Investors have money to spend on property in the Middle East and North Africa, but a lack of good opportunities at reasonable prices spells more stagnation for the region's markets, according to a survey by Jones Lang LaSalle.
Almost three quarters of large institutional investors surveyed said they planned to invest in property in the Middle East and North Africa (Mena) in the next year, while only 8 per cent said they were looking to sell.
Yet the property consultancy predicted that transactions would be limited by political instability, concerns about oversupplied markets and a dearth of solid investment opportunities.
"They can't find the product they want at a price that makes sense," said Andrew Charlesworth, the head of capital markets for Jones Lang LaSalle in the Mena region. "They're keen to invest, but not at any cost. Pricing is everything and risk is everything."
While regional funds were focused on investing at home, he said, international investors were looking increasingly to developed markets, where they could see better returns.
That means the Mena region is "missing out on foreign institutional investment", according to the report.
Unrest in the region is among the top concerns for investors, the report says.
The central issue, however, is that investors are focusing on stable, income-generating assets, but finding such properties is a challenge.
Investors want to buy office buildings and industrial complexes in good locations, and occupied by tenants on long-term leases. But such opportunities are rare after a property boom that was characterised by shorter leases and a focus on construction rather than stable income from rentals.
"There is a shortage of commercial assets in prime locations with high occupancy and strong tenant covenants and, more importantly, owners rarely want to dispose of such assets," the report says.
In the UAE's office market, another concern is persistent oversupply. Numerous office buildings are nearing completion in Dubai, creating a risk of further price declines. Overall, respondents to the survey expected property prices to go down in the coming year. The highest declines were expected in Abu Dhabi, while Dubai was expected to stabilise.
That assessment comes as views about the UAE's property market begin to shift from negative to positive. Analysts at CB Richard Ellis, another property consultancy, said recently that a better economic outlook in Dubai would probably "result in improved demand levels as the year progresses". While the consultancy predicted residential rents in the emirate would fall by 8 to 12 per cent this year, it cited a "more stable outlook" for well-developed districts.
Jones Lang LaSalle, meanwhile, said in its report that Dubai had "already surpassed the supply peak".
Matthew Green, the head of research and consultancy at CB Richard Ellis in Dubai, agreed with Jones Lang LaSalle that investors in commercial property were "looking at prime assets that have a long-term future". Overall, he said, the pain caused by oversupply in the UAE continued but the future was looking increasingly less bleak.
"There is still a lot of supply to come on, but we're not producing the same numbers we were during the peak," he said. "It's too early to see any kind of real improvement, though certain areas are starting to pick up a little bit."