2020 is another important year for the UAE. Due to the fast-approaching Expo 2020, the country has been further elevated into the global spotlight; and much is being done to ensure the UAE takes full advantage as host nation of the “greatest show on earth”. Many industries are currently undergoing quiet transformations as they prepare for Expo 2020, and the legacy challenges and opportunities that this could bring as a direct result. Businesses are also having to evolve in line with a changing global economic order, digitalisation and shifting consumer trends – this is especially true within the real estate sector.
There have been a number of challenges in 2019 which the real estate industry as a whole will be keen to try to mitigate in 2020. In the residential market, a strong focus will likely be placed on adjusting any imbalances between supply and demand aimed at further reenergising the market. With this in mind we are also expecting to see a developer backed push towards encouraging buyers maybe through more creative payment terms including longer payment periods, expanded rent-to-own schemes and wider access to alternative homebuyer funding structures. Another key trend for 2020 will potentially be a continued focus on providing community developments with flexibility in living space, which is very much in line with a move towards co-living and co-working, which witnessed a notable rise in popularity in 2019. Creating sustainable living communities has long been a driver and we expect this to continue with focus not just on the residential units but also the ancillary services whether it be retail, leisure or education.
The investment market remains robust; however, we can expect to see a continued imbalance between increases in mature investable capital and a shortage of institutional grade investment products. Institutional grade buildings (i.e., those with long term income secured against secure covenants) remain sought after with strong demand in particular for sale and leaseback or build to suit projects across most asset classes. In addition, within this investment space this increased demand is resulting in positive downward pressure on investment yields with enhanced capital values. In 2020, we expect to see continued increased transparency in the market and the further strengthening of regulations to encourage foreign institutional capital. Furthermore, we are likely to witness increased interest from global investors who want to capitalise on the longer-term commitments being made by corporates as the UAE continues to bolster its position as a leading regional and global business hub.
The commercial market will continue to witness a flight to quality with low vacancy rates within prime core developments such as within DIFC and TECOM. This year will see a growth in corporate consolidations into single occupied spaces, which is likely to result in a growth in build-to-suit requirements. Last year saw a strong focus on employee considerations especially around wellness and we can expect this trend to remain a core priority for businesses in 2020. The growth of the fintech industry in Dubai is extremely promising for the commercial sector, with developments such as DIFC 2.0 likely to have a huge positive impact on global sentiment within this specialist area, supported through legislative measures to reduce barriers to entry.
In the past year, there have been a number of developments which show a promising trend towards transparency and data sharing. The recent announcement by the Dubai Land Department (DLD) that it will work closely with CBRE to create a mechanism to cleanse and analyse public data will make huge leaps in improving transparency and will, we envisage, improve sentiment in the market significantly.
As we enter 2020, we can expect the further enforcement of Real Estate Regulatory Agency (RERA) regulations; this will continue to protect the interests of the market participants and will only serve to further increase interest in the UAE as it becomes a global hub for real estate. The recent announcement by the Dubai Land Department around the launch of Mo’asher (the house price index offering a portal wherein consumers can gain a snapshot of the market at any moment) when combined with professional advice will provide a further level of confidence in the market.
On the whole, we are extremely optimistic about the outlook for 2020. Although challenges continue to exist, the industry and Government are working closely together to ensure that the UAE is well placed to take full advantage of the bountiful opportunities that Expo 2020 is sure to bring. Over the past few years, a number of key regulations have been introduced to further boost inward investment and improve the ease of doing business in the UAE. And, we will continue to see the positive effects of regulations such as the 100 percent foreign ownership law and longer residency visas in 2020 and continued Government support to ensure the real estate market remains one of the most prominent in the region and beyond.
Simon Townsend, Director – Strategic Advisory, CBRE Middle East
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