Leaders in Dubai’s real estate sector have identified an urgent need for the industry to refocus on end users and diversify future developments in order to drive economic growth for the emirate.
Speaking at a roundtable hosted by international real estate consultant Drees & Sommer, 13 senior executives from Dubai’s major developers, contractors, architecture firms and consultancies gathered to debate the most pressing issues facing the real estate industry.
Moderated by Stephan Degenhart, Managing Director, Drees & Sommer Middle East, the discussion centred around the need for the different disciplines within the real estate business to work together to tackle the current challenges of over-supply, sales and product delivery.
Summing up the debate, Degenhart said: "Expectations on the level of return for real estate investors have changed amid increasing competition. While net yields are still good on international standards, the shift requires a change of mindset at all levels of the supply chain, from consultants and architects through to contractors and the master developers."
"The profile of the end user is different, with more owner-occupiers, and the market should adjust to their needs," he noted.
“There is an opportunity here for developers to diversify their product, away from traditional residential, and for consultants and contractors alike to invest in technology in order to become more efficient partners, and we are looking forward to seeing innovation across the sector in the future,” stated Degenhart.
With Expo 2020 Dubai now less than a year away, the group discussed how the industry could refocus with the global mega-event in mind.
Alexander Davies, the Chief Operating Officer, Dubai Properties, held discussions on “How is Dubai positioned to attract the growth that Expo 2020 Dubai could offer?
"The real estate market has to start refocusing and has to start driving economic growth. In terms of the future, we’ve got to diversify, we’ve got to look away from retail-resi. The biggest potential is in small industry, and in how to be sustainable," he stated.
Rajan Israni, the Chairman, Sun and Sand Developers Group, said: "During Expo 2020, over a period of six months, 20 to 25 million people will be visiting Dubai. At least 3-5% of these people will look to invest here. We need new regulations that will help them do so.”
Aaron Chehab, the Head of Strategy and Business Development at ACC, agreed that more needed to be done to nurture the needs of end users and suggested that home owners in Dubai be eligible for visas, regardless of mortgage status or property value.
“We have to increase the population by nurturing user demands somehow, otherwise there will be a surplus of supply that’s not going to be consumed for at least another five years,” warned Chehab.
Following the recent launch of Dubai’s Higher Committee of Real Estate, which aims to avoid duplication of projects in the sector and achieve a more sustainable balance between supply and demand, the debate turned to the subject of industry regulation.
The group welcomed the launch of the new Committee but held mixed views on the level of regulatory framework needed for Dubai, with some suggesting that various caps on projects and/or rates could be necessary, while others remained strongly against any rigid governance, he added.
Sami Elmadalla, Chief Development Officer of First Investment Group, said: "Regulations are important and they are meant to sustain the qualitative growth of the industry, nevertheless the market needs to make mistakes to mature, encouraging new players to come to market, which will move the economy towards a more constructive competition, making a quality offering the focus of the industry rather than purely price; it’s the only way."
"Then we can fine tune the regulations by creating standards to make sure we gain from this experience," he noted.
Irma Coello, Senior Project Manager at VX Studio, said it was time for the market to take some risks.
"As a designer, and even as a user; aware of design intricacies, when I look at what the big developers pour into the market, I see little to none will stand out. They all use the same formula, no innovation whatsoever, just a worrisome, progressive reduction in size pressed into the same schemes they “successfully” sold in the past," pointed out Coello.
"One wonders if smaller developers should be more willing to think out of the box in their commercial approach in order to stand out in this increasingly grey scenario, which is full of design opportunities wasted by this lack of vision," she added.
Head of Interdisciplinary Design & Research at Drees & Sommer, Abdulmajid Karanouh, advised a strategy refocused on value.
“What is the strategy in Dubai? It’s unlikely that we will be the cheapest, but can we be the most innovative and the most interesting in terms of value? I think so. There are still plenty of people willing to invest in Dubai if they see the promising signs that we are ready to build differently,” said Karanouh.
Davies from Dubai Properties agreed: “I think it’s all about value – how can we add value into the development chain, how that development chain adds value to the economy at the macro-economic level, and how all of that innovation at all levels adds value to the end users”.
Ultimately, the delegates were in agreement that change of some level is needed to sustain the real estate industry in Dubai.
Scott Coombes, Partner, AESG, said: "If we keep doing things the way we’ve historically been doing them, we will dinosaur. Our biggest takeaway should be that the only way we’re going to survive is if we focus – there’s that word again – on new opportunities and how we do things, whether that’s innovation or changes to the design and construction process."
"We are being squeezed left, right and centre on fees; we need to redesign this process," he added.-TradeArabia News Service