TBY talks to Nicholas Maclean, Managing Director of CBRE Middle East, on the state of the real estate sector in Dubai.
TBY CBRE is a global leader in real estate management. What are some highlights from its experience in Dubai? What steps have you taken to attain your current position since your entry into the market?
NICHOLAS MACLEAN CBRE came to the UAE in 2004 to establish businesses in Abu Dhabi and Dubai. We had for sometime been servicing the requirements of businesses based in both cities from elsewhere, and we felt the time was right to provide these professional services in the home markets of our clients. We chose the UAE because it appeared to provide the best platform for CBRE, and internationally we acted for more people from Dubai and Abu Dhabi then other cities within the region. Our revenue is now split one-third government entities, one-third local businesses, and one-third international corporates. In 2008 we saw an opportunity to create a business in Bahrain, and despite the recent difficulties in that market, our office is going from strength to strength. We are now looking for further expansion through the region as our current operations reach stability and grow naturally.
Vis-à-vis other real estate companies, do you consider yourself a latecomer? If so, what strategies have you conducted to establish such a strong presence in such a short time?
Prior to establishing our initial businesses here we spent considerable time analyzing why other businesses in our industry have failed or performed badly, and we concluded that the key to our businesses being successful was a deep understanding of the way the markets worked. We consequently and immediately established a strong, market-leading research capability that continues to collect, collate, and analyze market evidence so that we have strong anecdotal records.
How does Dubai compare to other markets in the GCC?
A very important component of our global business is our relationships with corporate clients, and CBRE tries to provide the best advice in all markets into which we expand. Dubai has a big advantage over other regional competitor cities in that a significant majority of our corporate clients have their regional (MENA) headquarters located here. This stems from the outstanding infrastructure and in particular air transport and airport facilities, which are world class. On top of this, our corporate clients report that Dubai is also the easiest market in which to recruit, and so the opportunity to expand businesses is stronger here than elsewhere. For us therefore Dubai provides a level of activity that is not currently present in other cities of the GCC and also provides an example of best regional practices. I do not therefore see Dubai being usurped as our regional headquarters.
How do you evaluate the real estate sector in the post-crisis period?
Dubai and its participants in all sectors of the property market (investors, developers and occupiers) have learned an important lesson over the last three years: the market, like all other markets around the world, is cyclical. Dubai’s property markets have experienced significant declines in value across all asset classes, but many landlords have adapted well to changed circumstances, and so CBRE transacted more occupier activity in 2011 than during 2007 and 2008. Changing regional circumstances have compounded Dubai’s advantage, but the quantity availability of quality stock have all been contributory.
What trends do you see in the market? What changes are you expecting in the coming years?
Perhaps the most disappointing aspect of the Dubai market over the last year or so is the lack of capital transactions that have taken place at arm’s length. Dubai has the current advantage of significant investment flows seeking to enter the market, but the activity that this demand should operate is being hampered by the lack of available stock. The level of liquidity in Dubai is therefore interpreted to be low. What is needed to unlock this revenue stream is willing sellers bringing appropriately priced buildings to the market. We are also seeing, for the first time in two or three years, overseas institutional funds actively researching the Dubai market as they seek to achieve better returns than in home markets.
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