Tuesday, October 19, 2021

Booz Allen Hamilton expects new priorities for UAE’s real estate sector beyond Expo 2020

With Expo 2020 days away from opening, Booz Allen Hamilton anticipates a new set of priorities for the UAE’s real estate sector. The six-month-long Expo extravaganza promises to be an unprecedented showcase of ingenuity, innovation, progress, and culture. With Dubai house prices increasing for the first time since 2015, the fundamental question is whether the Expo will have a transitory or long-lasting impact on the UAE real estate market. Booz Allen has identified key trends and strategic priorities that have emerged and can be leveraged by the UAE’s real estate sector to thrive beyond Expo 2020. These include:

Shift in the UAE’s demand base boosting alternative segments: From being a stopover destination, the UAE is evolving into a country of choice for long-term stays where families and individuals lay down roots, study, and retire. Aided by expatriate-friendly visa and investor programs, a steady demographic shift is already occurring with old and young dependency ratios at a decade high. Developers and investors should explore resulting alternative pockets of demand, such as larger and affordable family housing, student housing, or assisted living facilities for affluent retirees. Other pandemic-driven segments gaining momentum include healthcare and well-being, logistics, digital infrastructure, and biotech.

Asset management to the fore: As in all real estate cycles with subdued development growth, the focus shifts to extracting maximum value from standing assets through rigorous and active asset management. As the UAE’s largest asset owners consolidate and rationalize portfolios like with Dubai Holding’s take-over of Meraas in 2020, the pressing priority is the in-depth management of operating assets and more synergetic re-thinking of uses, especially amidst Covid’s new realities. This includes the rejuvenation of mall offerings to a rapidly changing, more local demand, rethinking lifestyle destinations and their digital integration, repurposing under-used offices into alternate uses, and reimagining the hotel experience beyond the room.

Double-down on third-party services: As demand slowly recovers, top real estate players have been redirecting their best-in-class capabilities into safe businesses that generate sustainable recurring income, such as fee-based development and operations. One of the regional pioneers in the space, ALDAR went all in on such services and reaped immediate rewards from its investor base.

Time for urban regeneration: As the urban sprawl of UAE cities expands, older communities could largely benefit from a push for strategic regeneration, coupled with stronger integration and connectivity initiatives. The recently unveiled Dubai 2040 Urban Master Plan, for instance, seeks to increase population densities around mass transit stations, while boosting green spaces and improving quality of life. Developers can benefit from a shift in focus from increasingly remote greenfield opportunities to selective regeneration projects in the historical cores of Sharjah, Dubai, and Abu Dhabi.

Technology, sustainability and innovation at the center of communities: With technologies reaching efficient scales, the pandemic boosting the need for connectivity and digital solutions, and the rise of ESG financing, community developers and operators should increasingly build their products and services around winning technologies. Some of the most common technologies Booz Allen is seeing in the market include EV charging stations, digital CRM lifecycle services, proptech and smart home solutions, sustainable power generation and integrated utility control services.

Bruno Wehbe, Vice President at Booz Allen Hamilton, commented: “While Expo 2020 will trigger a turnaround of the UAE’s real estate sector, and the case for optimism is real, long-term priorities for real estate players need to evolve from the last few decades. By tapping new alternative products and segments, doubling down on asset management and fee-based services, and embracing technology, UAE developers can set themselves up for another decade of phenomenal growth.”

Joseph Mazloum, Vice President at Booz Allen Hamilton, concluded: “Despite the setbacks of the pandemic, opportunities are emerging for savvy developers who pay attention to timing and demand. These players will lead the resurgence into profitability and sustainable yields.”

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