To prove his point that “by definition, the main activity of a real-estate developer is construction,” Damac Properties MD Ziad El Chaar says it has “50 projects under development at the moment across the region.” He explains: “Our strategy is to build and deliver what we are committed to, and that has resulted in 21 buildings being completed last year. Since the start of the recession – even though I do not like to bring it up, because it was four years ago – Damac has handed over 30 buildings. Our pipeline for 2013-14 is delivery of the buildings that are currently at an advanced stage of 70% completion.”
El Chaar adds: “We have not slowed down construction; that has been the main focus.” Such was the developer’s confidence in the property market, especially in Dubai, that it announced at Cityscape Global 2011 that it foresaw “an end to the oversupply”. This is because Dubai has transformed into two distinct markets: “One where the infrastructure is complete, and one where the infrastructure is still under completion.”
In the former, “we predicted, starting October 2011, that the prices would stabilise and start increasing. We have seen reports from research companies confirming 2.7% growth in Q4 2011. This showed that the market is growing back – definitely slowly; always when you come back, you come back slow. It is growing back in the areas where infrastructure is complete, with Dubai separated into developments around Sheikh Zayed Road and developments around Emirates Road.
“All the infrastructure around Sheikh Zayed Road is complete, prices are growing there, there is no oversupply in those areas, because now the demand is picking up and people see that those masterplans are complete. Around Emirates Road, we know that the infrastructure is still under completion, frequently people are asking a discount to buy in those areas, so the growth in those areas is yet to come, but it will go hand in hand with the development of planned infrastructure in those areas,” says El Chaar.
“We technically have projects in almost all the masterplans of Dubai, and we are committed to build and finish those projects.” Latest handovers include the 84-storey, 612-unit luxury Ocean Heights in Dubai Marina and the three-tower, 1,020-unit Lago Vista development at TECOM’s International Media Production Zone (IMPZ) in New Dubai.
“On the residential front, we have finished six buildings in that area [IMPZ], and are finishing the last four, which will give us about 3,000 units. The first project we delivered, a three-building development of about 700 units [The Crescent], is around 90% occupied. You can buy, at today’s prices, a big 580 square foot studio for AED400,000. With that studio you get a gym, swimming pool, children’s swimming pool, tennis courts, jogging track, residents’ lounge, steam and sauna room and aerobics room.” An added attraction of the location is the proximity of Jumeirah Golf Estates, home to Greg Norman’s Fire and Earth golf courses, and venue of the Dubai World Cup. El Chaar adds: “Definitely we still await completion of the infrastructure in that area.”
Also in New Dubai, El Chaar points to what is perceived as “the underdog of master developments”, namely Jumeirah Village South. “We have statistics from Jumeirah Village that the rental yield on a one-bed Damac apartment is AED10,000 higher than a competitor one-bed next door. It is down to size, amenities, gardens and swimming pool.” While the infrastructure in the area is incomplete, El Chaar says Damac has come up with the novel solution of utilising the roof space offered by its buildings. “On top of every low-rise, five-storey building you have a huge rooftop garden.”
The issue of build quality and level of amenities is evident at completed Damac projects like The Waves and Marina Terrace in upmarket areas like Dubai Marina, where the occupancy level is 97% to 98%. “The reason is that, even though they are six-year-old buildings, when you walk in they look like new, so the demand is incredibly high. We have seen this with Ocean Heights as well, a relatively new development at one-and-a-half years, which is running at a 91% occupany level.”
El Chaar adds: “We even have a project at Dubai World Central, where the new Al Maktoum International Airport has just opened for logistics, freight. I think we are the only ones with a residential project in that area, which is more than 50% complete at present.” All the developer’s projects at Business Bay in Dubai are about 70% complete, with the flagship Burjside Boulevard topped out and due for handover in June 2013.
“Business Bay is a key future area for us. We see it as a clear extension of the Downtown Dubai area, with the Dubai Mall, the Burj Khalifa and all the other developments around it. Now that the roads are being completed, the two areas are actually being linked together.” However, some of the developer’s most significant projects are outside Dubai at the moment. “We started this diversification in 2006, which is a natural progression for a developer,” says El Chaar.
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“We are present in Jeddah in Saudi Arabia, Amman in Jordan and Beirut in Lebanon. We are present in the upcoming commercial area in the new downtown in Cairo, Egypt, and we are present in the upcoming Lusail City in Doha, Qatar, the main city for the 2022 World Cup. When you look at all those projects in all those cities, they share a common platform in terms of customers. Many of the customers in Jeddah are also buying in Dubai, Abu Dhabi, Qatar, Lebanon, Egypt and Jordan. Usually you diversify to reduce risk and gain growth opportunities, so it has paid off for us on both sides. And having approximately the same customer base across all those areas is making it more lucrative,” says El Chaar.
He is adamant that Damac will continue to focus on the luxury side of the property market. “From day one, we have been at the high end. We started out as a luxury developer with ‘live the luxury’, and are now growing that platform across the region.” However, El Chaar confirms that the developer’s next venture is the hotel apartment sector, where its slogan will be ‘luxury at your service’. “Take each and any project that we have in the context of its area and location, and you will find in that project a very distinct design, with luxurious quality and a level of amenities over and above projects in any other masterplan.”
Burjside Boulevard at Business Bay will be the developer’s first serviced-apartment project, with the newly-formed Damac Suites & Spa as manager and operator. The development will “offer rented luxury space where you can live in the unit you want, and when you are not, you can earn the returns.” El Chaar says hotel-industry statistics point to an 86% occupancy level in January, with an average room rate of AED1,000 a night. “That was an industry that ordinary consumers did not have access to. Through this offering they can now access the hotel sector, and get a return on investment and a rental pool on a schedule that suits them.”
El Chaar says such a business model is particularly suited to the Dubai market, where many people only occupy apartments for specific times of the year. “In three years’ time we will have 2,000 keys under management as one of the biggest hotel apartment operators in the region. We totally believe the future is serviced apartments, because most of the people coming into this area are not single residents, but families. The most important tourists in Dubai are from Saudi Arabia, who invariably have big families demanding a certain level of facilities and service.”
An example of this approach is Al Jawharah Tower in Jeddah. “At the category we are in, it is hard to find a similar project. When Al Jawharah is delivered [in June 2013], it will be the most luxurious residential address, not only on the Corniche, but in the entire Kingdom. With that development, the first 30 storeys are luxury apartments, and to top it off, the last ten storeys have luxury apartments with interiors by Versace. El Chaar confirms that the Versace display lobby has been completed . “It is the first time we have finished a lobby while the rest of the building is progressing,” he says of the construction challenge this posed.
However, Damac does not propose to enter the FM market. “Under the new Strata law, a developer cannot be involved in FM,” points out El Chaar. “We are involved in Strata management, we help each of our developments find all the suppliers they need for managing their buildings.” This also translates into a one-stop service for residents and owners from the time of handover. “We process your DEWA application, district cooling, title deed; you do not need to go out and chase down all of those elements.”
While Damac continues to build and champion service and quality, El Chaar says the Dubai property market, in particular, is still constrained by finance. “Definitely the market is redeveloping and growing again, but without any proper financing. And the real-estate market cannot thrive without the involvement of the financial institutions. Financing is needed for end users and buyers; financing is needed for developers. I think the evaluations by banks versus what the prices are on the market are very close. Hopefully this means the banks will take a chance again to finance the property market.”
El Chaar says the second big challenge is “the completion of the masterplanned infrastructure in all the areas around Emirates Road, because this will give a big boost to all those areas. For a long time people were saying, if you were working in Dubai and earning an average salary and belonged to the middle class, you had nowhere affordable to live.” Market differentiation has meant that New Dubai is now essentially catering to this segment of the population. “You cannot build a city on the upper or middle class alone; you need to have everything. Now along Emirates Road, the middle class can thrive.”
Looking at the Dubai versus the Abu Dhabi market, El Chaar says the former “was quicker to take the hit than the Abu Dhabi market. The cycle has been completed in two to three years, and now the market is growing again. So give it one more year and the Abu Dhabi market will come back again, because all the parameters for demand are there: the population is growing, the economy and infrastructure is good, there is a lot of investment in new projects.”
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