By Bik Bhuptani, Co-Founder of Greenridge.
For investors looking to diversify their portfolios with lucrative, income-generating properties, the UK’s economic climate presents a well-timed and highly compelling proposition
Global real estate has become an increasingly attractive asset class over recent years as a hedge against inflation and its ability to deliver stability and relative cash flow predictability. Real estate can create diversification and balance across a portfolio within the context of volatile indices, uncertainty in bond markets, and geopolitical unrest. For many international investors, the United Kingdom’s prevailing economic climate has created fertile ground and widespread opportunities for income-producing commercial properties at competitive values.
Despite the country’s economic uncertainties, analysis from the Bank of London and the Middle East suggests that GCC investors are likely to invest $3.2 billion in UK real estate in 2024. This appetite for UK real estate is driven by lower asset prices and favourable exchange rates – a drop in the value of Sterling against the Dollar in 2024 will make the country’s commercial real estate sector more affordable for international investors.
In the face of Britain’s economic uncertainties, many investors are encouraged by the UK’s well-regulated free market economy, historic diplomatic ties, and bilateral agreements with Gulf countries. Financial synergies between the GCC and the UK stretch back decades, predating the birth of many GCC countries.
The UK has always played a leading role in the development of several of the region’s financial centres, with Britain’s Eastern Bank being granted a licence in Bahrain as far back as 1918. The bank later became Standard Chartered, one of the GCC’s largest financial institutions. Similarly, the British bank HSBC has been in the GCC since 1944.
Fast-forward to post-Brexit ‘global Britain’ and bilateral trade between the GCC and UK reached a record $40.88 billion in 2020 alone, and the UK and GCC are currently negotiating a free trade agreement. The most recent talks took place in July 2023, and a draft treaty has been developed.
Rock solid foundations
Building upon many decades of mutual trade and inherent diplomatic trust, GCC investors are well-primed to explore and take advantage of the UK’s prevailing economic climate. Many property owners are being forced to divest, challenged by high inflation, escalating debt costs, and higher domestic taxes. Many institutions face redemption and liquidity issues, and lenders are exerting growing pressure on borrowers. This represents a rare moment for GCC investors to access high-income-producing premium UK commercial properties at highly competitive rates.
The promise of growth is already resonating with many international investors, as demonstrated by Greenridge. In October, the company – which has a track record of counter-cyclical investment strategies – completed the first round of capital raise of its $190 million Greenridge Opportunities fund targeting the acquisition of high-quality commercial assets in the UK. Surpassing its first capital raise target by 46%, more than 80% of the fund’s total commitment came from GCC investors.
The anticipated growth represents a win-win for the UK real estate market and investors. With an established presence in Dubai, Greenridge bridges the best of both worlds, capitalising on the UK’s property market while understanding the nuances and expectations of GCC investors. The company has already completed its first acquisition of a prime asset through the deployment of the fund capital. It has a strong pipeline of institutional-grade assets available at discounted prices from which to select its next acquisition.
Investors taking advantage of the UK’s current economic conditions can look forward to steady growth in the mid-term as the country’s economic recovery gathers pace and UK institutional entities and investors begin to re-engage with the market. Unlike several of its EU neighbours (notably Germany, the bloc’s largest economy), the UK has so far avoided recession.
Furthermore, the country’s Office for National Statistics revised its estimate of the size of Britain’s economy, suggesting that the economy was already 0.6% larger than its pre-pandemic size in the final quarter of 2021. This news represented a significant revision to previous reports that Britain had not returned to pre-pandemic growth.
As the UK’s economy gathers pace, investors can enter the country’s real estate market in a variety of ways – including the emerging trend of co-investing, which allows investors to take a share of a real estate investment – potentially larger deals that they might not be able to afford on their own – and with shared risk. The approach also allows investors to benefit from commercial real estate investments without the complexity of full asset ownership. Such an approach helps to ensure mutual benefits for investors and real estate entities alike.
Now is the perfect time for many international investors looking to evaluate UK real estate opportunities. Thanks to the growing diplomatic and economic ties between the UK and GCC – which coincide with a rare set of economic conditions within the UK market – now is the time for Middle Eastern investors to seize the moment and explore the vast potential of the UK market.
The original version of this article was featured in CNN Business Arabic.