Dialogue: Business prospects

Hagkull: KSA, Morocco and Egypt have the greatest need for housing.

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Blair Hagkull, managing director for Jones Lang LaSalle in the Middle East and Africa, discusses the key trends for the real estate and construction industry in 2010 and how developers can shape a better future for themselves.

Do you think that there is currently an oversupply of houses in some parts of the Middle East?
There is a selective oversupply. There are certain markets like Saudi Arabia and Egypt where there continues to be a lot of domestic demand. In the UAE, we see areas of selective stability, but we also see greater supply in some areas that are yet to materialise.

In Saudi Arabia, there is an undersupply of affordable housing. Will this situation improve this year?
Sure. The thing about real estate is that it is essential to developing the economy. The supply of new homes leads to a need for places to work and shop. So, central to the growth plans of Saudi Arabia is housing, just as it is in Egypt.

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We know that there a lot of programmes in place and some funding to help develop new homes, but the issue of additional housing is also focused on making it more affordable. The reason for the demand for housing in these countries is simply down to population growth.

As a result, you find that there is a necessity to be able to create real homes for real people.

Is there still a demand for hotels and commercial outlets?
There are certainly opportunities to develop retail outlets in Abu Dhabi, particularly in areas where there is existing population. In terms of hotels, the best designs and the hotels in the best locations have performed the best and there is still a demand for these.

The other market that is doing well is low budget accommodation for people who only want to spend a certain amount
of money.

What should real estate developers in the UAE focus on this year?
They should encourage demand because over the last three to four years there has been an increasing supply of homes. They have been built, but where are the tenants to fill them? Further, it is important that investors have trust in the market place; a lack of transparency is a major issue in the UAE real estate industry.

Other trends will relate specifically to how to refinance and look at alternative ways of financing projects. Finally, the market has grown tremendously over the past ten years, but it is now time for regulation and legislation to catch up.

How can developers gain back the trust of investors?
Every situation has a different solution and the first thing you have to do is communicate. Secondly, people have to acknowledge what is happening in the market place. At best, the market is flat and at worst it has gone down 30%.

I don’t know anybody that is wealthier than they were a year ago, except people who have invested really well. So people have to recognise that this is a new paradigm that we are in and it is a lot more about reducing risk, increasing confidence and doing things that are more logical.

Which Middle East country is demanding the most housing right now?
We have just opened an office in Cairo and we see that Saudi, Morocco and Egypt have the most domestic populations and therefore, the most demand for housing. In our minds, these areas have the most promising future.

Which new reports will you publish this year?
Like every year, we are putting together quarterly reports on the major cities of the Gulf. This year, we are publishing a report on the importance of valuations and this will come out in a few weeks.

We are doing an Abu Dhabi report in April, a hotels report in May, a couple of investor reports in May and September and we have many more in the pipeline.

About Blair Hagkull
Blair Hagkull has played a leading role in some of the world’s largest and most successful real estate ventures in North America, Asia and the Middle East over the past 20 years.

He is active in leading markets throughout the region, working directly with leading international and regional investors, developers and government organisations.

He contributes directly to regional policy forums and strategic government initiatives and is a frequent regional commentator on real estate and investment trends.