Dubai – The onset of the COVID-19 pandemic has had the biggest impact on global economic activity since World War II. While global GDP is estimated to have shrunk by 3.3% in 2020, this rate of contraction is significantly lower than the worst-case scenarios predicted at the start of the pandemic.
Going forward, as global immunization programs continue to roll out and economic and social mobility returns to historic norms, global GDP is expected to grow 6.0% in 2021.
In the UAE, this stronger global economic backdrop, combined with the world’s second-highest vaccination rate and the enactment of a host of business-friendly residency visa programs, regulatory and diplomatic initiatives, should support a high rate of economic growth, both in the short and the long term.
While this upturn in economic activity and the resulting upturn in business confidence will help support the performance of UAE real estate markets, the pandemic has undoubtedly accelerated already changing fundamentals in industries such as office space. , the retail and industrial trade, and the logistics sectors.
In other areas, we are likely to see longer term changes brought about by the pandemic. For example, in the hospitality sector, the pandemic is likely to have lasting impacts on demand and supply, creating both challenges and opportunities. In more nascent alternative sectors, due to accelerating changes in consumption patterns and consumption trends, we have seen an increase in demand for real estate assets such as cooling facilities and data centers. .
Below, we explore some of the key themes that CBRE believes will define key real estate sectors going forward:
- The UAE is increasingly a tenant-driven market, with occupants having greater bargaining power and flexibility in negotiating with landlords. The most frequently seen incentives include rent reductions and the possibility of multiple-check rent payments.
- The developers offer option-to-buy rental programs, fee waivers, attractive post-rebate payment plans to attract demand from investors and homeowners.
- Millennials are emerging as a key consumer class, with the expected reconfiguration of residential spaces as well as increased demand for digitally enabled homes and larger unit sizes to accommodate home offices.
- The increase in working from home and the Dubai 2040 Urban Master Plan is expected to further accelerate the transition to green housing as end-users are increasingly motivated to reduce utility costs as they spend more time at home .
- After COVID-19, Dubai will remain the preferred regional hub for the region’s multinational occupiers, at least in the short term, as it remains the most mature and secure market for occupiers.
- Physical offices here to stay, portfolio optimization through the right mix of traditional and flexible spaces and any relevant remote working strategy.
- Flexibility must be critical – sustained flexibility in lease terms and expected tenures. Modular spaces to remain attractive options in the short term.
- Environmental, social and corporate governance (ESG), health and well-being likely to be at the forefront of CRE’s strategies; employee productivity is key.
- Key players must remain focused on the sector; focus on reinventing “the experience”; the realignment of existing spaces should increase the emphasis on outdoor and open spaces. Optimizing the store size should lead to faster recovery and better profitability.
- Flexibility to remain the key to success – landlords with flexible lease terms, shopping malls with flexible / convertible / open spaces to show greater retailer interest.
- The rapid growth of online shopping is driving an increase in omnichannel retailing, but preserving the “physical experience” will be a critical part of these omnichannel strategies, especially in the Middle East.
- Omnichannel strategies to push retailers to streamline supply chains and focus on workforce planning, automation, inventory management, and flexible production cycles. Initiatives such as Click & Collect and product returns via the store are expected to increase significantly.
- Rising ahead of COVID-19, the pandemic has been a catalyst for accelerated growth in the domestic tourism sector. The trend is here to stay and further growth is expected for the segment in the medium term.
- Hoteliers have achieved cost reductions, primarily through pay cuts and efficiency gains. As wages return to normal, cuts and downsizing are here to stay as they have little to no impact on the customer experience, but contribute to higher GOPs.
- Despite the challenges faced by industry players, investors remain confident in the UAE as a tourist destination and the pipeline for new hotel development is still strong.
Industrial and Logistics
- E-commerce and 3PL are expected to continue to drive demand for Category A warehousing. There will be an increase in demand for such space outside the bonded free zone, to serve the local market.
- Diversifying away from traditional underperforming asset types, such as residential, office and retail, will be the focus of investor activity. The challenge will remain a shortage of medium and long term income, associated with institutional quality real estate.
- The emphasis on food safety and cold storage space should be a key element of speculative development in the industrial and logistics market.
- Increased investments in automation and robotics for the supply chain and warehouses will be essential with the wider application of technology to improve the efficiency of the entire supply chain.
- Flexible office space to remain the key to increasing portfolio agility, delivering short-term solutions and managing workforce volatility; spaces managed to stimulate demand.
- Post COVID-19, data centers must be augmented by the growing need for data storage, sustained political momentum and nationwide digital initiatives; third-party colocation and cloud demand are expected to experience strong growth.
- A reconfiguration of the traditional layout of student accommodation is expected; larger rooms / single occupancy rooms and larger common areas to enable social distancing standards to be met.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate investment and services firm (based on 2019 revenues). The company has more than 100,000 employees (excluding subsidiaries) and serves real estate investors and occupants through more than 530 offices (excluding subsidiaries) around the world. CBRE offers a wide range of integrated services, including facilities, transaction and project management; property management; investment management; evaluation and evaluation; Property rental; strategic advice; real estate sales; mortgage and development services. Please visit our website at www.cbre.ae
© Press release 2021