industry trends insight
THE SHAPE OF THINGS TO COME
Trend
10
ASSET CREATION TO ASSET MANAGEMENT
With tightening demand developers need to reconsider how their assets are managed
2006-2009 was a period of development and asset and value creation
2010 onwards will be focused on asset man- agement and value retention
Better managed assets will retain value in a more competitive, quality-driven market
Was this a natural progression in terms of market evolution and maturity, or was it fast- tracked by the global situation?
There are issues with respect to supply and demand that have been identified for at least the last five years, so we can’t say that the issues of oversupply are due to external factors. However, what happened globally has of course had an impact. The UAE is heavily dependent on foreign investors, so when times became tough a lot of global investors took excess capital back to their home countries. We also had that perfect storm where we
had supply, issues regarding cash in the banks related to a potential de-peg of the currency and then the global downturn took hold. It affected us later, but in 2008 we saw
prices go up by 40 percent and drop by 40 percent; so perhaps in the grand scheme of things, 2008 was something of an anomaly. Buying a home is about location and quality;
over time the assets that have the greatest enduring value are those that are well-located and well-maintained. In the past we’ve seen a disposal building syndrome – buildings are knocked down and rebuild after 20 years. We look at real estate as effectively a long-term asset. In many respects you have new buildings that look and act the same, but which in five or ten years may offer a very different set of investment returns.
Trend
09
FROM LANDLORD TO TENANT MARKET
Tenant is king in an increasingly competition- driven market
2006-2009: Undersupply – annual leases, one cheque payment, annual rent increases
No bargaining power 2010 onwards: Increased attention to tenant retention – longer lease terms, decreased rates, better payment terms
Greater competition for new tenants will require landlords to provide fit-out con- cessions/subsidy, rent-free periods, longer leases
Are landlords going to be forced to be even more innovative in order to attract or retain tenants and will these moves become the new norm?
History has shown that those that have first mover advantage usually fare better. The relationship between a landlord and tenant is a partnership in every respect and this is a global trend. Real estate is always seen as a mid to long-term investment and here it became a tradable commodity, so now we need to see a win-win situation. Consumers can now renegotiate better terms or else move, and it’s good to remember the saying ‘better to keep the customer you’ve got than find a new one’. It wasn’t that long ago that the majority
of contractual landlord-tenant relationships were corporate based on the one cheque mentality, and there has been a dramatic shift. We sense that the more advanced markets here will continue to follow these new trends.
Trend
08
REAL HOMES FOR REAL PEOPLE
Moving from investors to end users
Past five years: supply led, investors/specul- ators; high-end/secondary home markets; 60 percent of stock for 16 percent of the market; majority of supply built for average monthly salary of above AED30,000
Next five years: end-user demand; repos- itioning of all asset classes; quality and availability of services key; transit; schools; parks; neighbourhood retail
Is this hampered by the limited access to fi- nancing? Are developers repositioning their ‘luxury’ products as more value-led?
This is something we’ve been talking about for a very long time. The announcement by Abu Dhabi Finance of new rates for mortgages is a clear indication that they see long-term benefit in focusing on an end-user market. Home ownership is at the core of personal wealth throughout the world and represents stability and longevity. A lot of what was sold as luxury is maybe
not being delivered as that. Secondly, products that were more modestly priced initially but, as a trading commodity, got ratcheted up with very little connection to quality. Construction specs meant that there wasn’t twice as much money available to build, even though the market price may have doubled. It’s all about changing the focus towards
value rather than affordability. You can have something inexpensive but still not good value and without staying power, and at the same time you can have an exceptional product in a great location that might be quite expensive compared to the rest of the market, but with enduring value. A customer would have different expectations
The announcement by Abu Dhabi Finance of new rates for mortgages is a clear indication that they see long-term benefit in focusing on an end-user market
38 /
/jun-sep 2010
if something is sold as midmarket or über-luxury. One of the key issues is what is perceived as luxury is actually about the finished materials. And this isn’t always easy to get right. It’s actually much easier to deliver a midmarket product because the finishing is much simpler; if a developer over-delivers then they will have happy customers.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52