COVID-19 response: Dubai's private developers proceed with extra caution
Those with cash in hand intend to push ahead with planned projects
Dubai: Developers in Dubai with cash in hand are sticking to their launch and project schedules… for now. This way, they are making sure there is no sudden and complete halt to development activity as what happened in 2009 when the property market went into a downturn.
“We believe that the post COVID-19 era will have its own considerations,” said Mohammad Saeed Al Shehhi, CEO of Dubai Real Estate Centre. “How that landscape will look and be, no one can tell today.
“But we remain attentive and aware and – most importantly – agile enough to be able to draw multiple scenarios for alternatives that are workable for us, for our communities, and for Dubai.”
When the 2008 crisis struck, the property market saw an instant sucking out of all liquidity, leading to projects that never launched construction or had to pause well before completion. It took a further year or two before project activity recommenced, led by the likes of Emaar, Damac and Nakheel.
It was only by late 2011/early 2012 that other private developers got back into the game.
This time, developers are intent that such a slack will not happen, whatever be the final impact left by COVID-19.
Onward with two
Al Shehhi confirmed the company will “maintain a steady pace” on projects still in concept mode. For the immediate future, it has two projects it intends to get busy with.
First up is the “Hive Coliv”, which, if all goes according to plan, start construction mid-year. The developer is targeting a younger buyer base for it. (Before the COVID-19 crisis struck, there were a handful of projects from the likes of Emaar and Nshama that aimed for a similar set of investors, and with the promise of co-working features.)
The second project is a non-freehold on AlWasl Road. “It consists of residential units but also has a retail element,” the CEO said. “The plan is to break ground in Q4-2020 and more details will be revealed later.”
But won’t the problems set off by the virus on the economy and buyers’ mindset be a factor in deciding new launches?
“We will monitor the situation over the next couple of months and see how it develops,” said Al Shehhi. “We will also be guided by further directives, if any, from government or regulator, before rolling out any further action in the future.
“We understand the current environment requires our business to act decisively to mitigate risks, and plan for rapid/slow growth scenarios and the associated impact on liquidity, refinancing and increasing third-party risk.”
Rent relief
Dubai Real Estate Centre, which is part of ARM Holdings, offered a three-month rent waiver for all of its retail tenants (excluding those operating pharmacies and supermarkets). Tenants at its commercial properties, including those leasing warehouses, were offered deferred payment “depending on their circumstances”.
“Decisions were quickly made to provide rental incentives for tenants,” the CEO said. “It was clear to us that the circumstances of those benefiting from the incentives needed to be considered when deciding the level or extent of the help.
“We cannot say that we have seen at DREC a rise in non-occupancy. Our tenants are generally long-term residents - so the villas in particular have not seen the change. Our occupancy rates have been steady throughout the last 10 years, averaging at above 90 per cent, and today we find that our position has not really changed that much.”
Switching to freehold
With the shift in buyer mood, some developers have been giving thought to changing the status of the projects, especially on those that are yet to launched. Al Shehhi said there is no intention to revise the status of his non-freehold projects to freehold or vice versa.
“ARM Holding was established to capture a diversity of real estate interests extending beyond DREC’s assets,” the CEO said. “It is positioned to manage investment interests that extend beyond real estate as well.
“With the holding company managing our real estate portfolio, we have freehold and non-freehold properties represented in good balance. We do not feel there is merit in making any such changes - but should there be, we will reassess as and when.”
We have actively monitored our costs and focused only on business critical spends. We continue to monitor our financial health to ensure immunity
We have actively monitored our costs and focused only on business critical spends. We continue to monitor our financial health to ensure immunity, depending upon how the situation progresses and how long it takes for demand and supply chains to return to normal.