Middle Eastern sovereign wealth funds: Loving London
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Middle Eastern sovereign wealth funds: Loving London

Despite commercial property values having plummeted some 12% since the start of the credit crunch, London’s lure is still strong for some investors, particularly Middle Eastern sovereign wealth funds.

The sovereigns are coming

Sizing up sovereign investment

London has always been a prime location for investment from the Middle East. Wealthy families’ and institutional investors’ taste for West End properties is well documented. Now that values have come down, London’s allure is stronger as these investors as well as sovereign wealth funds identify opportunities to buy and invest at more attractive levels.

In May, the Kuwait Investment Authority through its London-based investment arm, St Martins Property, bought the Willis Building in the City of London from British Land for £400 million ($800 million). This transaction, one of the biggest since the credit crunch hit, is part of a trend observers of London commercial property hope will continue and even underpin the market.

Since the Willis Building transaction, talk of Middle Eastern sovereign wealth funds’ interest in the capital of the UK has increased. Reports of a consortium of Qatari investors seeking to invest up to £5 billion in UK commercial property have been rampant.

Gulf Finance House, a Bahrain-based specialist Islamic investment bank, has announced its intention to launch a Shariah-compliant UK commercial property fund. The launch of Gulf Atlantic Real Estate II grew out of GFH’s real estate fund management team’s study of the UK commercial property market, which identified a rare, cyclical buying opportunity in the UK commercial property market following significant falls in value during the past six months. The prices of many good-quality buildings have fallen by 25% from their peak and this presents astute investors with the opportunity to lock into compelling income yields, according to a GHF statement.

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