United Arab Emirates Real Estate Report Q4 2011
Includes 3 FREE quarterly updates
Increasing tourism, strengthening investor confidence and the tentative shoots of lending in progress show that the UAE is getting to the end of its real estate industry crash. GDP growth may well be small in 2011, but it is positive. However, the state remains plagued by huge amounts of unoccupied property. The UAE’s commercial real estate sector remains under pressure from failing rents. In H210 the quoted maximum and minimum rental levels for property across the board had dropped. However, when we spoke to our in-country sources again in the middle of 2011, rents had diverged. Maximum rents in the three sub-sectors in Sharjah had rocketed. The other two emirates had a mixed bag of results. The office rents continue to decline a little in Dubai and substantially in Abu Dhabi – by more than half. Conversely, retail rents rose in both, with the same pattern of movement in Dubai and a nearly 40% increase in Abu Dhabi. Industrial space commanded a moderate rise in rents in Dubai and a moderate decline in Abu Dhabi.
According to our in-country sources, we expect that rents across the board are likely to remain stable through the rest of 2011, at minimum and maximum levels. Considering the huge variations in previous half-years and by city and sub-sector, this may not be entirely likely. They do however, expect them to diverge again in 2012.
Some key opportunities in the real estate market are:
Increasing tourism, strengthening investor confidence and the tentative shoots of lending in progress show that the UAE is getting to the end of its real estate industry crash. GDP growth may well be small in 2011, but it is positive. However, the state remains plagued by huge amounts of unoccupied property. The UAE’s commercial real estate sector remains under pressure from failing rents. In H210 the quoted maximum and minimum rental levels for property across the board had dropped. However, when we spoke to our in-country sources again in the middle of 2011, rents had diverged. Maximum rents in the three sub-sectors in Sharjah had rocketed. The other two emirates had a mixed bag of results. The office rents continue to decline a little in Dubai and substantially in Abu Dhabi – by more than half. Conversely, retail rents rose in both, with the same pattern of movement in Dubai and a nearly 40% increase in Abu Dhabi. Industrial space commanded a moderate rise in rents in Dubai and a moderate decline in Abu Dhabi.
According to our in-country sources, we expect that rents across the board are likely to remain stable through the rest of 2011, at minimum and maximum levels. Considering the huge variations in previous half-years and by city and sub-sector, this may not be entirely likely. They do however, expect them to diverge again in 2012.
Some key opportunities in the real estate market are:
- Plenty of development projects are being restarted, including Dubailand, one of the most ambitious developments ever conceived. Following an evaluation, the plans are to relaunch the large leisure project backed by Dubai Properties Group by the end of 2011.
- Investor confidence has improved as they become more comfortable with the emirate’s debt situation. The latest FPI investor attitudes report shows investor confidence in the UAE has risen 5 points to 18, according to the Arabian Gazette in July 2011. Dubai Holding, a struggling state-owned entity repaid a US$317.6mn bond and Dubai Aerospace refinanced debt and debt sales from the Dubai government and Emirates airline.
- Legislation is improving for property buyers and investors. Laws now protect investors' interest. According to Jones Lang Lasalle, the three-year residency visa for property owners is a new tenancy registration system ‘Tawtheeq’, where a buyer can register their property when purchasing, whether it is completed or purchased off plan and during the handover when they receive the title deeds. There is also a new law limiting overcrowding in residential properties. Some key risks to the real estate market are:
- Some UAE real estate companies remain in significant financial trouble through 2011. Al- Habtoor Leighton said in April 2011 that it needed AED4bn to safeguard its future projects in the Gulf following writedowns and delayed payments from clients, according to Arabian Business. The company’s parent, Australian company Leighton Holding, had to raise AUS757mn from shareholders to fund an injection of AUS272mn into the UAE subsidiary, following the announcement that the firm was owed more than AED4bn for completed projects.
- **The UAE’s construction industry has looked to other states to take advantage of their governments’ large-scale infrastructure projects. Arabtec reported in Arabian Business that it is planning growth of its Saudi Arabian workforce to 2,500 in June 2011.
- RERA (Dubai’s real estate watchdog) lists 300 projects that have stalled or been cancelled and according to Arabian Business in August 2011, is reviewing the financial viability of about 90,000 properties due to be delivered over the next five years. Out of the projects it is investigating Nakheel, the struggling development behind the offshore Palm Jumeirah in Dubai, is the lead on 107 projects and the article says state-backed Dubai Properties has 42 projects that are on hold.
- The state government needs to focus on offering long-term subsidies to investors, such as discounts on municipality fees and electricity for up to 10 years, in a bid to boost the construction industry.
- The UAE central bank announced that lending to the country's real estate sector declined by 1.4% between January and May 2011, according to Zawya. Credit levels have been affected by the continuing problems caused by the global financial crisis and the political unrest in other parts of the Middle East.
Contents
Executive SummarySWOT Analysis
UAE Real Estate Industry SWOT
UAE Economic SWOT
UAE Business Environment SWOT
Real Estate Market Overview
Real Estate Market Analysis
Table: UAE Real Estate Market – Net Yield, 2011 And 2012 (%)
Table: UAE Real Estate Market – Terms Of Contract/Lease, Mid-2011
Table: UAE Real Estate Market – Available And Vacant Space, Mid-2011 (m2, unless stated)
Industry Forecast Scenario
Real Estate Outlook
Table: Real Estate Markets – Rentals, 2011-2012 (m²/month, AED)
Table: Forecast Yield, 2008-2015 (%)
Construction Industry Outlook
Table: UAE Construction And Infrastructure Industry Data
Table: UAE Construction And Infrastructure Industry Data
Construction and Infrastructure Forecast Scenario
Macroeconomic Outlook
United Arab Emirates - Economic Activity
Business Environment
Introduction
Table: BMI Business And Operation Risk Ratings
Legal Framework
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
Table: Middle East and Africa - Annual FDI Inflows
Table: Trade And Investment Ratings
Table: Top Export Destinations
Operational Risk
Competitive Landscape
Company Profiles
Aldar Properties PJSC
Al Habtoor Leighton Group
Damac Properties
Deyaar Development
Dutco Balfour Beatty
Emaar
Mubadala Development
Nakheel
Sorouh
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Project Finance Ratings Indicators
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
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