Colliers MENA Real Estate Overview for Q1 2010 Shows Region is Adapting to New Investment Landscape
Colliers International today released its comprehensive regional overview of real estate markets in the Middle East and North Africa (MENA) for Q1 2010. The report, providing comparative key performance indicators across 10 cities, shows how markets are adapting to the new investment landscape following the economic challenges of the previous two years.
Despite differences in socio-economic, demographic and regulatory factors between the cities, the deterioration of regional markets that was recorded over the last 12 months is showing early signs of abating as they begin to adjust to new conditions. The report also indicates a diversion of interest away from the more established property markets in favour of nascent markets like Syria, Saudi Arabia, Egypt and Libya.
Providing a snapshot of performance in the office, residential retail and hospitality segments in Abu Dhabi, Dubai, Doha, Riyadh, Jeddah, Eastern Province, Amman, Cairo, Tripoli and Damascus, the report reinforces the cyclical nature of property markets.
With most sectors across the MENA region continuing to experience price falls, there has been an overall shift towards tenant driven markets. This has resulted in an emerging trend of landlords introducing incentive schemes to manage or resolve supply and demand issues, while in the retail segment, diversification and repositioning of existing properties is helping to minimise the risk of potential oversupply.
A general focus on business tourism in key markets has also helped to address the potential oversupply of hotel rooms and is having a knock-on effect on retail performance in some locations.
Demand for affordable housing among a rising middle class remains a trend in several markets where sustained economic development and population growth have been recorded. According to the MENA Real Estate Overview, opportunities abound in Abu Dhabi, Jeddah, Cairo, Damascus and Tripoli, which remain significantly undersupplied in this area.
Commenting on the latest MENA Real Estate Overview Ian Albert, Regional Director of Colliers International said: â€œDespite the economic storm that we have seen globally over the past two years and the shockwaves felt by regional real estate markets, our research indicates signs of a potential overall rebound. The property crash of 2009 forced many countries to adjust their strategies so it is interesting to see how the real estate value chain is responding.
â€œEfforts to address the demand-supply dynamic are indicators of a maturing real estate market, but we are also seeing a shift towards the newer regional markets where domestic economic growth has largely insulated them from the fallout from the global crisis. The increase in business travel to places like Jordan, Qatar and Saudi reinforces this. From a regional perspective, we will begin to see a repositioning of markets as the industry responds to varying opportunities in established and new property markets.â€
The report also sees a return of the commercial occupancy surveys for Abu Dhabi and Dubai, comparing the performance levels of specific buildings. With office occupancy rates a key indicator of a cityâ€™s economic vitality Colliers International instigated a market watch for the two emirates to see how these sectors have responded to the economic crisis.
In Abu Dhabi the average occupancy currently stands at 99%, dropping a marginal 1% from a fully occupied market in Q4 2009. While the overall results exemplify the present undersupplied market for office space in Abu Dhabi, the market is expected to reach equilibrium during 2010 with an oversupply by the end of the year due to a lower demand rate.
However, in light of the rumoured plans by the Municipality to end the long standing practice of allowing residential villas to be used for commercial office premises, Colliers estimates a potential demand of up to 125,000m2 of office space could be generated. While the additional demand could be absorbed into the forthcoming supply, Colliers cautions the effect will not be a cure all to the market.
â€œLandlords will need to remain competitive in their terms to attract tenants while developers will need to start planning for subdivision of floor space to match supply with market demands,â€ said Albert.
In Dubai, Colliers observed an overall year-on-year increase between Q1 2009 and Q1 2010 in occupancy levels across new commercial districts, while occupancy levels in the older more established districts dropped 7% during the same period. The movement of commercial tenants is believed to be a direct result of the lower rental rates and other incentives, such as rent free fit-out periods offered by landlords in the new commercial districts.
Best Performing Sectors and Markets:
- Office: in Cairo, demand is expected to continue to outstrip supply over the next three years provided no new major projects are announced. There remains extensive pent-up demand for high quality space, intensified by new local demand created out of strong economic growth.
- Residential: in Damascus Colliers expects over 3,000 units to be delivered to the market over the next three years. Based on estimated demand and forthcoming supply, it is expected that a shortfall of approximately 106,339 units will arise, which will likely leave the market undersupplied for the next five years.
- Retail: despite immediate concerns of low footfall levels in smaller shopping centres and current economic conditions, Colliers remains bullish on the Abu Dhabi retail market over the medium to long term given population forecasts outlined in the Abu Dhabi 2030 Plan.
- Hospitality: although the Libyan hospitality market is currently in relative infancy, the government expects considerable growth of tourist arrivals to Tripoli over the short to medium term. With demand for 5 star properties increasing, a number of international hotel chains have now entered the market, driven by the increased openness and economic growth of the country.
The report can be found at www.colliers-me.com