Green shoots are finally appearing in the supply side crisis-hit commercial real estate sector in Dubai, with new developments coming up in sought after areas such as Dubai Hills, even as industry insiders called for enhanced collaboration between developers and local authorities to address regulatory bottlenecks impacting new constructions.
Exploring investment opportunities in different geographical areas such as suburbs to avoid price wars for prime real estate in city centres and developing flexible office solutions such as co-working spaces or innovative layouts to align with the evolving needs of businesses in the post-pandemic era are the other moves suggested for meeting the rising demand for office spaces.
The new commercial developments launched to meet the rising demand for office space include four new buildings in Dubai Hills Business Park and two additional blocks in Park Heights Square in Dubai Hills.
“The existing supply-demand gap in Dubai’s commercial real estate sector is presenting many challenges. The city’s sustained economic growth and appeal as a thriving business hub have generated heightened demand for commercial spaces, surpassing the pace of new developments,” Farooq Syed, CEO of Dubai-based Springfield Properties, who is also considered as a distinguished industry leader, told Arabian Business.
“Enhanced collaboration between developers and local authorities is essential to address regulatory bottlenecks and streamline approval processes for commercial real estate projects.
“Equally important is the need for developers to engage in long-term strategic planning to anticipate future demand trends and proactively address potential market gaps to ensure the market remains resilient,” said Syed, who is also a highly regarded industry influencer, hosting Dubai’s largest real estate channel on YouTube.
He said the extensive planning and execution periods required for large-scale construction projects is another major reason for the supply-demand gap in Dubai.
“To alleviate the situation, potential remedies include streamlining construction processes and timelines to expedite ongoing projects or initiate new developments promptly,” Syed said.
Flexible solutions, development of alternate locations needed
The chief executive of Springfield Properties said an alternative strategy to meet the surging demand for commercial real estate could involve offering flexible office solutions, co-working spaces, or innovative layouts that align with the evolving needs of businesses in the post-pandemic era.
“Effective collaboration among developers and investors, pooling resources and expertise, holds significant potential in collectively addressing the demand,” he said.
Syed also highlighted the surging real estate prices in the city as a major challenge for commercial developers.
“The obstacle posed by the surge in prices for prime real estate significantly complicates the launch of new projects for developers, presenting a multifaceted challenge with diverse impacts on the industry,” he said.
Syed said while the rising costs of acquiring land in prime locations substantially strains developers’ financial resources, the increased pricing also diminishes the affordability of commercial spaces, potentially impacting demand from businesses and tenants seeking prime locations.
“Moreover, the intense competition within prime real estate markets can incite bidding wars, further inflating property prices and creating barriers for smaller or newer market entrants,” he said, adding that this also raises concerns about the return on investment (ROI), prompting developers to evaluate whether the potential returns justify the substantial upfront expenditure.
“To confront these challenges, developers need to contemplate strategies such as diversifying their portfolio geographically, forming strategic partnerships to share financial burdens and focussing on innovative design solutions to optimize space,” Syed said.
Suburban areas could hold the key
Syed said exploring projects in suburbs or relatively less sought-after areas will be a viable alternative for developers grappling with high prices in prime locations.
“While it involves a certain level of risk, strategic development in these areas can offer several advantages,” he said.
The chief executive of Springfield Properties said suburban areas often feature more affordable land prices, enabling developers to acquire larger parcels at a lower cost, thus offering a positive impact on the overall project budget.
“These areas may present untapped potential and room for expansion. Investing in different geographical areas also diversifies the risk for developers. While prime locations may have a higher entry barrier, suburbs provide a chance to diversify the portfolio and explore emerging markets,” Syed said.
He said lower rental and property prices in suburban areas can also attract businesses seeking cost-effective solutions.
“This affordability may drive demand and contribute to the success of the project.”
No market slowdown in Dubai in the foreseeable future
The industry leader said given the current market dynamics, a slowdown in the Dubai real estate market, including demand and prices, is not anticipated anytime soon.
“Various factors underpin this optimistic outlook. Foremost, Dubai retains its status as a global hub for business, tourism, and investment, boasting a robust and diversified economy.
“Besides, the city’s strategic location, top-tier infrastructure, and business-friendly environment make it an appealing destination for residents and investors,” Syed said.
He said the ongoing government initiatives and policies, exemplified by the Dubai 2040 Urban Master Plan, emphasise sustainable urban development, infrastructure enhancement, and economic diversification.
“These strategic measures are expected to catalyse sustained growth in the real estate sector,” he said, adding that Dubai’s resilience and adaptability to changing global circumstances further instill confidence in the market.
“The real estate market in Dubai also benefits from a diverse portfolio, encompassing residential, commercial, and hospitality segments. This diversification acts as a risk-mitigating factor against fluctuations in specific sectors, contributing to the market’s overall stability,” Syed said.
While global economic conditions can influence market trends, Dubai’s proactive approach to economic challenges and a dynamic and resilient real estate sector position the market to effectively navigate potential headwinds.
“Nevertheless, vigilance and adaptability to global economic changes and market dynamics are crucial, ensuring a proactive response to potential challenges,” Syed said.
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