Over the past six months, we have seen various developments in the commercial sector of the UAE’s real estate market. From extensive financial support for the retail, hospitality and tourism industries to license fee waivers and more, the UAE government has taken proactive measures to strengthen the commercial real estate market and support industries that are facing unprecedented challenges due to COVID-19.
For our latest episode of the State of Real Estate with Bayut, we sat down with leading experts from the UAE’s commercial real estate sector to learn more about the evolving trends and the impact of COVID-19 on consumer interest.
WHO WAS PART OF THE BAYUT WEBINAR?
The eighth Webinar of Bayut was moderated by Fibha Ahmed, our highly successful Sales Director at Bayut and dubizzle Property. She led the discussion on the commercial landscape of real estate in the UAE.
Joining her in the discussion were our esteemed guests Andrew Love, Partner and Head of Investment at Commercial Agency, Cavendish Maxwell, Behnam Bargh, the Director of CRC, (A Betterhomes Group Company) and Robert Thomas, the Head of Core Real Estate Agency. They also shared their thoughts and expertise on the prevailing trends for commercial properties.
Watch the full webinar below or read up on the highlights to learn more about how industries initially reacted to the lockdown measures and how the concept of office spaces and work environments has evolved in the aftermath of the pandemic.
PANEL DISCUSSIONS ON THE IMPACT OF COVID-19 ON THE UAE COMMERCIAL PROPERTY MARKET
The session started off with our panellists sharing their individual experiences working in the commercial market of the UAE. They also spoke at length about how the commercial real estate space has performed before, during and after the initial mobility restrictions were introduced for COVID-19. The panellists also highlighted the rise in demand for co-working spaces and the challenges faced by SMEs in the region.
Business centres and co-working spaces in the UAE
Our panellists unanimously agreed that the business sector is growing in the UAE with more and more people opting for business centres and co-working spaces. They elaborated on how these spaces cater to people who prefer smaller working spaces and are keen on arrangements with greater levels of flexibility.
“Business centres and co-working spaces are great for the people who don’t want the big office or don’t want to make a yearly commitment so they can pay us on the go,” said Benham Bargh.
The panellists also agreed that due to the Covid-19 pandemic, larger organisations are also opting for flexible options like business centres with co-working spaces since many of their staff are now working from home.
Robert Thomas also clarified that although business centres have co-working spaces that offer the utmost flexibility, they are not the only part of business centres. So, companies that are simply looking for business centres can find a plethora of such options aside from co-working spaces.
“If you look at co-working spaces in a business centre, it’s actually 5 to 10 per cent of their overall space, so co-working in the way many people think of a traditional workspace is not the biggest part of business centres.“
While discussing the occupancy rate of business centres in Dubai, Ben highlighted that people are keen to retain their presence in business centres, but there are more negotiations for rent reductions or requests for a grace period.
“We are lucky to have a 98% occupancy in our business centre. There has been a demand for a rent reduction and some tenants have asked for a grace period and rent-free period but almost all of them want to stay, which is good.”
The effect of Covid-19 on the retail sector, SMEs and warehouses
In the next segment of the webinar, our esteemed panellists elaborated further on how the COVID-19 pandemic in the UAE has impacted the commercial real estate market.
Andrew shared his insight into the performance of commercial real estate and opined that while warehouses have been more resilient, office spaces have borne the greater impact of the recent events.
‘Offices haven’t rebounded yet. We are not at the same volume of inquiries. We are getting viewings but I think it’s more from corporates taking the time to evaluate and see where the market is going. It’s a similar story for the retail segment as well.’
Robert also agreed with Andrew and highlighted how the SME segment, in particular, was impacted by the mobility restrictions and work-from-home guidelines. He shared some interesting statistics about the segment that accounts for 95% of Dubai’s economy and makes up to 40% of the workforce, faced a challenging period in the last few months.
Ben, on the other hand, talked about the most sought-after areas for a commercial estate in Dubai. He said that while Business Bay and JLT are popular with SMEs, areas such as Dubai Investment Park (DIP), Al Quoz and Jebel Ali are appealing to those who need warehouses and more elaborate logistics to support their business operations.
The panellists also mentioned how some of the private landlords are offering incentives to tenants in terms of discounts, rent reductions and extension in rental free periods amidst these challenging times.
How are social-distancing guidelines impacting co-working spaces and business centres?
In the next segment, our distinguished panellists discussed the effect of social distancing guidelines on co-working spaces and business centres. Ben pointed out that business centres are allowing people to work in shifts while companies are also providing more support in this regard.
Andrew highlighted an important fact that well-structured business towers that offer state-of-the-art amenities and well-appointed elevators have an advantage over old buildings with fewer provisions.
“The older stock with lesser amenities will probably see bigger drops in rents and occupancy, as compared to the newer Grade A buildings that have adequate reserve provisions.”
Discussing the consolidation aspect of the commercial segment during and post the lockdown, Rob also concurred that those looking to upgrade their offices are moving to well-appointed buildings.
“People are looking to upgrade into A-grade buildings so consolidation has been leading post-COVID.“
He mentioned that areas such as JLT are in high demand with those who have a freezone licence.
Dubai CommerCity and the future of the E-commerce sector in Dubai
The UAE government recently announced the construction of the first-of-its-kind e-commerce city in Dubai Airport’s Freezone. The development will comprise of about 240,000 sq.m of offices and 54,000 sq.m of logistics space.
Applauding the initiative of Dubai CommerCity, Andrew said, ‘The challenge has been really been, for most e-commerce players, about operating from within a free zone, because of the speed at which goods need to clear the gates. So, the recent announcement of having a dedicated e-commerce zone, which is linked to customs, is of great benefit to the economy and free zone itself.’
While discussing the upcoming Dubai CommerCity, our panellists also spoke at length about the rapidly growing prospects of e-commerce in the UAE. They also shared their hope about the stability in rents for commercial properties over the next few months.