IF YOU BUILD IT, THEY WILL COME

UAE, Sharjah 2017 | CONSTRUCTION & REAL ESTATE | REVIEW

With investors flocking to Sharjah for its comparatively low prices, the Emirate is seeing an increasing diversity of residents, prompting developers to build more mixed-use facilities.

Though for many years Sharjah may have stood in the shadows of its neighbors Dubai and Abu Dhabi, with tourists, investment, and construction projects going to the Emirate's neighbors to the west, this has ultimately worked to Sharjah's advantage. With the spotlight and pressure on Dubai and Abu Dhabi, Sharjah had the opportunity to thoughtfully and intricately build up its sectors, with sustainability playing a key role across the board. Now, as investment and exuberance begin to run dry and signs of bubbles start to show, Sharjah is emerging as the UAE's preeminent place to live, and with that shifting reputation the Emirate is becoming a hotbed for all sectors, especially construction and real estate.

While the property market in Sharjah had long been tethered to Dubai's fluctuating sales and rental prices, new changes to property ownership laws throughout the country now allow citizens of the UAE to purchase property via freehold or 100-year leasehold. This has spurred Sharjah into developing itself as a highly lucrative market among the Emirates for both UAE nationals and international investors.

Over the past two years the Sharjah market has opened up to foreign investors considerably. Whereas investors would previously move into or out of the Emirate according to what was happening in Dubai, a significant increase in the availability of mid- and high-quality buildings, in addition to a more affordable lifestyle, has meant that Sharjah's property market is becoming highly diversified.

With the Emirate long being the hub of the manufacturing sector for the country, the nationwide changes to ownership laws meant residents throughout the UAE who have been long worked in Sharjah were able to move in and officially settle down. It also provided an affordable option to those who could not afford to buy in Abu Dhabi or Dubai, as well as investors seeking greater diversity in their portfolios.
In many ways the new law has totally transformed the market. The Emirate now sees demand for projects that previously did not exist. With an increasing expatriate community, the demand for lifestyle projects, such as family entertainment centers, malls, and mixed-use developments, is growing alongside. With more expatriates and UAE nationals with higher disposable incomes moving to the Emirate, the construction sector is putting a new emphasis on building facilities and providing amenities that provide them the lifestyle they are seeking. More residents with more money to spend translates to positive effects on Sharjah's economy and job creation. In fact, the government's budget for 2017-18 has plans to create some 1,800 new jobs specifically for Emiratis.
One particular aspect of the changing profile of development is the increasing prevalence of gated communities. After the Emirate allowed foreigners to own property, the Sharjah Urban Planning Council was set up to develop a comprehensive strategy for urban development, infrastructure projects, and environmental issues. Since then, gated communities and developments have been constructed at an extremely fast pace. With a significant gap for this segment in Sharjah, buyers flock to these units that are sold almost immediately, considering the significant price difference from Dubai and Abu Dhabi.

There are several big-name developers launching projects in the Emirate either in partnerships with the government or on their own. One of these is Tilal City, a AED2.4 billion mixed-use development that occupies 2.3 million sqm and provides the option to buy or lease land and build. Built by Tilal properties, the largest planned real estate project in the Emirate will house approximately 65,000 residents, as well as a 185,806sqm mall, when fully completed.

Sharjah's own Omran Properties recently announced a score of new projects, opening up potential investments in hospitality, commercial, residential, and retail sectors, in total worth just under AED2.5 billion. The portfolio's largest project, Maryam Island, situated amongst the Al Khan Lagoon and Al Mamzar Peninsula, is a mixed-use development worth AED2.26 billion and set to open before the end of 2017. In addition, the company has planned Al Khan Village Resort, an over AED120 million five-star hotel, as well as the AED106 million Kalba Waterfront Mall.

As one of the greenest cities not only in the UAE but the region, there is pressure on builders for developments that exceed the highest international standards and break ground in the realm of green buildings. TBY sat down with Faisal Ali Mousa, the builder of the first smart tower in Sharjah and chairman of FAM Holding. The project, a 1,800sqm lot that saw USD54.4 million and 85% sold within the first three months, was such a success that FAM Holding received awards from the government for Best Developer and Best Project in 2016. The company is also developing projects on the premier Jamal Abdul Nasser Street. A six-floor, 3,200-sqm mixed-use space, Sarkwa Tower has also seen similar success, with 95% already sold. About 20% of the project is completed, which will be equipped with a swimming pool, gym, and basketball and tennis ball courts on top of the building.

According to the property consultation firm Cluttons, the Emirate saw average residential rents fall by 10.6% through 2016, at just above AED63,000 per annum. In the first six months of 2017, however, the market showed signs of bouncing back. Average rent for villas increased by 11.7%, up to just under AED112,000 per annum, with growth coming in both the first and second quarters. According to Cluttons, this is the first time rents for villas have gone up since late 2015, a sign of the increasing knowledge of the lucrative prices of real estate in the Emirate. Comparatively, the annual average price to rent a villa in Abu Dhabi and Dubai are between AED140,000 and AED150,000.

Unlike villas in the Emirate, however, apartment rents failed to make a comeback in 2017. As of June 2017, average annual prices have dropped by 7%, and that is down from the 8.1% drop seen in 2016, Cluttons reports. Among the markets that declined the most is Al Nahda, which saw a decrease as high as 10.9% between January and June 2017. Within the Al Nahda market, one-bedroom apartments decreased in annual price by close to one-fifth, to stand at AED38,000, whereas three bedroom flats managed to record some growth, increasing to AED70,000. Overall, residential rents saw a decrease of 5.5% year on year from June 2017.

Cluttons predicts that average annual rents for apartments will continue their moderate downward trend for the remainder of 2017 and will probably fall in tandem with those of Dubai, from 5-7%, with property owners reducing prices to stay competitive. Meanwhile, the demand for villas is predicted to continue its climb, still driven primarily by Sharjah's competitive prices. The sustained increase will ensure the continued construction of mixed-use projects throughout the Emirate.

So far in 2017, office rents have remained in a comfortable standing, Cluttons reports. In the areas of Al Soor and Al Majaz, rental prices have stood steady over the first six months of 2017. The stability this year is much welcomed, considering 2016 saw rents drop by as much as 9.3% in some premium locations in Al Majaz, equating to AED68 per square foot, and by 7.7% in Al Soor, with rents at AED60 per square foot. While global economic factors played a role in weakening the market worldwide, Sharjah and its prime office market was able to emerge relatively unscathed from it all, primarily due to its small size.
It is not just locals that the country is interested in, however. In line with the Emirate's tourism vision for 2020, Sharjah is preparing to host 10 million tourists by the end of the decade, and is in the midst of building the infrastructure to support it. Announced in September 2015, currently under construction is the Sharjah Waterfront City, located on the Emirate's northeast coastline. The USD5.4 billion project is set to be the Gulf's third-largest mixed-use project. It is by far Sharjah's largest master planned development, set to cover approximately 60 million sqft over 10 islands and contain 36km of waterfront. About 60% of the land will be made into parks or beaches, while the other 40% will be used for buildings; developers hope this higher park and beach ratio will help boost the project's attractiveness to potential buyers.

The first phase of the project, set to be complete in 2018, has a budget of USD2.6 billion and will include several tourism facilities, a 3.3 million sqft mall, 24 mixed-use towers, a luxury hotel, and a central business district. Sharjah Oasis Real Estate Development Co., the developer of the massive project, began the first round of residential unit sales not long after the project was announced. The real estate company has already signed an MoU with Kempinksi Group affiliate Shaza Hotels and with Dusit Hotels and Resorts. The former will develop a five-star hotel with 300 rooms and 350 serviced apartments, while the latter is set to build a hotel with 200 rooms and 200 serviced apartments.

When complete, the project will consist of 200 towers, 95 apartment buildings, and 1,110 villas, as well as restaurants, shops, banks, marine clubs, schools, and mosques. The area will also boast the Crystal Lagoon, a water theme park designed by Jack Rouse Associates, 30 family friendly attractions, and an integrated tram network to connect it all.

In an exclusive interview with TBY, the Vice President of the project's developer, Ahmad Al Hadidi, explained the many advantages of the project. “As the land formation is natural, it does not involve dredging and the canals have a natural flow of water. The location itself is a clean and undeveloped area that we can control in order to preserve its cleanliness," Al Hadidi said. “The location also offers direct access to three highways, Al Ittihad Road, Emirates Road, and Sheikh Mohammed Bin Zayed Road, making it easy to reach any of the Emirates. Plus, the water taxi will connect Sharjah Waterfront City to the other Emirates via a platform previously unexplored. It is also very close to the Hamriyah and Ajman free zones, which plays a major role in generating business visits and overseas employment."