Winning the World Expo 2020 vote will act as the single most importance influence of the UAE's real estate sector in 2014, Jones Lang LaSalle said on Tuesday.
While the immediate and short term impact is likely to dominate the headlines and define the shape of the market in 2014, the most important and strategic benefits will be the long term "legacy" effects of the Expo on the UAE economy, the company said in a statement.
Alan Robertson, CEO of Jones Lang LaSalle, MENA, said: “Expo 2020 will not benefit all sectors of the Dubai real estate market to the same degree. The hotel and logistics sectors being the biggest winners, while the residential and retail sectors will also derive significant benefits."
He said the short term impact (from 2014 to 2019) would need to be "managed carefully" to avoid the inevitable boost in sentiment translating into excessive price growth or over development.
"Sentiment is a major factor driving the UAE real estate market. Despite the Expo being 7 years away, we would expect the news of Dubai’s successful bid to result in a major boost in short term sentiment and increased interest in the real estate sector," he said.
He added that the most immediate impact of this improved sentiment is likely to be an increase in the asking price for both land sites and existing villas and apartments in developments close to the Expo site.
"While prices in the Jebel Ali area will almost certainly increase, the availability of significant new supply will temper this increase and could result in a widening gap between asking prices and those the market is willing to pay," Robertson said.
A number of developers have major land holdings around Dubai World Central and plans to develop these are likely to be ‘kick started’ on the back of the improved sentiment resulting from the World Expo decision, Jones Lang LaSalle said in the statement.
It added that there remain significant levels of new residential supply planned for Dubai over the next 2 years (with 45,000 units scheduled for completion by the end of 2015).
JLL also said hosting the World Expo will have a significant positive impact on the Dubai economy and therefore the demand for real estate, with estimates that the event could add as much as two percent to Dubai’s GDP and result in the creation of up to 277,000 additional jobs.
"If these estimates prove correct, the real estate market would be a major beneficiary, through increased spending and higher demand for housing, hotels and commercial accommodation," the company said.
"The challenge for developers and real estate owners is twofold, to phase projects in line with increased demand (and therefore avoid flooding the market with excess space in the short term) and to find long term uses for the real estate after the event itself," it added.
With up to 25 million visitors expected to attend, the World Expo forms a major plank in the Dubai Government's vision to attract more than 20 million foreign visitors annually by 2020.
The retail and leisure sector will also benefit directly from the high level of visitors during the event itself, JLL said.
Robertson added: “Perhaps the greatest benefit from hosting major global events, be they Olympic Games, Soccer World Cups or World Expo’s lie not in the immediate impact on the host economy during the event itself, but in leveraging these short term factors to create positive long term legacy benefits to the economy and the urban structure of the host city."
In terms of the real estate market, the most significant legacy benefits of hosting Expo 2020 will be to bring forward the timing of a number of major infrastructure projects and to provide the impetus to develop a whole new urban district (Dubai World Central) to the south of the existing urban area.
A key component of the Dubai Expo bid is a commitment to extend the existing red line of the Dubai metro to Dubai World Central by 2020. As with other proposed infrastructure improvements, this extension may well have proceeded at some point, but the timing will be brought forward by the need to serve the Expo in 2020.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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