Details

Integrated Plans Required to Control Property Supply in GCC States

– There is a growing tendency toward small office spaces to circumvent pressures

– Real estate investments are most secure and lucrative in the long run

The fast-paced business developments witnessed over the past period have proven in no uncertain way that the region’s countries are unable to develop any kind of reliable forecasts about business platforms without having clear-cut project plans and integrated strategies. The paradigm shift in areas of financial and economic investments has generated myriad decisions that have had their bearing on all projects, including those under execution now and those planned for the future. In the meantime, indicators showed that all types of real estate investments have proved to be the most secure and feasible over the long run. Further, it has transpired that the success of any projects, mitigation of investment risks, maximizing returns and circumventing legal and legislative obstacles all depend on the availability of realistic and genuine data and the nature of information issued by official or private authorities with regards to current or future market indicators.

In its weekly real estate report, Al Mazaya Holding said commercial property investments are the most affected by global economic and financial developments and by the financial and economic momentum witnessed locally and regionally.

The report said that the fall in government spending around the world has resulted in a decline in demand for commercial real estate projects. 2016 witnessed many remarkable developments on this score, with the demand over office spaces and other commercial real estate projects having tangibly fallen in a way that is noticeably greater than its equivalent over residential and investment property.

Regarding the region’s realty markets, the report said that Qatar has an oversupply of vacant office spaces, with the ‘tower area’ having turned out to be the most negatively affected as a result of the decline in demand by tenants despite a fall of over 20% in rental rates by the end of 2016. Statistics showed that the Qatari market would need more time to recover, with the supply of office spaces, which cover more than 600,000 square meters, thus outstripping demand. The report referred to a number of reasons that would slow down any recovery in the Qatari market over the short run, including the heated competition among landlords to attract tenants and the reluctance of some of them to reduce prices and others’ insistence to keep prices high. The report also referred to the lack of proper geography diversity with most of the residential units being concentrated only in modern areas, with old and logistics areas being marginalized and lacking development.

A slowdown was witnessed in demand over office spaces in Abu Dhabi, with demand only focused on small office spaces that are less than 500 square meters. The Dubai realty market was not different in its declining demand over office spaces as result of the fall in economic activities in general and the tendency among organizations to downsize. The report attributed this to the decline in oil prices and slowdown in all types of investment activities. The report expected this year to witness more demand over different real estate products in UAE, with luxurious office spaces situated in plush areas of distinguished locations and those in free zones to be the most attractive.

The Saudi realty market stilll enjoys a major competitive edge thanks to the government’s 2030 vision. The Saudi Vision 2030 will play a major role in forestalling a potential economic crash and in increasing demand of office spaces over the coming period. The King Abdulla Center alone has around 1.7 million square meters of office space in addition to other spaces added by the different projects implemented in major cities over the past years.

The Bahraini market is witnessing a state of stability in comparison with its neighbors, said the report, expecting this state of stability to persist over the first half of this year, provided that economic recovery should continue. The demand over office spaces is still reasonable in Bahrain, thanks to a balanced supply-demand mechanism and stable rental rates.

The Bahraini market, however, has been affected negatively by the fall in economic activities, thus resulting in reduced job vacancies as an outcome of the decline in oil prices. Such a situation has triggered austerity measures in response to the paradigm shift, primarily in areas of oil and gas, in order to avoid any potential consequences that could afflict all economic platforms, atop of which comes the real estate business.

The report added that there is a tendency among the region’s companies to opt for small office spaces in view of the current circumstances and conservative future outlook.

Conclusion

In conclusion, the report indicated that it is quite difficult to control the supply-demand mechanism by reducing rental rates due to the fact that there are other factors that govern sector performance. In order to control supply, there should be a mechanism to review the issuance of real estate licenses and to determine the right time for launching property investments.