JLL: Top 7 UAE property trends to expect in 2016
Construction Week rounds up JLL's list of seven trends and practices which could shape the UAE's real estate market this year
Real estate consultancy, JLL, has predicted seven trends it expects will impact the UAE's real estate sector in 2016.
A combination of factors including contractual disputes, financing delays, licensing and approval delays and developers holding back plans as market conditions slow, will result in low ‘materialisation’ rates over the coming 12 months, the company said, according to Arabian Business.
Read on to discover JLL's predictions for 2016.
Please note this list is unranked, and includes the top themes likely to impact the UAE's property market in 2016 as per JLL's findings.
Continued low oil prices means national revenues are constricted and the government has less scope to inject liquidity into the financial system, resulting in a general tightening of liquidity.
Banks are becoming more and more cautious with real estate lending, while global bond markets are nervous and developers will have to look for alternative funding mechanisms such as joint ventures, refinancing, public private partnerships (PPPs) and co-investment vehicles.
Next page: contractual amendments to boost funding
Increase in ‘Build-to-Suit’ and ‘Sale &Leaseback’
These are two potential solutions as conventional capital-raising becomes increasingly difficult.
Build-to-suit involves developers building schemes according to the specifications provided by corporate tenants, which then commit to either lease or purchase the premises upon completion.
Sale and leaseback is when existing occupiers sell real estate space to free up capital for reinvestment in their core business.
Both concepts are prevalent in more developed markets, and signal evidence of growing maturity in the UAE real estate market, Craig Plumb, JLL's head of research for the MENA region, said, according to Arabian Business.
Next page: the purse strings tighten
Reduced outflow of capital
Middle East investment in global real estate is likely to decline from $11 billion in 2015 to $10 billion or less, as investors tighten the purse strings in a low oil price environment, according to JLL’s forecast.
Also, the sovereign wealth funds that have traditionally dominated the overseas real estate investment market are likely to retreat, with most of the buying done by family and private businesses.
There is likely to be more selling activity among Middle East real estate investors instead.
Next page: functionality to the fore
Buildings that work
There will be a new focus on “functional rather than fancy” buildings, according to Plumb.
While overall demand for office space is expected to be lower than in 2015, occupiers will increasingly seek buildings that offer efficient floor plates, high quality lifts and other services, sufficient parking and access to public transport, rather than buildings that look striking, but are inefficient inside.
Next page: the rise of retrofit
Adding value to existing buildings
Retrofitting existing buildings is likely to become more just as, if not more, important than developing new buildings, as occupiers examine fit-outs in a challenging economic environment where construction costs are expected to remain roughly the same, JLL said.
Next page: tourism transformation
Changing hotel landscape
The UAE’s hospitality sector will continue to undergo a shift from a business-focused to resort and entertainment-driven offer, due to increased demand from younger customers and the impact of ‘disruptive’ technologies such as Airbnb and other non-traditional marketing platforms, said JLL.
Next page: safe and sound
Emphasis on building safety
A spate of building fires in 2015 culminating in the New Year’s Eve fire at The Address Downtown Dubai has turned the spotlight on building safety and substantial investment is likely to be made in upgrading buildings across the emirates.
Due to increased overall awareness, there will greater demand for well-maintained buildings with better fire safety and other systems.
“This is likely to remain a hot issue as stakeholders seek to reduce the reputational risk to their brand from accidents and incidents relating to building safety,” JLL said.