BOOK SMART

UAE 2018 | SHARJAH | REVIEW

Sharjah's free zones continue to lead the way forward, kindling activity across a broad swath of industries and sectors.

As the third-largest Emirate in the UAE, Sharjah is a central piece of the UAE's economic health. Boasting 18 distinct industrial zones, Sharjah accounts for nearly one-third of the UAE's manufacturing sector, which alone accounts for around 20% of GDP. Sharjah is considered the cultural capital of the UAE, and as such attracts a host of visitors from across the Emirates and around the globe.

Despite a global slump in oil prices, the Emirate of Sharjah continues to be one of the most dynamic and robust economies in the region. Large infrastructure projects across the Emirates are expected to provide Sharjah with continued growth potential. After new census population data was released in 2016, nominal GDP per capita is expected to be in the area of USD19,000 and GDP growth between 2016 and 2018 is also expected to average 2.8%.

Sharjah's stability in the face of economic headwinds owes a great deal to prudent economic planning and diversification. With one of the most diversified economies in the region, Sharjah has been able to rely on non-petroleum industries. According to Standard & Poor's, the real estate and business services sector constitutes 22% of Sharjah's GDP, while manufacturing makes up 17%, wholesale and retail trade 12%, and mining, quarrying, and energy 12%.

Though Sharjah's economy has little direct reliance on hydrocarbons, much of its economy is reliant on regional partners whose fortunes are heavily exposed to price fluctuations in the hydrocarbons market. This indirect association has had, and will likely continue to have, some negative effect on Sharjah's economy, according to Standard & Poor's.

However, large infrastructure projects in Dubai and Abu Dhabi, particularly those initiated in preparation for Expo 2020, are expected to bring significant growth to the Emirates, particularly Sharjah, which has a strong construction sector. According to The National, BMI Research expects construction for the Expo to stimulate growth of more than 6% in the construction sector alone.

Each of Sharjah's three free trade zones—the Sharjah Airport International Free Zone (SAIF Zone), the Hamriyah Free Zone (HFZ), and the Sharjah Media City—help to stimulate robust levels of economic activity. Each of the free zones offers a variety of investment incentives, including pre-built infrastructure, long-term and guaranteed leases, 100% foreign ownership, 100% repatriation of capital and profits, zero personal and corporate taxes, and no import duties.

SAIF Zone's 6.1 million sqm of space hosts 6,800 firms from 157 nations. The HFZ covers more than 12sqkm of commercial and industrial space, has 80km of internal roads, access to three sea ports, and the Sharjah International Airport. Nearly 6,100 firms from 157 nations operate in the HFZ's seven distinct zones.

But it isn't just free zones that make the Emirate tick; Sharjah's proximity to Dubai and Abu Dhabi and its affordability has traditionally meant that it is a popular Emirate for commuters. However, falling rents in Dubai and Abu Dhabi have been enticing renters away from Sharjah. Despite this, certain developments continue to be key drivers of economic growth in the Emirate.

Tilal City, a partnership between the government of Sharjah and Iskan Real Estate Development, is a project that has continued to keep buyers excited. The development is spread across 25 million sqft and five separate zones that host residential, commercial, and communal space. Raising more than AED2.4 billion and attracting investors from over 25 countries, Tilal City is the new face of living in Sharjah.

Another prime development is the Sharjah Waterfront City, an AED20 billion project that will include 200 mixed-use towers, 95 apartment buildings, hotels, and 1,100 villas. According to the Sharjah Investment and Development Authority, the city will stretch across 10 islands and consist of more than 60 million sqft and 36km of waterfront.

But while Sharjah's status as the UAE's industrial powerhouse is well known domestically, abroad it is its cultural credentials that have put it on the map. In recent years, Sharjah has been in the midst of a major tourism push. The Emirate was chosen as the Islamic Culture Capital of the Arab Region for 2014, but its ambitions don't end there. As outlined in Sharjah's recently unveiled Tourism Vision 2021, the Emirate hopes to attract over 10 million tourists by 2021.

In an effort to ensure that the necessary infrastructure to accommodate this hoped-for influx is in place, tourism-related construction projects have been pushed into high gear; Sharjah now has over 10,000 hotel rooms and there are plans for an additional 4,000 more to be developed in the coming years. Dividends have already been seen, and according to Shurooq, hotel revenues were up nearly 7% in the first half of 2016.

As the industry continues to come into its own, new projects are expected to continue springing up, adding opportunity and flavor to the 100 hotels and hotel apartments currently operating in the Emirate.

Elsewhere, Sharjah is also well placed as a transport hub. Comprising 6.4% of GDP, the transport sector is an indispensable cog in the local economy, and as business incentives grow, logistics, aviation services, and the quality of staff have come into focus.

With access to the Arabian Gulf and Indian Ocean, as well as a direct link to Dubai, Sharjah looks set to be the next big transport and logistics market in the GCC. In coming years, the value of the local transportation sector is forecast to increase by the billions. And as the sector continues to attract global attention and more SMEs choose to operate out of Sharjah, transportation may be valued at up to AED3.43 billion by 2020.

Just 15km away from Dubai International Airport, and closer in distance and time than Al Maktoum, Sharjah International Airport is also transforming itself into an optimal choice for SMEs operating in both the cargo and passenger transport segments.

The airport is home to locally kept aircraft, a convenient stopover for refueling or FBO services, and a stepping stone for business and leisure travelers continuing on to Dubai.

Overall economic volatility has impacted the real estate market across the Emirates, with a number of unique dynamics impacting prices. Yet despite weakness in real estate markets across the UAE, developers in Sharjah are discovering that demand remains high for premier complexes that are well maintained and marketed.

Sharjah, typically a hotbed of activity thanks to its reputation as a cheaper alternative to Dubai, has seen its real estate market soften somewhat as prices in Dubai have fallen. According to The National, this trend could continue beyond 2016 as developers in Dubai continue to sell affordable housing.

Uncertainty in the broader economy has disrupted the traditional system of inter-Emirate migration whereby Emiratis reside in more affordable Emirates like Sharjah and commute to work in prohibitively expensive Dubai. Slackening demand in Sharjah has prompted landlords to drop rents. The silver bullet for declining demand has proven to be luxury and quality.

Across Sharjah, developers and landlords are finding that providing consumers with innovative and elegant choices stimulates purchases despite broader economic headwinds. This has proven to be the case in exclusive gated communities across the Emirate

At the helm of the Emirate of Sharjah is Sheikh Dr. Sultan bin Muhammad Al Qasimi, UAE Supreme Council Member and Ruler of Sharjah. A scholar in his own right, he has already cemented his legacy as a strong supporter of the role of education.

Following the declaration of 2016 as the “Year of Reading" in the UAE, Sharjah has stepped up efforts to increase literacy and instill the desire to read in young people across the Emirate. In line with this goal, Sheikh Dr. Sultan bin Muhammad Al Qasimi has authorized the distribution of AED2.5 million worth of books to public, school, and university libraries.

And in a nod to how far the Emirate has come, when the UAE was first established, not a single secondary institution was open; today, Sharjah boasts nine universities, with the American University of Sharjah (AUS) and the University of Sharjah ranked among the top five.

With such an enthusiasm for learning, it is then little surprise how successful the Sharjah International Book Fair has become. With Sheikh Dr. Sultan bin Muhammad Al Qasimi as patron, the fair has run since 1982 and is now one of the largest book fairs in the world. The 2017 fair is set to take place in early November.