GLOBAL - Real estate markets in the Middle East and North Africa (MENA) are missing out on global capital flows despite latent investor appetite, according to Jones Lang LaSalle (JLL).
The latest instalment of JLL's MENA Real Estate Investor Sentiment Survey highlighted a shortage of investment grade product and a "lingering price gap" between buyers and sellers of property.
For the first time the annual study has focused on understanding the perspectives of the top 30 financial institutions investing in the region.
JLL found that the amount of overseas capital allocated to investing in MENA real estate was negligible.
It also reported that local investors were seeking to increase their exposure within the region, activity was constrained by the type of product available and asset pricing that did not fully incorporate local market risks.
JLL said the MENA real estate markets had the potential to capture a much higher proportion of capital flows from both international and regional buyers.
Unlocking this potential, however, would require certain adjustments: an increase in the product available; willingness of owners to transact with greater transparency; and realistic pricing that is benchmarked against global markets.
Andrew Charlesworth, head of capital markets for the MENA region at JLL, said: "Whilst recent events have created some uncertainty across MENA, there are areas within the region, particularly the Gulf Cooperation Council, where there remains a reasonable level of demand among local investors.
"The problem is one of finding and securing the right product at a price that makes sense."
The report also indicated that investors continued to be frustrated by the lack of bank finance and the cost of financing when it was available.
Increased risk aversion was leading investors and developers to adjust their corporate strategies and focus on building stable income generating portfolios.
Even for investment grade commercial properties available in the region, institutional investors are simply not willing to purchase at yields available in mature markets like London, JLL concluded.
"Together with limited transaction activity, the custom of privately conducting local investment deals discourages international investment and inadvertently stifles recovery of the regional real estate markets," the report said.
