Hot on the heels of Jones Lang LaSalle’s report on the real estate market in Dubai in Q1 2012 follows its similar report on Abu Dhabi. Not surprisingly, the findings are also quite similar: a significant increase in supply across all sectors, coupled with weak demand and increasingly tight economic conditions, is causing rents to fall even further.
So how does this affect contractors and developers, for example? Interestingly, Damac Properties senior VP Niall McLoughlin says the much-mooted oversupply only equates to 28,000 units or about 8% in total, which he says is a quantity that the market should be able to absorb, if you take into account the current level of demand.
And demand is rising at a much faster rate than supply, contents McLoughlin. He goes so far as to say that “concern over supply issues has been greatly exaggerated.”
Kele Contracting MD Andrew Elias says that the UAE, in particular, is still reaping benefit from the Arab Spring. While the rest of the region has been wracked by turmoil and civil unrest, the UAE is still perceived as a safe haven for investment – especially in real estate. This is like to translate into increased investment in construction projects going forward.
Elias predicts that 2012 will be the year of “steady and sustainable” growth, as opposed to the ‘wait-and-see’ mood that has prevailed since the downturn struck. What is also clear is that the current heavy investment in infrastructure is going to provide a very sturdy platform for growth in the foreseeable future, which will enhance both real estate and construction.
In keeping with this sentiment, the UAE ambassador to France, H.E. Mohamed Meer Abdalla Al Raeesi, told CW at Intermat in Paris that the UAE’s construction industry could see a boom even bigger than the one that preceded the original downturn.
Is this wishful thinking or over-optimism? Al Raeesi pointed to all the figures emerging from the construction industry indicating that demand was up, projects and tenders were being announced again, and people are evincing excitement and anticipation, as opposed to the recent doom-and-gloom.
It is not only the Middle East that is feeling optimistic. For example, the Committee for European Construction Equipment (CECE) reports that an overall 6% increase in sales is anticipated this year.
Of course, this has to be put into context, with the European industry having achieved a record turnover of $40.8bn in 2007/08. Still, according to the CECE business barometer, two thirds of companies polled stated that they expected sales to grow even further in the next half of the year.
The ongoing economic drama in the European Union regarding debt bailouts and political restructuring, coupled with the Middle East’s own ongoing problems with social instability, has made it increasingly difficult to predict the future. However, there is cause for optimism. Dubai, for example, is seeing an upsurge in all kinds of numbers, from number of tourists to construction project announcements. Here’s to the future.
