Everyone has an opinion about Dubai Real Estate, what's yours about?
There is no right or wrong answer to real estate, it is about science and art, subjectivity, gut-feel and most importantly experience. Our Consultancy Services team comprises specialised and economists qualified Chartered Surveyors. We look specifically at the real estate market, treating it as a tangible investment asset class while at the same time appreciating that to many people, real estate can also carry emotional value. What sets us apart is that we are supported by a very high quality of information and primary data, a diversity of experience, and a client base of excellent calibre.
What is your near term outlook for the Dubai real estate sector?
In Dubai terminology, the near-term is defined as a matter of 6-12 months. In that case the outlook of Dubai's real estate market looks strong. Looking beyond into the medium terms (one to three years), with significant amounts of supply released in late 2007 and into 2008 we anticipate a correction to residential apartment rents across the city. Although some areas will perform better than the others, many high-end units are being constructed speculatively, with little end-user consideration - and that is always risky.
Demand for suitable office space currently outpaces supply. There are plenty of new companies, as well as those looking for a Mid-East foothold. In the near-term they will continue to find it difficult to source Grade A space for their business needs. Their searches will become much easier as office property construction programmes, many of which are facing completion delays, deliver new stock to the market.
What is your long term outlook for the Dubai real estate sector?
In the long-term, we are bullish about Dubai's real estate sector, since it appears that all of the right steps are being taken to support the current construction boom with strong economic and demographic fundamentals. The Dubai Government is progressive and catalyses growth. Retail and hospitality facilities are best-in class, and the money-multiplier effect that we are observing means of their income to their country of origin. Dubai now offers products, services, lifestyles and investment opportunities en par with an expatriates home country. The result is that a much larger proportion of residents' disposable income is spent locally which contributes to a thriving economy, sustainable economy.
But it is much more difficult to assess the longer term outlook of Dubai's real estate sector given the pace of development. Dubai has surprised sceptics with its ability to maintain strong revenue growth across all economic sectors. With the introduction of a Government- implemented residential rental cap taking effect at the beginning of 2007, it remains to be seen how developers react to this artificial construct when to date landlords and developers have been able to raise rents with relative impunity. It is anticipated that the office sector will continue to benefit from economic levers available at the Government's disposal, while the hospitality and retail sectors will benefit from heavy investment into world-class facilities (Dubai Mall, Palm Jumeirah, etc.) In addition, the continued growth of Emirates Airlines as an "enabler" to opening up the Dubai market to the masses will help drive its real estate sector.
Overall, success breeds success: Dubai's first-mover advantage of creating a business friendly, commercial hub in the region with relatively few barriers to entry enables it to be the "de facto" choice of regional and multinational organizations.
Has the market slowed down?
There has been evidence that some residential units in weaker developments are remaining on the market for longer periods of time than has historically been the case. We certainly know of cases where developers are remaining on the market for longer periods of time than has historically been the case. We certainly know of cases where developers have become more competitive in order to finance their development cash flows through off-plan sales.
Do you envisage a crash?
The Dubai market is a very unique case, with no real comparable cities to benchmark against. We believe that both the rents and prices are presently inflated, more so in weaker development and locations across the main real estate sectors. We also expect to see significant shifts in landlord behaviour as their market becomes increasingly competitive with the introduction of a staggering number of developments that are to complete within the coming 36 months. However Dubai's economic and demographic growth strategies appear well suited to be able to support the long-term real estate situation.
Is there anything that can be done by investors to reduce their market risk exposure?
Absolutely. The speculative nature of much of Dubai's development and investment activities has led to the emergence of some virgin niche territories within the Dubai real estate environment. Our strengths as professional real estate consultants has been in identifying our clients' risk in full, as well as the niches for which they are optimally positioned, and synergizing these opportunities with their unique objectives and constraints. Dubai is full of real estate investment opportunities at the moment, they are just more sophisticated than they have been to date.
Will demand continue to outstrip supply?
No.
RESIDENTIAL: Colliers has identified a high risk of oversupply within the high-end apartment segment of the residential market segment. We forecast the average annual market demand to be outstripped by new supply within the coming 12-18 months, having allowed for sustained population growth rates, and a reduction in cohabitant trends.
OFFICE: We model market supply and demand on a macro-market basis, and can expect more than 300% growth in office net leasable area by the end of 2009. There are certainly office developments that are outstanding, that are and will perform very well despite oversupplied market conditions. However there are numerous projects that are currently being built entirely speculatively, with no strong support from end-users to sustain them in the long-term. The rush to erect office buildings quickly has meant that few investment grade commercial real estate assets are actually available in the market for international funds and REIT's to acquire. We are expecting the off-plan sale of office space to introduce numerous complications for landlords and tenants alike, as the drawbacks of strata ownership title arise at the operational stage of a property's life.
Is the type of investor entering the market changing?
Although we continue to see wealthy, individual speculative investors participating in the market, particularly investing in off-plan office and residential product, there is increased interest from global institutional investors and investment vehicles, looking for attractive plays. These more sophisticated investors, who look for longer-term opportunities in specific property sectors with strong fundamentals, demand, demand well-overdue transparency, as well as a quality of build that is not being presently met. Until that time many of them appear happy to play the waiting game.
Is there an increase in foreign investment?
Yes and no.
As a geographic hub for the Middle East and North Africa (MENA) region, bridging east and west, Dubai has carved out an excellent reputation as the destination of choice for many regional investors. However the more risk-averse investment money has been noticeably avoiding the Dubai real estate scene for two reasons: the lack of investment grade properties, and the uncertainties inherent with the future of emergent, fast-growing markets.
How can the Dubai market achieve further growth?
We project considerable growth in the mid-income residential segment. As Dubai obtains critical mass in a number of property sectors, growth will be achieved through catering to more niche markets, under served segments, and operational strategies. For example, we cannot stress enough how intangibly profitable it can be to incorporate components of social value into development schemes.
By: Mr. Eamon Alashkar
Associate Director - Consultancy Services
Colliers International
There is no right or wrong answer to real estate, it is about science and art, subjectivity, gut-feel and most importantly experience. Our Consultancy Services team comprises specialised and economists qualified Chartered Surveyors. We look specifically at the real estate market, treating it as a tangible investment asset class while at the same time appreciating that to many people, real estate can also carry emotional value. What sets us apart is that we are supported by a very high quality of information and primary data, a diversity of experience, and a client base of excellent calibre.
What is your near term outlook for the Dubai real estate sector?
In Dubai terminology, the near-term is defined as a matter of 6-12 months. In that case the outlook of Dubai's real estate market looks strong. Looking beyond into the medium terms (one to three years), with significant amounts of supply released in late 2007 and into 2008 we anticipate a correction to residential apartment rents across the city. Although some areas will perform better than the others, many high-end units are being constructed speculatively, with little end-user consideration - and that is always risky.
Demand for suitable office space currently outpaces supply. There are plenty of new companies, as well as those looking for a Mid-East foothold. In the near-term they will continue to find it difficult to source Grade A space for their business needs. Their searches will become much easier as office property construction programmes, many of which are facing completion delays, deliver new stock to the market.
What is your long term outlook for the Dubai real estate sector?
In the long-term, we are bullish about Dubai's real estate sector, since it appears that all of the right steps are being taken to support the current construction boom with strong economic and demographic fundamentals. The Dubai Government is progressive and catalyses growth. Retail and hospitality facilities are best-in class, and the money-multiplier effect that we are observing means of their income to their country of origin. Dubai now offers products, services, lifestyles and investment opportunities en par with an expatriates home country. The result is that a much larger proportion of residents' disposable income is spent locally which contributes to a thriving economy, sustainable economy.
But it is much more difficult to assess the longer term outlook of Dubai's real estate sector given the pace of development. Dubai has surprised sceptics with its ability to maintain strong revenue growth across all economic sectors. With the introduction of a Government- implemented residential rental cap taking effect at the beginning of 2007, it remains to be seen how developers react to this artificial construct when to date landlords and developers have been able to raise rents with relative impunity. It is anticipated that the office sector will continue to benefit from economic levers available at the Government's disposal, while the hospitality and retail sectors will benefit from heavy investment into world-class facilities (Dubai Mall, Palm Jumeirah, etc.) In addition, the continued growth of Emirates Airlines as an "enabler" to opening up the Dubai market to the masses will help drive its real estate sector.
Overall, success breeds success: Dubai's first-mover advantage of creating a business friendly, commercial hub in the region with relatively few barriers to entry enables it to be the "de facto" choice of regional and multinational organizations.
Has the market slowed down?
There has been evidence that some residential units in weaker developments are remaining on the market for longer periods of time than has historically been the case. We certainly know of cases where developers are remaining on the market for longer periods of time than has historically been the case. We certainly know of cases where developers have become more competitive in order to finance their development cash flows through off-plan sales.
Do you envisage a crash?
The Dubai market is a very unique case, with no real comparable cities to benchmark against. We believe that both the rents and prices are presently inflated, more so in weaker development and locations across the main real estate sectors. We also expect to see significant shifts in landlord behaviour as their market becomes increasingly competitive with the introduction of a staggering number of developments that are to complete within the coming 36 months. However Dubai's economic and demographic growth strategies appear well suited to be able to support the long-term real estate situation.
Is there anything that can be done by investors to reduce their market risk exposure?
Absolutely. The speculative nature of much of Dubai's development and investment activities has led to the emergence of some virgin niche territories within the Dubai real estate environment. Our strengths as professional real estate consultants has been in identifying our clients' risk in full, as well as the niches for which they are optimally positioned, and synergizing these opportunities with their unique objectives and constraints. Dubai is full of real estate investment opportunities at the moment, they are just more sophisticated than they have been to date.
Will demand continue to outstrip supply?
No.
RESIDENTIAL: Colliers has identified a high risk of oversupply within the high-end apartment segment of the residential market segment. We forecast the average annual market demand to be outstripped by new supply within the coming 12-18 months, having allowed for sustained population growth rates, and a reduction in cohabitant trends.
OFFICE: We model market supply and demand on a macro-market basis, and can expect more than 300% growth in office net leasable area by the end of 2009. There are certainly office developments that are outstanding, that are and will perform very well despite oversupplied market conditions. However there are numerous projects that are currently being built entirely speculatively, with no strong support from end-users to sustain them in the long-term. The rush to erect office buildings quickly has meant that few investment grade commercial real estate assets are actually available in the market for international funds and REIT's to acquire. We are expecting the off-plan sale of office space to introduce numerous complications for landlords and tenants alike, as the drawbacks of strata ownership title arise at the operational stage of a property's life.
Is the type of investor entering the market changing?
Although we continue to see wealthy, individual speculative investors participating in the market, particularly investing in off-plan office and residential product, there is increased interest from global institutional investors and investment vehicles, looking for attractive plays. These more sophisticated investors, who look for longer-term opportunities in specific property sectors with strong fundamentals, demand, demand well-overdue transparency, as well as a quality of build that is not being presently met. Until that time many of them appear happy to play the waiting game.
Is there an increase in foreign investment?
Yes and no.
As a geographic hub for the Middle East and North Africa (MENA) region, bridging east and west, Dubai has carved out an excellent reputation as the destination of choice for many regional investors. However the more risk-averse investment money has been noticeably avoiding the Dubai real estate scene for two reasons: the lack of investment grade properties, and the uncertainties inherent with the future of emergent, fast-growing markets.
How can the Dubai market achieve further growth?
We project considerable growth in the mid-income residential segment. As Dubai obtains critical mass in a number of property sectors, growth will be achieved through catering to more niche markets, under served segments, and operational strategies. For example, we cannot stress enough how intangibly profitable it can be to incorporate components of social value into development schemes.
By: Mr. Eamon Alashkar
Associate Director - Consultancy Services
Colliers International
1 comment:
What are the high end apartments like and how much do they cost?
How does the closing process work?
In Mexico you can only lease the land from the government for 50 to 100 years. You never really own what you are buying...How does the system work in Dubai?
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