STRONG AGAIN

UAE, Dubai 2014 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Nicholas Maclean, Managing Director of CBRE Middle East, on the resilience of the real estate business in Dubai.

What is CBRE's strategy for 2014?

It should be an interesting year, as we have been enjoying a pronounced recovery in certain Middle Eastern markets. We are aiming to expand our existing team and add new service lines, and we are actively looking at new locations from which to operate during the rest of the year.

In which markets have you witnessed a recovery, and which markets and service lines do you plan to expand?

The most active location is Dubai, where we see significant recovery in terms of rental and capital values and the arrival of investors, particularly from the Far East. Whilst the level of corporate real estate activity is not quite at 2007 levels, 2013 was nonetheless a very strong year. I expect this level to be surpassed in 2014.

“The construction sector is likely to enjoy a prosperous period over the next few years."

What have you learned from the crisis of 2008?

There are two important lessons to be learnt from the difficulties suffered from 2008; that Dubai's property market is cyclical and subject to the fundamental forces of supply and demand and that Dubai's real estate market is not unique and has been affected in similar ways to many other global markets. Although painful at the time, the experiences will help the development and investor markets in the UAE mature. The experiences have also led the government to introduce various forms of legislation to protect investors and control some components of speculation, which became excessive by 2007.

What is your approach to Emiratization?

Emiratization is an important priority of the government. All our vacancies at all times are open to all nationalities, and CBRE Middle East currently employs peoples from 22 different countries. We also have a scheme, whereby four Emirati graduates have been seconded for training to CBRE offices around the world including London, Boston, Singapore, and Hong Kong. As the commercial real estate markets rebound, the recruitment of qualified professionals in all our offices is an important driver for growth.

You have mentioned that some corporates are coming here from Africa. What are the main advantages to having them in Dubai?

The UAE, and in particular Dubai, has particular advantages for businesses operating over a large geographical area. The capacity and reach of the aviation sector here has created a natural hub for businesses operating across Middle East and Africa and the quality of life that the UAE can offer is becoming increasingly attractive as a recruitment advantage for corporate businesses. We therefore see some of our corporate clients who have traditionally operated on the continent of Africa relocating headquarter businesses, so as to benefit from these advantages.

Construction is expected to have grown by 9% from 2013 to 2014. What is your forecast for Dubai's real estate sector?

The construction sector is likely to enjoy a prosperous period over the next few years, with strong investment in real estate and infrastructural projects from both the private and public sectors. Abu Dhabi and Dubai both have ambitious infrastructural expansion plans proposed and strong business sentiment is stimulating new demand for commercial and residential real estate. Additional events like the World Expo and FIFA World Cup, the general growth in population and tourism, and the construction of real estate sectors are the ingredients for strong medium-term growth.

What do you think EXPO 2020 will bring to the real estate sector and to Dubai's economy in general?

There is no immediate and direct impact on the real estate market as a result of the 2020 Expo decision as the infrastructural expansion dedicated to this event has not yet been started. It does, however, further fuel positive sentiment and in particular has caused some international institutional investors to positively re-evaluate Dubai as an investment location. There does, however, have to be some caution shown by landlords who, in some cases, have tried to crystalize the “Expo effect" by increasing rents substantially. This action is not helpful to the long-term sustainability of Dubai's residential real estate market. As to the event itself, it sit very well with Dubai's medium-term strategy of attracting 20 million visitors by 2020, and perhaps a further five million visitors as a result of the Expo. This general tourism and leisure growth requires substantial amounts of real estate and generates a significant number of new jobs for the Emirate.

Which of CBRE's products are the most profitable for you?

CBRE's Middle East business is extremely well balanced between professional services and transactional services, and we are also lucky enough to have an extremely loyal client base across both these divisions. We see strong growth ahead particularly in respect of our commercial agency teams, our property management business, and our project management business. Our valuation and research teams also continue to be hungry for new professionals. Last year was a great year for us as all departments achieved growth, and I expect 2014 to be even better.

How is CBRE improving or helping Dubai´s economy?

We consider ourselves ambassadors for the country. There is quite some misunderstanding among corporations as to where Dubai sits in the context of the Middle East. Much of the news that comes from the region as a whole is negative. However, Dubai is a positive story and we take time to talk about opportunities in the competitive landscape that exists within the Middle East, principally within the UAE, and not exclusively in Abu Dhabi or in Dubai, but also in places such as Bahrain and Saudi Arabia.

What kinds of projects do you undertake with the private sector?

Our client base is split evenly between corporate and public sector work. The work that we do for the government entity is a form of consultancy, whereby we inform them on developments happening in the rest of the world. The fact that CBRE has roughly 500 offices around the world means that if there is a requirement to benchmark, for instance, or to look at some successful markets and at how the model would work in the Middle East, we can do this relatively easily. With regard to the private sector, we take time to look at retail and identify opportunities there. Retail is expending broadly and performing well by international standards. A key aspect of our business is looking at how retail businesses can pursue new routes into the market.

For 2014, what will be the highlight for your investors in Dubai?

We see an increasing number of investors from all over the world targeting Dubai, but this investment capital is partly frustrated by the lack of commercial investment stock available. I hope, therefore, that with Dubai's creation of an inbound investment office there will be a greater number of investment opportunities available to stimulate new capital flows into the Emirates.

© The Business Year - March 2014