Gulf Real Estate Study

Delivering The Promise

David Clover — Tue, 05 Jan 2010 05:06:53 +0000

As every brand’s action or inaction is scrutinized more than ever before, there will be an increased emphasis on companies on the delivery of measurable results. The market will insist on seeing tangible and real supporting evidence for each promise, projection or claim. The days when business needs set marketing deadlines with no correlation to the development timeline have past. This spells doom for those brands that maintain hype-driven, empty promises.

In this environment of rigorous analysis, companies that operate in an integrated and holistic fashion (aligning business, marketing and development timelines) will be better positioned to survive.

Crisis management teams that involve the full spectrum of the organization need to be seriously considered as a vital part of the organizational structure of the future. Even though most players in the region are private entities, adapting the PR practices of publicly listed companies in managing crises will help them better weather the storms that might lie ahead.

A New Dialogue

David Clover — Tue, 05 Jan 2010 05:05:20 +0000

Across the region many units are being completed and handed over to residents (whether rental tenants or owners), and people who live in the developments are finally emerging as an important audience. To date, this large audience has been neglected or siloed as a concern for the facilities management company. During times when long queues at sales launches were commonplace, the focus was on converting potential buyers into actual customers. Once the sales agreement was executed, customers were no longer of primary importance unless they remained potential buyers of future properties. Worse still, rental tenants were completely disregarded, as they were not considered direct clients of the developers.

Tenants and residents represent the largest group of potential brand detractors or brand ambassadors, and they will wield significant weight in shaping the public perception of the brand. How effectively and innovatively developer brands can connect with the residents, tenants and the wider community will be a critical element in building brands of the future.

Breaking The Silence

David Clover — Tue, 05 Jan 2010 05:04:47 +0000

The ways of communicating to end users have never been more varied. The emergence and ease of use of social media and other Web 2.0 applications have provided a very effective megaphone to the masses. Reflective of the overall market sentiment, it is often the most disgruntled (from irate groups of foreign investors to the outraged tenants of a particular community) who use these outlets to vocalize their frustrations and mobilize like-minded people. A region still dogged by a lack of transparency and a silent media, both of which foster unabated and uncontested attacks on a brand’s reputation, is ripe for this trend.

Instead of ignoring these voices or the new media available, it is imperative for brands to embrace them. If nothing else, it can serve as a valuable way to better gauge the brand’s performance and take the pulse of market sentiment. Brands should look to develop strategies to engage their audiences in a positive dialogue.

Financial Innovation

David Clover — Tue, 05 Jan 2010 05:03:17 +0000

Demand is at an all-time low as an increasing amount of property is flooding the market. Surprisingly, the region has been slow in enacting some of the financial measures put in place in Europe and the US to stabilize and boost the real estate sectors. Mortgage rates (from those institutions that still offer mortgages) remain high, with no signs of relief for those burdened with properties decreased in value. In an unfortunate state of affairs, the banks and lending institutions are often treating existing and potential customers as potential liabilities and defaulters rather than as prized clients.

Through closer partnership with financial institutions or state-backed offerings, new and innovative financial products will be critical to generating any real boost in demand.

Portfolio Rationalization

David Clover — Tue, 05 Jan 2010 05:02:42 +0000

The steady flow of news of various cancellations, delays and re-evaluations have left investors, the media and industry analysts confused as to the true scale and scope of both tier 1 and tier 2 developers. Many developers remain silent about the true situation of many of their projects, with many continuing to market though their websites developments that have been suspended, cancelled or delayed.

Whether through financial constraints or imposed mergers, consolidations or downsizing, developers are faced with difficult business and brand decisions regarding the optimization of their portfolios in reaction to the new economic reality. While it might initially appear to harm the brand’s status to reduce the size of the active portfolio, being more transparent with information on project timings and each project’s primacy to the developer’s value proposition will yield greater dividends and optimize the outlook for the future.

The Rise Of Abu Dhabi

David Clover — Tue, 05 Jan 2010 05:01:16 +0000

Major real estate developments and country branding initiatives in emerging markets are inextricably linked. An awe-inspiring mega project can generate tourism, and a city’s successful tourism promotion program can generate demand for property. Dubai’s meteoric real estate success and rise as an international tourism destination is a prime example of the impact that one can have on the other. With The Palm, Burj Khalifa, Dubai Shopping Festival and a spectrum of other projects and government initiatives, it was no surprise that Dubai dominated and led the emergence of the region’s real estate sector.

Since the global financial crisis, however, no other city has suffered a more dramatic fall from grace than Dubai. Emerging to take its lead is its neighboring city, the Emirate of Abu Dhabi. As the future home of the Guggenheim and the Louvre, host of the F1 Grand Prix at an immaculate new racecourse, and the rising prominence of Masdar in the global discussion of alternative energy; Abu Dhabi is putting on an impressive — albeit more reserved — and diversified bid to claim the title of the new capital of the Middle East. With its financial strength and its rise as a destination of note, Abu Dhabi is best-placed to lead the region’s real estate recovery. It is also poised to be the first place in the region to attract foreign investment and partnership opportunities in the future, should the Emirate seek these.

Additional Insights

David Clover — Mon, 04 Jan 2010 05:08:49 +0000

Preferred Locations

This chart illustrates the performance of cities in the region in driving preference.

Preference Drivers

This graph depicts the relative importance of key attributes in terms of their ability to predict a homebuyer’s predisposition toward a developer.

Breakdown By Transaction Type

Breakdown By Nationality

Insight On Developers II

David Clover — Mon, 04 Jan 2010 05:07:04 +0000

Developer Image

If “room to improve” and “parity at the top” were the two key takeaways in the 2008 examination of developer brand image, in 2009 the themes would touch on “weakening” and “decentralization.” Perhaps not surprisingly, given the downturn-fueled events of 2009,
ratings of developers across measures have declined, typically by between 5% and 10%. This is compared with the 2008 performance figures that had room to improve. Overall, the average grade fell from a B to a C+/B-. The other big story of 2009 is the continued decline of the Nakheel brand, the dramatic fall of Damac and the rise of non-Dubai-based developer brands including Abu Dhabi’s Aldar, Saudi Arabia’s Dar Al Arkan and Qatar’s Barwa.

Insight On Developers I

David Clover — Mon, 04 Jan 2010 05:03:54 +0000

Developer Recognition

Emaar remains the most recognized developer brand, although its lead over Nakheel has decreased. Beyond the jumps made by Barwa, Aldar and United Development Company (UDC), the big story is the decline of Damac. In 2008, Damac had risen to share the #2 position in recognizability with Nakheel. Today, Damac is almost 70% less familiar than Nakheel.

Developer Reputation

Emaar, again, remains the most highly esteemed developer brand, but the dramatic rise of Aldar, Dar Al Arkan, Barwa, Dubai Properties and UDC has closed the gap significantly.

Developer Preference

Similar to reputation, Emaar’s once unassailable lead in the GCC has greatly diminished. Aldar, Dar Al Arkan and Barwa are now preferred at levels that are beginning to rival Emaar.

Developer Outlook

In terms of how developers are expected to do in the current economic climate, Emaar is still the dominant developer brand in the region.

Impact Of The Downturn

David Clover — Mon, 04 Jan 2010 05:01:11 +0000

Based on the research, the principal impact of the economic downturn can be seen in the lack of trust homebuyers have for developers. Heightened awareness of risk, the potential for monetary loss, loopholes and corruption all speak to a weakening of homebuyer confidence. Perhaps most interesting is that this new wariness does not seem to affect homebuyer attitudes towards purchase.

People are almost 70% more likely to see value in investing right now than they are to feel less likely to buy or invest in the region ever again. A significant majority—approximately two-thirds of homebuyers—see value in the Gulf real estate market and intend to purchase in the future.