Top 10 projections for UAE real estate in 2010

Top 10 projections for UAE real estate in 2010

Selective stability

The UAE market will see a general decline in performance during 2010. The market will experience greater differentiation as some locations will perform better than others. This is in spite of the on-going decline in values plus an oversupply and higher vacancy scenario. This selective stability will result in a polarising effect on the market and will give rise to distinct winners and losers in the real estate sector.

Additional demand

Generating additional tenant and occupier demand will provide a significant boost to market performance. This will be critical to the timing of recovery in the UAE real estate market. Many of the initiatives required in this area go beyond the real estate industry. The industry needs to implement structural changes to better position itself for the needs of end users and occupiers.

Trust and confidence

Lack of transparency and trust are major issues facing the UAE real estate industry. They have negatively impacted the UAE market and have eroded investor confidence. Effective regulation and greater transparency are some of the major industry challenges in 2010 and the years ahead.

New investment paradigm

A greater emphasis will be attached to income producing assets as the regional real estate industry takes a long- term view on property. The trend of investors accepting lower returns is the “new normal” which is increasingly becoming an industry reality. The market is witnessing more investment decisions led by asset performance, credit worthiness and tenant quality. There is little investor appetite for incomplete projects that do not produce income.

New financing model

Cash flow is critical as we expect debt markets to selectively ease in the coming year. Such a scenario results in an increased emphasis on equity and reinforces the need for co-investment vehicles. Scarce debt will make private equity and family wealth funds the preferred option due to their cash strong positions.

Defining real value

There is an important need to better define real value in a market with minimal transactions. Valuations are hampered by fewer transactions to benchmark as investors seek to find the “new normal” in real estate capital values. Significant new initiatives are expected in the valuation profession as the region evolves into a more mature real estate market.

From global to local

Middle East real estate developers and investors are increasingly adopting inward looking strategies and are seeking more opportunities in local rather than international markets. Localisation of the real estate industry is an important trend as capital flows from regional entities shift towards domestic priorities.

Real homes for real people

In the past five years, 60 per cent of the housing stock comprising luxury and secondary homes was targeted for 16 per cent of the market who were mostly investors and speculators. The market is expected to re-position in 2010 as it increasingly caters to the needs of end-users in the middle segment of the UAE real estate sector. This is a significant development for the industry as its priorities are shifting towards the majority of end-users from the earlier focus on investors in the high- end segment.

From landlord to tenant

The continuing demand-supply mismatch is bringing about a further shift in the balance of power from the landlords to the tenants. The UAE real estate market is becoming increasingly tenant-friendly as it faces greater competition by increasing supply, lower demand, falling rents and higher vacancies. This is a beneficial situation for tenants as landlords are expected to offer greater incentives to retain existing tenants and attract new ones.

Asset management

2009 marked the end of a transformational decade for the UAE real estate sector as the market shifts from a period of asset and value creation to that of asset management and value retention in 2010 and beyond. The shift in focus from creation of new assets to management and value enhancement of existing assets is a sign of maturity for the real estate market. (JLL)
Fonte /www.emirates-re.it