Dubai: Dubai’s property market had been feeding off the buzz surrounding the city’s campaign to host the Expo 2020. Now, with Dubai formally confirmed as the host after the vote in Paris late on Wednesday, the realty sector is looking to secure a deeper foundation.
In particular, Dubai’s commercial space — particularly the office towers that have been completed and the many still flowing through the project pipeline — can expect a pick-up in interest post the Expo win.
“It was clear that market upturn so far was confined to residential transactions and that commercial market was lagging considerably in investor and tenant interest,” said Ziad Al Chaar, managing director at Damac Properties. “But with the Expo win, apart from hospitality, which will be the big winner, demand for commercial space has an opportunity to get on the bandwagon — there’s bound to be lots of new companies looking for premises and that will a big positive.”
Al Chaar’s words could ring true. It’s not that activity is subdued in Dubai’s office realty, but the action has been to a good extent confined to existing office tenants shifting to new premises, particularly Grade A office units.
But go down the scale and it is a pretty mixed picture. Quality properties are not having trouble getting tenants, but there is still lingering concern among businesses on how to deal with multiple landlords (strata ownership) holding individual office units.
If, with the Expo announcement, Dubai’s office realty could get that much needed clearing off of legacy issues. Landlords could adopt a more mature approach on strata issues in the dealings with potential tenants.
According to Cluttons’ Q3 update on the local market, “On average, prime office rents (Dh200 per square foot) have risen by 8.1 per cent between Q1 and Q3... however this masks the fact that Grade A prime stock is still available for as low as Dh150 per square foot in some submarkets.
“However, that many landlords who have recently taken possession of properties maintain unrealistic rent expectations that is stemming occupier demand along - but downward adjustments are expected as landlords lower rents to match occupier expectations.”
Away from commercial, industry sources are cautiously optimistic that the Expo win will not be reflected in turbo-charged property values and rents. Steve Morgan, head of Cluttons M.E., said: “We feel the much-talked-about ‘Expo boost’ has already been priced in, to an extent. Dubai has already seen a surge in property prices and we expect a trend of more stable and sustainable growth to persist over the short term.
“Population growth, hand in hand with job creation, will mean that housing demand levels will continue to rise, but the Expo will boost investor confidence and help lift values further as global capital hones in on our city, particularly in the months leading up to the Expo when a mini surge is almost inevitable.”
The 18 to 24 months before the Expo 2020 will be the period to watch out for Dubai’s property market.
That is when “There will certainly be a marked hike in rentals and some rise in the selling price of property,” said Mark Wellman-Riggs, general manager, Crompton Partners Real Estate Agents.
“However, Dubai’s property sector is unlikely to see a true and immediate growth as a result. While there will be knee-jerk reactions from some sellers drastically inflating their selling prices following the announcement, in reality, we predict that investors are unlikely to see the benefit of investing right now in overpriced property and may wait to purchase when the dust has settled.”
