New research from Bank of London and The Middle East (BLME), a London-based Shariah-compliant bank, predicts that Gulf investors will increase their annual investment in UK commercial property to over $4 billion (£3.1 billion). The study indicates that the UK is poised for a decade-defining economic alignment, with anticipated interest rate cuts, a new government, declining inflation, and lower property prices in certain market segments creating a favorable environment for GCC investors.
BLME's survey of respondents revealed that 87 percent believe falling interest rates will significantly boost GCC investor interest in the next year. After a period of cautious investment, BLME anticipates a surge in demand from investors. The bank's third annual report on GCC investment in UK real estate identifies three main factors driving this trend: 1) Economic alignment with expected interest rate cuts, falling inflation, and lower property prices enhancing the UK's appeal. 2) The potential to earn a substantial 'green premium' by upgrading assets to meet new or anticipated environmental standards. 3) Opportunities in the living sector driven by demographic changes and a persistent shortage of residential properties.
Rashid Khan-Gandapur, Director of Real Estate Finance at BLME, noted that GCC investors are likely to view the UK as a key market for portfolio diversification, with opportunities to enhance and invest in existing building stock, particularly in improving environmental, social, and governance (ESG) credentials. He also highlighted the expected growth in investment, which could be further amplified by interest in the residential sector.
Andy Thomson, Head of Real Estate Finance and Private Banking at BLME, added that the UK's stable economic and political outlook, coupled with forecasted interest rate reductions and lower commercial property prices, positions the country well to attract increased investment from the GCC. The report also emphasizes the growing recognition of the importance of optimizing assets, including their ESG credentials, in response to increasing market and regulatory pressures.
Looking ahead, BLME forecasts that demographic trends and supply shortages will make the living sector, especially purpose-built student accommodation, a more attractive investment option for GCC investors. The UK continues to be a favored destination for GCC students, with a significant increase in applications from the UAE to UK universities, as evidenced by recent data from the Higher Education Statistics Agency (HESA).
