Interview: Mohammed Al Mubarak
Are developers now looking to restart schemes that were placed on hold after the market downturn?
MOHAMMED AL MUBARAK: The slowdown afforded Abu Dhabi the time it needed for the market to catch up with customer needs. Dialogue between regulators, master developers and key stakeholders helped formulate policy to create a suitable market structure that allows for positive economic gains and provides greater protection to end users and investors. We anticipate further clarity will come as new regulations are implemented, also helping to grow the maturity of the market and heighten local and international business interest.
More importantly, the slowdown exacerbated the undersupply of quality real estate developments, and I want emphasise the word “quality”. Abu Dhabi’s strategy of economic diversification is creating significant demand for high-quality, modern residential property. Major employers such as the Cleveland Clinic and the Abu Dhabi Education Council require bulk-housing solutions in communities that offer excellent amenities and facilities. As a result, leasing activity has been very strong, contributing to healthy recurring income for developers. The increased demand for quality developments has not been limited to residential properties – demand for quality retail, hospitality, commercial properties and even schools is also on the rise. Developers are therefore looking to introduce new products into the market. We are currently evaluating over 20 different developments across a diverse array of segments within the sector. However, we are rigorous in our planning and before launching any project an immense amount of research is conducted internally to develop a clear strategy for each of our developments.
How can Abu Dhabi ensure that short-term growth is not at the expense of medium-term stability, and in what ways can developers contribute?
AL MUBARAK: A lot has been accomplished since 2006 in terms of developing high-quality infrastructure to support development, be it on Al Reem Island, Yas Island, Saadiyat Island or Al Raha Beach. To ensure a sustainable recovery, priority must be given to projects in locations where high-quality infrastructure already exists. We have also focused on creating a more mature sales environment with well-established guidelines, including payment plans that work for the developer while also protecting the customer (e.g., contingencies based on project construction). As an industry, we must avoid past issues, such as when sales were primarily driven by the secondary market. Developers also need to strike the correct balance between developing recurring revenue-generating assets and those that can be sold as part of a broader strategy to inject capital into new developments. Diversifying our customer base among end users and individual and institutional investors is also key for achieving greater balance.
To what extent has the retail market gone from being underpenetrated to being oversupplied, and what is your outlook for the segment?
AL MUBARAK: When you look at the forecasts, Abu Dhabi’s retail offering seems abundant, but upon closer examination it is really not the case. Again, it comes back to the need for quality. Several community malls were developed in the past 10 years, and they did an excellent job of servicing market needs. By 2017-18 we anticipate more malls of this nature will be developed that cater to particular demographics in specific locations. This will foster greater competition, forcing older malls to evolve and improve their quality offering.
Yas Mall is a unique product in the emirate’s retail landscape. There is currently nothing matching its size, scale and quality. As a destination mall experience, Yas Mall will fill the market gap and address the need for such retail offering. Abu Dhabi has a mall-oriented culture, with families spending an average of four to six hours per visit. Conservatively we anticipate an estimated 20m visitors during the first year, with an expected annual increase of 5-8% thereafter. It will be a significant contributor to Aldar’s recurring revenue.
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