Gulf’s Planned and Underway Real Estate Ventures Rise to $1.7 Trillion
Continued Expansion Anticipated for Middle East Property Market in 2024, CBRE Predicts.
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According to a CBRE analysis, the Gulf region’s planned and ongoing real estate projects experienced a significant surge in valuation last year. The combined value of these developments, either in the planning phase or under construction, has reached an impressive $1.68 trillion, CBRE reports.
The real estate market in the Middle East is prepared for continued growth into 2024, driven by robust economic expansion, rising demand, and a constrained supply, as per the CBRE 2024 Middle East Real Estate Market Outlook.
Middle East Property Sector’s Dynamics
Economic growth within the GCC countries presented a mixed picture in 2023, with an average growth rate of merely 0.6 percent, a sharp decline from the 6 percent seen in 2022. This slowdown was largely attributed to a deceleration or contraction in several GCC countries’ oil GDP growth rates, averaging a drop of 3.1 percent. However, this contrasted with an average increase of 3.1 percent in their non-oil GDP growth rates.
Expectations for 2024 indicate a rebound in GDP growth across the GCC, with projections of 2.9 percent overall growth. While oil GDP is forecasted to rise by 2.2 percent, non-oil sectors are anticipated to experience a more robust growth rate of 2.9 percent during the same period. Despite global and national economic challenges, especially in oil-related areas, the non-oil sectors, especially real estate, remain vibrant across the GCC.
By 2024, the total value of real estate projects either planned or currently under construction in the region is estimated at $1.68 trillion, up from $1.38 trillion the previous year. Saudi Arabia represents a significant portion of this value, accounting for 63.1 percent or approximately $1.06 trillion, followed by the UAE with $409 billion, making up 24.4 percent of the total. Bahrain, Kuwait, Oman, and Qatar contribute smaller shares to the overall total.
The heightened investment levels underscore the GCC countries’ commitment to diversifying their economies through the development of the built environment, according to Taimur Khan, Head of Research – MENA at CBRE.
Khan emphasizes the positive economic outlook for the region, underlined by stronger growth and investment inflows, which are expected to support robust demand and performance in the real estate sector.
The GCC’s residential market saw uniformly positive price performance throughout 2023, and this trend is likely to persist with continued split in growth rates. The office real estate sector is anticipated to maintain its strong performance from 2023 into 2024, although challenges such as global economic uncertainties and limited supply in key markets may affect activity levels.
Sector-Specific Insights
– Office Real Estate: In 2023, Bahrain witnessed stable rental rates for Prime and Grade A office spaces, accompanied by an uptick in occupancy and a restrained addition of new supply. The coming year is projected to see a modest decline in rental prices as the supply slightly expands. Resident interest and market performance are expected to remain robust in Saudi Arabia and the UAE.
– Residential Real Estate: The residential sector across the GCC enjoyed uniformly strong price increases in 2023, with a forecast of continued but varied growth in 2024. Notably, the UAE distinguished itself with significant growth in both pricing and transaction volumes.
–Hotel Sector Real Estate: Visitor numbers across the GCC saw an upward trend in 2023, a pattern anticipated to persist into 2024, though distribution will vary by country. The high-end beachfront segments in Abu Dhabi and Dubai are poised for exceptional performance, primarily due to the scarcity of new supply.
–Retail Real Estate Sector: Bahrain experienced a mixed retail market performance in 2023, with expectations of an ongoing occupier-friendly environment in 2024 driven by an increase in supply. In the UAE, the pressing issues are robust demand coupled with a lack of premium stock.
-Industrial and Logistics Real Estate Sector: The sector continued to see demand surpassing supply in strategic GCC areas, with the addition of new supply in 2024 unlikely to lower rental rates. The rate of rent increase is expected to see a slight decrease.
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Villa prices saw particularly strong growth, with capital values increasing by 33.4 percent year-on-year
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Dubai’s real estate market showed strong performance in the second quarter of 2024, with notable increases across the residential, office, and retail sectors, according to a new ValuStrat real estate report for Q2 2024.
Villa prices experienced particularly strong growth, with capital values rising by 33.4 percent year-on-year.
Haider Tuaima, Director and Head of Real Estate Research at ValuStrat said: “The Dubai real estate market has shown impressive growth and resilience in recent months. The ValuStrat Price Index for Residential Capital Values increased by 6.4 percent quarterly and 28.2 percent annually, reaching 178.2 points.
“Despite severe flooding caused by record rainfalls in April, the quick and effective response from developers and authorities helped to control the damage, ensuring that market activity and property valuations remained robust in the subsequent months.”
The office sector also performed well, with the VPI for office capital values surging by 31.7 percent annually and 9.4 percent quarterly, reaching 212.5 points—the highest quarterly increase in a decade.
In the retail sector, Emaar Properties reported 98 percent occupancy in their prime mall assets, while overall mall occupancy stood at 96 percent during the first quarter of 2024. The hospitality sector also saw growth, with total international guests reaching 8.12 million as of May 2024, a 9.9 percent increase compared to the same period last year. Hotel occupancy reached 81 percent, rising by 1.4 percent year-on-year.
Despite these positive indicators, Tuaima added, “The decline in transaction volumes calls for a closer examination of market dynamics as stakeholders navigate this evolving landscape.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
