Alan Robertson,the chief executive for the Middle East and North Africa (Mena) region at Jones Lang LaSalle, is interviewed as Dubai's real estate showcase got under way.
Another year, another Cityscape. What's your on-the-spot assessment of the event this year?
This is my first Cityscape so it is difficult to compare it with previous years. I understand it is a bit smaller than before, but that is no surprise given the market conditions. However, my experience from other events shows that smaller events can be more effective in many ways - Cityscape is about building long-term relationships, not about making direct sales, and it is easier to arrange valuable face-to-face time with clients when the event is smaller. In difficult times, developing and maturing relationships with clients, suppliers and other market participants becomes even more critical. For these reasons I think Cityscape this year will be useful and valuable to us.
You've been JonesLangLaSalle's chief executive for the region since June, when the firm said Mena was missing out on its fair share of global capital flows. What's the view now?
This remains very much the case. Jones Lang LaSalle data shows that global real estate capital flows increased by 50 per cent over the first six months of this year (to more than US$103 billion (Dh378bn), while there were no major sales recorded in the Mena region. While data for the third quarter is not yet available, it is likely that global capital flows have slowed down over the summer. The Mena region is always quiet during the summer-Ramadan period, but there have been no major arms-length transactions reported over the past few months. There remains a number of active investors (mostly from within the region) looking for suitable opportunities in the real estate market. Activity is being largely constrained by the absence of investment grade opportunities being offered to the market at realistic pricing levels.
Give us your take on residential and commercial sectors in Dubai and Abu Dhabi. Is the pain over? If not, when?
While the Dubai residential market is showing some signs of recovery, this has so far been limited to a small number of select projects. Elsewhere we believe there will be further falls in prices and rentals in these markets in both Dubai and Abu Dhabi. Whether these falls represent pain or gain depends on if you are an investor or an occupier. The office market is continuing to move firmly in the favour of occupiers and this will provide benefits to both individual companies (by lowering their real estate costs) and also at the city level (by making Dubai and Abu Dhabi more competitive and therefore more attractive locations).
What is the single biggest factor keeping property prices down on the UAE?
There are two major factors - one is internal (local) and the other is external (global).
The internal threat relates to the high levels of supply that are now being delivered to the local markets. While the governments of both Dubai and Abu Dhabi have taken steps to limit future supply levels (such as through the cancellation of projects), these measures will take some time to come into effect and the future supply pipeline is excessive in the short term. This is a particular concern in relation to Abu Dhabi, where peak levels of new supply have yet to be realised, while Dubai has moved past peak completion levels in most sectors of the market.
The international threat relates to global demand. The experience of the 2008-09 global financial crises was that the Dubai market was very closely related to events in the global economy, with the collapse of Lehman Brothers in September 2008 acting as the trigger for the rapid fall in prices and rents experienced in the Dubai real estate market. While the global economy managed to recover last year and the first half of this year, the pace of this recovery is now being threatened by concerns over excessive debt levels in both the euro zone and the US. It is possible that a sovereign default (such as Greece), could have a negative effect on both global trade levels and the Dubai real estate market.
Your last job was in Turkey. Are they doing something right that the UAE could learn from?
There are many similarities between the Turkish and UAE markets, although the main Turkish cities are not facing quite the same oversupply issues as Dubai and Abu Dhabi. However, this is more by accident than design. I am not sure there is anything I would suggest that the UAE should copy from Turkey but there is one initiative that I think some of the wider GCC countries should consider. This is in the area of affordable housing, which is becoming a significant problem in countries such as Egypt and Saudi Arabia. In Turkey the government housing agency has formed joint ventures with large residential developers, which has resulted in very large social and mid-market housing developments taking place on government-owned land. Huge numbers of well-located, well-designed and affordable homes for rent and sale have been procured quickly, and I think it is a good model of public-private-sector partnership.