The contrast between the two largest markets in the UAE, Dubai and Abu Dhabi, is becoming increasingly distinct. Once the flagship of the region’s real estate potential, the Dubai market suffered the brunt of the economic crisis with falling prices, cancelled projects and mergers dominating the headlines. Although not without its own challenges, Abu Dhabi reported increases in prices and progress on its major developments.
Updates & Milestones
In an event that closed a tough year for the UAE real estate market, Emaar Properties launched the world’s tallest structure at 828 meters. In a surprise move, the tower was also renamed and will henceforth be known as Burj Khalifa. It is named after the current UAE President and Ruler of Abu Dhabi.61
In Q2 2009, Hydra Properties declared that it is considering delaying, canceling or selling many of its scheduled developments. With sales of less than 10% in some developments, Hydra has begun an internal assessment of its project portfolio to evaluate which developments are worth completing. Developments in Abu Dhabi, Dubai, Kuwait, Libya, Pakistan and Mexico could be affected.62
The $5.4 billion Awali City project could be scaled back to half its original size. Most investors have defaulted on their monthly payments for the past eight months, and the developer is re-evaluating plans to continue with the entire project.63
In Ras Al Khaimah, Rakeen bought the La Hoya Bay project from a private developer to maintain confidence in the RAK market during the economic crisis.64
All major projects in Abu Dhabi, such as Saadiyat Island, Al Sowwah, Reem Island, Yas Island and Masdar, are in progress, with a demonstrated commitment by the government to see them through to completion in their initially envisioned form.65
Residents of Discovery Gardens, a Nakheel property, have asked the Ruler’s Court in Dubai to freeze their service fees to the developer in light of substandard building maintenance and a general failure to develop common areas. The residents insist that the newly increased annual service charges ($5,948 for every 1,000 square feet) are unjustified because the services they are being charged for are either poorly maintained or do not exist.66
Manarat Al Saadiyat, a 15,400-square-meter visitor center that will host a gallery and special events, is scheduled to be opened at the end of the year on Abu Dhabi’s Saadiyat Island. The redevelopment of the natural island, which has been undertaken by the Tourism Development and Investment Company (TDIC), is set for completion in 2018 and will promote Abu Dhabi as a world-class cultural destination.67
Emaar Properties’ US development arm, John Laing Homes — a company it bought for $1.05 billion in 2006 and into which it poured another $614 million during subsequent financial troubles — was written down as a loss. John Laing Homes initiated bankruptcy proceedings in 2009.68
The UAE Minister of Economy has reported that the government will soon be amending the laws governing foreign ownership of businesses located outside designated free zones. In the hope of attracting a wider range of foreign investors to the country, the government may choose to allow 100% foreign ownership of businesses across the UAE; currently foreign investors may own a 100% stake in a company only if it is located within a free zone.69
As part of the Abu Dhabi 2030 plan, the Abu Dhabi government has launched a media production free zone, twofour54, which aims to become a regional hub for Arabic-language content production.70
Abu Dhabi’s TDIC has launched the first phase of the Desert Islands project by inaugurating Sir Bani Yas Island. As part of a larger plan to develop the Al Gharbia region of Abu Dhabi, the government plans to develop the Desert Islands project as a showcase for sustainable, eco-friendly developments. Work continues on two other islands as part of the Desert Islands project: Dalma Island and Discovery Islands.71
In Q3 2009, commercial rates in prime office locations around Abu Dhabi fell by around 40% as compared to the same period in 2008.72
In Q3 2008, the average lease rate for residential properties in Dubai was AED 110–120,000 per year; a year later rates had dropped to AED 55–65,000 per year.73
Office lease rates in Dubai have fallen below 2006 levels. Since Q3 2008, rates in Dubai’s CBD have seen a decrease of 55% year-on-year, while other business districts as well as newly developed commercial areas have seen an average fall of 67%.74
Though Dubai house prices are currently 47% lower than in Q3 2008, transaction volumes in Q3 2009 rose 64% in comparison to the previous quarter.75
A tenfold increase over Q2 and Q3 2009 was noted in active and potential demand for commercial office space in Dubai.76
Dubai is set to see an influx of 50,000 housing units in 2010, of which 20% are expected to be villas and only half of which are expected to be available for rent.77
Abu Dhabi saw the fifth-fastest fall in office rents as compared to other cities in the world. With a 39% decrease in commercial rents in Q3 2009 as compared with 2008, Abu Dhabi’s office real estate also faces a 6% vacancy rate.78
Office space in Dubai is facing a 40% vacancy rate, with over 10 million square feet unused as demand has dried up. Analysts predict that 150,000 white collar jobs would need to be created in Dubai to fill the office space that is currently available.79
Dubai tops the list of the world’s cities that have experienced housing price declines in 2009. Dubai was the worst performer on a list that surveyed 42 cities, with the emirate suffering a 47% year-on-year decrease.80
The UAE jumped from 31st to 18th rank in a global property opportunity index designed to inform the expansion plans of property developers.81
Masdar’s eponymous $22 billion green city has decided to focus on the first phase of its project, due for completion by 2013, while relaxing its 2016 deadline to complete the whole project.82
With a third of the 29 stations planned on Dubai Metro’s Red Line operational and the remainder set to open by April 2010, the Dubai Roads and Transport Authority now faces a contractual dispute over overdue back payments with the consortium building the rail network. The consortium has declared that it is stopping all work on the network and is focusing on securing back payments. The RTA has dismissed the reports.83
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