The Evolution of Real Estate in 2021: A Market Response
Matthew Sexton, Managing Director at SAY Studio, the Dubai based design firm discusses the impact the past twelve months have had on the UAE’s real estate landscape and what key dates in 2021 have done to industry projections.
The primary trends we saw as a design firm, in Q4 of 2020’s tenders, were a dramatic increase in mixed-use developments as well as large-scale, sustainability-focused, refurbishment projects across the hospitality industry. A minor, but entirely new, trend was the emergence of bio chemical tenders, primarily within Dubai.
For the most part construction remained on-site in the UAE during the pandemic. That said, we definitely experienced delays, mainly due to reductions in site capacity, in line with social distancing guidelines. According to GlobalData’s report on the UAE construction sector, the reported drop to 1.9 percent last year was comparatively low compared to other markets in the GCC where work ceased altogether. The industry as a whole is expected to recover to 3.8 percent this year with sectors such as transport and tourism set to lead the way, which we have definitely started seeing already. Overall, I’d say tourism is on the up, but targeted at a medium to long-stay, working client base.
Overall, industry players have made leaps and bounds in the solving of issues that had become entrenched in the construction sector, in order to recover quickly. Speeding up the use of technologies such as BIM, drones and virtual reality to reduce waste from processes was a huge leap forward for us all. The recent approval of a new Dubai Building Code is also a positive development; the new code outlines a revised set of construction rules and standards and seeks to reduce construction costs by streamlining building regulations.
The pandemic, whilst certainly a severe impediment to overall growth for the region, saw investment priorities move into some sectors over others. Moving in to 2021 we see the medium to longer-term, government investment to be focused on upgrading physical infrastructure and reforming the financing and regulatory environment to stimulate growth across the construction sector, in time for Expo.
According to MarketLine’s September 2020 report on “Construction in United Arab Emirates”, the UAE construction industry had total revenues of $84.4bn in 2019. The non-residential segment was the most lucrative in the same year with total revenues of $56.6bn, 67 percent of the industry’s overall value. We see the non-residential segment (we are including mixed-use developments as non-residential here) taking even more market share this year. Based on what we’ve already seen, we’re expecting closer to 75 percent in the UAE. According to a MEED and Mashreq industry report on construction megatrends, we are expecting 82 percent of projects to be non-residential, across the Middle East this year, with 37.5 percent of total investment going in to mixed-use developments.
We are currently working on some really interesting mixed-use projects. One worth especially mentioning is in Abu Dhabi and is specifically designed to cater to SME’s in the capital. The project, due for completion in 2022, will offer a unique co-living and co-working environment that is being designed to support both SME’s, but also larger international businesses expanding their offerings to the Middle East. We believe this is going to be the first of its kind and will set a new standard for mixed-use developments within the region. The project allows residents access to an Abu Dhabi business license, which means they can live, work and access a specific business license all under one roof. With the Expo coming up we expect to see many more of these developments appearing.
Construction work on Dubai’s Expo 2021 continued at pace during the coronavirus pandemic and organisers still expect 25 million visits over the course of the six-month event, despite concerns about the pandemic’s impact on global travel and tourism.
Expo should coincide with a general recovery in economic activity this year and will provide a timely boost to the travel, retail and hospitality sectors that have been hit so hard by the pandemic. Property may also receive a boost.
Expo is expected to attract 25 million visitors overall, 17 million of whom will be international. We are expecting this to provide a huge boost to the tourism and hospitality industries and for construction firms servicing them. Quality hotels and accommodation located near the event will enjoy higher occupancy rates between October 2020 and April 2021 without doubt. There will be a need to attract clients by hotels in the key areas of Dubai as well, the Marina, DIFC and likely Business Bay which hosts a number of co-working business centers within its hotels. Hotels will need to invest in refurbishing its public spaces this year, if they are going to be able to claim some of the footfall from Expo. We are already seeing this happen and are working on a number of projects doing just this. A keen focus has been sustainable design alongside our renovation and refurbishment tenders.
The industry could benefit from turning this crisis into an opportunity to do things differently. The focus now needs to be turned towards people-centric solutions, meeting sustainability criteria set out by the UAE Government and becoming increasingly enforced. 2021 will certainly be a year for change and we expect to see a marked uplift across construction as a whole, by Q3 of this year.