% of carbon emissions in 2018. Sectors emissions grew by 2% from 2017 to 2018 globally. Global building stock is also set to double by 2050, as more people are anticipated to be living in cities.

Since, the Middle East, especially Saudi Arabia, UAE and Egypt is expected to witness strong growth in construction, the use of modern construction techniques and the selection of smart building technologies can open a new field of exciting opportunities for improving building performance and also on enhancing customer experience.

Possibilities with Vertical farming

Another key trend in this sector is ‘vertical farming’, also known as controlled environment agriculture (CEA), which currently tops the popularity chart of agri-tech concepts rising in the region and especially in Dubai.

Given that the UAE imports close to 85% of all its food, this technology would enable the country to become less dependent on imports and lead the way in food security and self-sufficiency.

Real estate is likely to be among the most significant beneficiary of this growing trend. Savills Dubai Industrial Report 2019 highlighted that the rise of new concepts such as ‘cloud kitchens’ and ‘vertical farming’ has had a positive influence on warehousing demand in Dubai.

Trade wars and risks associated with them 

While the world is involved in an ongoing discussion about the implications of the trade war between Washington and Beijing, the economies of the Middle East are observing rising investments from China, a move that may have long-term implications for the economic and political dynamics of the region.

Between 2014-2017, the Middle East’s total belt and road (BRI) funding was $71.1 billion, with Egypt being the largest beneficiary. In Oman, China is key to the country’s plans to expand its industrial zones and has committed to spending $10.7 billion by 2022 in Oman’s Duqm special economic zone.

China has much of what the region needs, whether through its private sector in technology-related fields, state-owned conglomerates in infrastructure and construction, or state-sponsored financing vehicles, stated Savills in its report.

We can only expect this trend of strengthening China-Mena relations to stay, especially as the BRI expands further in the region, the report appended.

Transports and innovations

Given that authorities in the region made technology and smart systems a key element of their investment plans, vehicle automation, high-speed Hyperloop capsule delivery and airborne drone transport are poised to disrupt the sector and may soon become the new normal.

Transport is the second-largest planned projects sector in the Middle East with Saudi Arabia and the UAE leading the way. As technology starts to transform how goods are disseminated and stored, real estate choices may change.

Developments in the Middle East have to future proof themselves as the region will continue to see increased investments into large scale infrastructure projects.

COVID-19 Implications

It is one of the greatest tipping points of our lifetimes and the consequences it will have on the global economy is being furiously debated.

Most forecasters acknowledge that there will be a global recession deeper than the global financial crisis (GFC) and many expect it to be the deepest since the Second World War.

The debate is around the shape of the recovery. Will there be a V-shaped rebound? Or is a U, L or W shape more likely? We’re even hearing conversations about ‘a Nike swoosh-shaped’ recovery. As countries continue to come out of their strict lockdowns but social distancing is still encouraged, the long-term impact of COVID-19 is yet to be seen. Many believe the world will emerge as a different place, stated the report.

Following the release of the Impacts report, the Savills team of experts will start engaging in the coming weeks in a series of webinar panel discussions with regional and international-based industry leaders who will deeper dig into regional-specific influences, how these are affecting real estate and our future, it said.