Real Estate of Mind

In this Real Estate of Mind briefing, we draw on our experience advising investors, asset managers and lenders, as well as discussions with market participants across the GCC, the UK and Europe, to share some of the trends and issues shaping investment decisions.

GCC asset managers continue to deploy capital into real estate, both at home and abroad. Since late 2021, rising interest rates have led investors to consider different forms of real estate exposure, including real estate private credit. 

The saying “any turkey can fly in a hurricane” applied in a low interest rate environment, and investors who did not buy well in the last real estate cycle have fared poorly as interest rates have risen.

Identifying the right asset exposure, with predictable returns and downside protection, has become increasingly difficult.

Our insights

UK and European Perspective

Direct ownership of real estate

Direct ownership in the UK and Europe has become harder to justify. Cash on cash returns of 7 to 9%, the benchmark for many GCC investors, have been difficult to achieve since interest rates began rising in 2021. 

Higher borrowing costs have compressed returns in many sectors. Returns previously achievable through core real estate now often require exposure to higher-risk assets or strategies, which many investors view as unattractive on a risk-adjusted basis.

As a result, many asset managers deploying GCC investor capital have stepped back from pursuing traditional direct acquisitions and are increasingly exploring alternative real estate strategies. 

The shift toward senior secured lending in the UK

Instead of owning real estate, some GCC asset managers have shifted towards lending to owners of UK commercial real estate. Senior secured loans offer predictable income, downside protection, and a clearer path to meeting investor return hurdles. 

However, the market is highly competitive and sourcing transactions that deliver predictable returns remains a challenge. 

The opportunity is attractive, but manager selection remains critical.

Selective direct acquisitions continue — but only in niche segments 

 For the UK and Europe, GCC investors continue to pursue direct acquisitions where there is a clear value creation opportunity, such as Greenfield sites with the potential for planning gain, especially for build‑to‑rent (BTR) strategies.

Healthcare real estate also remains attractive, particularly where assets are acquired and leased to operators on long‑term, inflation‑linked terms.

The Global Perspective

Allocations to global real estate funds have slowed

Prior to the recent period of market volatility, we saw strong interest in global (particularly the US) real estate funds. 
More recently, most managers have adopted a wait‑and‑see stance, reassessing risk and timing.

The GCC Perspective

Demand for Logistics, Data Centres and Build-to-Rent Assets Remains Strong
Demand continues for logistics, data centres and build-to-rent assets. These sectors continue to benefit from long-term demographic and structural trends.

Private credit real estate remains a developing story

 Private credit real estate remains a developing story. Prior to recent market volatility, there was a growing appetite for real estate private credit, particularly in the UAE. We are currently watching closely to see how existing deals perform. If developers face short-term liquidity constraints, private credit providers may find opportunities to provide alternative sources of capital.

UAE valuations: Looking beyond the cycle 
A correction was always coming. The only unknowns were the timing and the catalyst. We expect selective buying opportunities to emerge, rather than a broad‑based and sustained decline in property prices.

Saudi Arabia

 In Saudi Arabia, activity remains strong, supported by government-led development and Vision 2030 initiatives, with opportunities primarily driven by large-scale projects and partnerships with local sponsors.

Concluding remarks

GCC investors remain active. Direct ownership is no longer the default position. Rather, investors are increasingly exploring lending strategies and selective development opportunities. It takes a skilled asset manager to generate competitive returns in an environment with elevated interest rates and geopolitical uncertainty.