Over the past decade, the GCC region has witnessed rapid economic development and demographic changes, including the influx of expatriates, which in turn has increased the region's overall population. This coupled with rise in per capita income has fuelled the demand for residential units in the GCC region said Al Masah Capital, region’s leading investment firm, in a Real Estate review report released.
Post-recession, the GCC has emerged as an attractive destination for global investors and the real estate sector has become a key economic barometer for the growth in the region. In fact, the GCC real estate sector is one of the fastest growing sectors across the world, albeit the recent slowdown in economic growth due to oil price fluctuations. The report reaffirmed that the GCC markets are still gaining a lot of investor attention as prices are relatively stable, which reflects the real estate market’s maturity and the improved regulatory environment in the wake of plummeting oil prices. Thus, despite oil price fluctuations, a volatile stock market and geo-political uncertainty, the sector remains resilient and is expected to register growth at a slow pace in 2016 and beyond.
Amongst all markets; Dubai, Abu Dhabi and Doha have emerged stronger owing to international projects, foreign investment flows and growing population. In addition to this, the upcoming Expo 2020 that will be hosted in Dubai and FIFA 2022 to be hosted in Doha, primarily buoyed the demand for exclusively designed amenities and world-class infrastructure spaces.
On the Real Estate Services front, this industry’s contribution to the economy has strengthened over the past decade due to an overall strong property market. The report mentions that, during 2000-09, the real estate services market grew most rapidly in the UAE among the GCC six. In UAE alone, the real estate services sector employed about 821,560 people (18.6% of the total workforce) and in 2015 the sector contributed about 13.3% to the GDP. This industry lateral encompasses of Facility Management (FM) and Property Management (PM); and both are still in its promising stage in the GCC when compared to developed markets such as Europe and North America. Both the FM and PM markets span a variety of functions, technologies and professions.
Furthermore, the tourism sector is likely to help accelerate growth of the real estate market in GCC, especially for UAE. While hospitality, residential and office lease markets remain buoyant in the GCC, the retail segment is expected to continue its aggressive expansion in the coming years. Within the residential sector, there is likely to be a continued shift of activity to the affordable sector. Given the relatively young real estate market across the GCC, a very high proportion of additional space has been in the form of new projects in recent years. This trend however seems to be changing, with increased interest observed in refurbishing and upgrading existing projects rather than developing new ones.
The report reinstated that the GCC real estate market has evolved from a predominantly cash-funded, off-plan driven investment boom to a consolidated market, servicing greater numbers of mortgage financed home owners. The market has become more aligned to global standards, thus giving rise to the services industry, including property management and consultancy. The UAE real estate market has turned out to be highly fragmented and competitive with many real estate assets managed by independent services providers.
The GCC Facility Management services industry has depicted huge growth potential due to higher infrastructure spending across the region. The rapid real estate and urban infrastructure development in terms of airports, roadways, ports and railways have resulted in increased demand for FM industry. The focus of the government to diversify its economy other than the oil sector has also boosted the growth of the FM market. While, the UAE has been the market leader in terms of volume of business for FM and PM services since long, the segment has started to gain considerable traction in Saudi Arabia and Qatar.
Consensually, the industry is touted to grow about 10% annually on average, driven by a burgeoning property market in Saudi Arabia, Dubai and Qatar, ahead of Expo 2020 and the FIFA World Cup 2022 respectively. In fact, the GCC FM market is projected to reach USD 66 billion by 2020 up from USD 37.3 billion in 2015, due to its huge potential, primarily driven by higher infrastructure spending across the region. The market is also working upon on its challenges pertaining to limited involvement in management cycle, unorganized markets, budgetary and costs pressure, economic and regulatory hurdles and workforce challenges; to evolve as a thriving industry.
Overall, the Real Estate Sector’s performance has been stable despite oil price fluctuations and is likely to be resilient and register growth, capitulating ample opportunities for the service providers. The report also made a worthy mention of the regional governments proactive bid to invest interests and funds to move the region’s development beyond oil economy.