Dubai: Such is the short-term nature of man's memory that it is very easy to define the UAE's property market purely by what has happened since September 2008. But it would be such a disservice to omit the many elements that made the sector one of the most compelling real estate plays in the world from 2002 until then.
Yes, there were many projects that were announced during those turbo-charged days that will never see the light of day — and not many can deny the marketplace is better off for that.
It's also true that the developers were caught in the frenzy of those heady days and could not think beyond making anything they wanted to build into the "tallest", "longest", "largest" and any other stretching of the imagination one can think of. Bling seemed to the only game in town.
But, at the same time, there are quite a few that have made the transition from the drawing board to being homes with all the creature comforts provided, swanky offices, or malls that are nothing less than shoppers' paradises.
These very properties — residential, commercial and retail — are the defining milestones of the UAE property sector's evolution in the 40 years since the country's formation. That these were built in the near decade since 2002 makes it all the more noteworthy.
But the UAE's property market is not just about what happened since 2002. If anyone assumes so, it would be a case of medium-term memory recall (if such an affliction actually exists).
But right through the 1990s and even earlier, the UAE — and Dubai in particular — was the natural base for global companies seeking a direct Middle East presence. A similar sentiment also led regional heavyweights to have offices in Dubai to facilitate their exposures into the global markets.
Apart from the support infrastructure these bases offered, the dominant factor was the cost of setting up here vis-à-vis other international locations. Be it in the Jebel Ali Free Zone or the early set of high-rises on Shaikh Zayed Road and later on in the Internet and Media cities, businesses could easily find accessible locations that would help them explore the Middle East markets — and in those days the region was being "discovered" by the global majors — in earnest. And that was what many did in the decade starting 1995, which accelerated in the timeline immediately after September 11, 2001.
Dubai was the place to do business from. The state-of-the-art operating infrastructure at an optimum cost — businesses couldn't think of a better place to be.
The cost element was what was getting lost in the couple of years starting 2006 when the property market was overheating. Now, after taking significant knocks in 2009, stability has been sighted in valuations and lease rates in the prime locations.
In other words, the property market has entered the age of realism. In many ways, it's also going back to the basic tenets of what made the UAE a favoured place for international businesses to be in. The same applies to the residential and commercial spaces in Abu Dhabi as well.
"The office market during the first-half of 2011 has seen a healthy increase in occupier demand and this seems to be fuelled by the increased affordability of office rents, the choice and variety of stock on the market and the slow return of domestic financial confidence," said Richard Paul, Associate Director at real estate consultancy Cluttons.
"Businesses of all sizes search for space in all locations, ranging from Dh30 a square foot to Dh300. There is generally a higher demand for stock which is in short supply and hence can demand higher rents."
But "high" in today's context is quite removed from what commercial locations were asking — and getting — in 2007 and 2008. And to ensure rates remain honest, market reality will take care of that.
"The market still faces the same downward pressure on rents seen throughout 2010 caused by the general oversupply of new space," said Paul.
In the age of realism for the UAE's real estate sector, that's not such a bad thing. New job creation is taking place across key sectors in the middle to senior management levels, though the banking and the wider financial services industry might be an exception to that. Retail is another core area where there are a lot of fresh positions — across the entire value chain — being created, seemingly every other day.
"It's the services industry that is leading the way in creating new positions — corporate lawyers seem to be in huge demand, so are specialist consultants on a project basis," said a senior official with a global placement agency.
"From what we have on the books, 100 new jobs are being created in Dubai and Abu Dhabi between now and early next year."
It's not rocket science to draw a straight line between all of the opportunities being created and the absorption of commercial, retail and residential spaces.
"The market is becoming realistic in terms of prices; tenants have now a wider array of choices and competition is extremely healthy," said Cecilia Reinaldo, Managing Director at Fine & Country. "This is clearly an illustration of an evolving market looking to mature.
"The local market is still uneasy with off-plan offering, and why shouldn't you be when one can purchase a ready unit for an attractive price and get nine to ten per cent rental return?
"If a community has the infrastructure with good road access and the basic living requirements, it will attract tenants even if the community is not necessarily complete or is centrally located to the downtown."
The best news for the UAE's property market is that it is on the fast track to regaining its competitive edge. With every disquieting episode that occurs in its Middle East neighbourhood, it's status as a haven for doing business is enhanced.
For all we know, the property market could well be on the cusp of an incremental improvement. And for any landlord attempting to raise rates without a solid reason, there's the oversupply to deal with.
For a business newly in town and searching for suitable premises, oversupply is not such a bad thing after all.