London, Asharq Al-Awsat – With the fabulous events of this summer now complete the business cycle continues. Investment has been a theme of my recent articles and opportunities are accelerating in Great Britain. However it is not a one way process. Immediately before preparing this week’s article I accepted an invitation to speak at the 2012 International Real Estate Finance (IREF) Summit which is being held again this year in London. I will speak on a panel discussion on the Saudi Arabian Real Estate Market and looking at transforming the future of real estate investment in the Saudi Arabia. It will be good to talk on this subject to an audience in London as I am more often asked to speak on this subject in Jeddah or Riyadh.
Investment into Britain by Middle East investors is often based around real estate, but inward investment from other emerging economies, especially China, is in the high technology sectors such as information and communications technologies (ICT). Britain’s world class universities and their science parks in which research is commercialised have produced one of the best workforces in the world. Highly skilled British workers attract high tech companies who need high quality premises to develop and export their technology. There is a virtuous circle here.
Last week China’s telecom equipment giant Huawei Technologies announced that it plans to invest £1.3 billion ($2 billion) to expand its operations in Britain in the next five years and is expected to create up to 700 new jobs. Huawei’s Chief Executive Ren Zhengfei revealed the investment plan on Tuesday when he met British Prime Minister David Cameron. He confirmed that the decision was made easier as Britain is an open market, which welcomes overseas investment and that Britain is one of the most important European markets in which Huawei has invested. Ren said, “Britain is a centre of innovation, has a highly skilled workforce, and is respected internationally for the quality of its legal and educational systems. It is for these reasons we have selected Great Britain as the location for a number of our centres of excellence.”
Prime Minister Cameron said the investment demonstrated that Britain is open for business.
Another major Chinese investment in Britain in the ICT sector is from AsiaInfo-Linkage. AsiaInfo-Linkage is a leading provider of telecommunications software solutions and related services. It has opened its Europe, Middle East and Africa (EMEA) HQ at Vision Park and is hoping to move early next year to a flagship building, possibly on Cambridge Science Park.
President and Chief Executive Officer Steve Zhang announced that the opening of the new EMEA headquarters is another major step in the company’s international expansion efforts. The plan is to leverage the technical knowledge and experience in serving China’s three telecom carriers, as well as experience serving carriers in Southeast Asia, to provide the EMEA market with world-class products and services.
The Company plans to hire locally-based sales, professional services, and customer support staff for the EMEA region through 2012. I will be meeting their management team in the next few weeks to talk about their entry into Middle East markets and how my company can assist.
Middle East investment into Britain has been visibly ramped up over the past five years with sovereign wealth funds from Qatar and Abu Dhabi taking a leading role in driving this trend. The acquisition of major shareholdings within household names such as Sainsbury’s and Barclays preceded more recent forays into prime Central London real estate.
As I mentioned in last week’s article, asset purchases have included the London 2012 Olympic Village which was bought in a deal between Delancey Estates Plc and Qatari Diar. The Shell Centre development site close to Waterloo Station was acquired in a 50:50 venture between Canary Wharf Group and Qatari Diar. This followed other equally high profile acquisitions such as the luxury department store Harrods, the Credit Suisse headquarters at One Cabot Square and the world’s most expensive apartment block at 1 Hyde Park. One of the latest deals has seen Abu Dhabi Investment Authority (ADIA), the world’s largest SWF, take a stake in Gatwick Airport as infrastructure investments by these vehicles continues to grow.
I drew attention to London becoming a hub of innovation and therefore a hotbed of investment and growth. This is especially the case in the monumental regeneration programmes that are taking place in the east of London. These follow the astonishing success of the redevelopment of the former London docks into one of the premier financial and business district in the world. And of course the world famous ExCeL London, the international exhibition and convention centre in London Docklands, is owned by Abu Dhabi National Exhibitions Company (ADNEC).
The US web giant Amazon is opening a new research centre in East London’s Tech City – Britain’s answer to Silicon Valley. The digital media development centre will employ hundreds of people and focus on ways to transform how we watch TV. The multi-billion dollar company joins a growing number of technology firms in the East End, as digital industries become an increasingly large part of the UK economy. The sector generates £86bn every year, around 11% of Britain’s GDP. For the managing director of the Amazon centre, Paula Byrne, London was seen as an attractive place to invest. The talent pool that we have around here is terrific,” she said.
This again offers opportunities for Middle East investors as the real estate market expands. This is not development based on a largely speculative market as we have seen many countries, but an extension of an already mature and sophisticated real estate market with high quality tenants and robust long term institutional leases. The Middle East is increasingly becoming a source of strong and growing demand in the real estate markets of Great Britain. The low value of Sterling is a key driver for this trend. Since the middle of 2007 sterling has fallen significantly against the Saudi Arabian Riyal, for example, reaching a period low of 30 per cent during the first quarter 2009 before rebounding slightly to its current level of 24 per cent.
In effect Britain has become a focal point for global inward investment in Europe and a place for many international businesses to establish their research centres and their operational offices for Europe and also for the Middle East.
There is the making of a virtuous circle here with high-tech international companies locating in Britain and needing high quality real estate; some of these high-tech companies are using Britain as the springboard for expansion into the Middle East; Middle East investors are continuing to provide office and other facilities to companies locating in Britain.
British – Middle Eastern cooperation continues to provide a virtuous circle.