As Dubai prepares to stage the World Expo in 2020, the focus of development is shifting from the central axis and moving to secondary locations in the south and east. The Dubai Municipality’s medium-growth scenario forecasts a population of 2.8m by 2020, while city planners are aiming to accommodate 3.4m in time for the Expo. Consequently, another 25,000 ha of land will need to be released for residential, commercial and industrial use, taking the total area of developed land in the emirate to 118,000 ha.
Market forecasts predict that the Expo will draw in 25m visitors and create 277,000 jobs over the next five years. “In the Expo area, land prices have doubled,” said Ozan Demir, data and research manager at Reidin. For example, in the south of the city land values have gone from Dh80 ($21.78) per sq foot to Dh160 ($43.56) per sq foot since the announcement, according to Reidin. “The southern corridor of Dubai has received a great deal of attention over the past year due to its proximity to the Expo 2020 site and the new airport, resulting in authorities accelerating public infrastructure plans, such as roads and utilities, with a massive increase in creating integrated master communities to support this new expansion of Dubai,” Yousuf Kazim, the CEO of Jumeirah Golf Estates, told OBG.
The new airport has also drawn investors to the southern end of the emirate. “In the Dubai World Central area and the south of the city, you see quite a lot of activity in land transactions due not only to the Expo but more significantly the new airport,” said John Stevens, the managing director at Dubai-based real estate firm Asteco. “It will be such a big airport that I think we will see a significant increase in both commercial and residential development supported by the progressive delivery of the new airport and related infrastructure.” Upon completion, Al Maktoum International is set to have a handling capacity of as many as 160m passengers per year. The airport will be part of the planned development of Dubai World Central, which will create a logistics hub in the south of the city and a Custom-bonded zone connecting the airport with Jebel Ali seaport, the largest container port between Rotterdam and Singapore (see Transport chapter).
The development is in its early stages and the airport has an annual capacity of 5m passengers. Although developers are naturally gravitating towards the south, where the available land is, some are sceptical about the current potential for development in the south of the city as a result of future projects such as the Al Maktoum Airport expansion and the Expo facilities. “If you build now, what sort of return can you get? It probably doesn’t justify the cost of construction. You could potentially have many years of pain before you see a proper return,” said Matthew Green, the director and head of research at CBRE Middle East, referring to the potential lag between development and Expo profits. “There has been a significant spike in land values everywhere. Land is used as a speculative tool in this market. Increases in value do not necessarily reflect what a company would get if they actually developed the land.”
The majority of land that has been designated as available for future development in the Dubai Urban Masterplan 2020, first released in 2012, lies in the east and south of the city, close to the two airports, Al Maktoum International and Minhad military airport. “Master developers have released billions of dollars worth of land plots near the Expo 2020 site over the past year, as the area increasingly looks set to become the new urban centre of Dubai,” Mirwais Azizi, chairman of the Azizi Group, which is involved in real estate investment, told OBG.
While much land to the east of the main north-south axis of the city has been zoned for residential development, it is unclear how the unzoned land banks to the east and south of the city will be used. “Social pursuits such as affordable housing will achieve land release together with potentially logistics and industrial projects as the land available is used for existing projects,” Christopher Seymour, head of property for the UAE at ARCADIS, told OBG. The head of Dubai Urban Plan 2020 at the Dubai Municipality, Najib Mohammed Saleh, told the local press at the Urban Agenda 2020 conference in March 2014 that community facilities and affordable housing will be addressed in the upcoming Phase 5 of the master plan. Saleh added that most growth in terms of urban development will occur in proximity to Al Maktoum International Airport and Dubailand in the east of the city, while urbanisation will largely be confined to the area between the coast and Emirates Road – the north-south axis formerly known as the Dubai bypass. As the city grows, upgrades are also due for public transportation infrastructure. Dubai’s metro is scheduled for a 40-km expansion, which will include additions on the Green Line, connecting suburban residential developments such as Dubai Silicon Oasis and International City, as well as a southern extension to the Red Line from Jebel Ali to the Expo site. Such improvements are likely to benefit developers that are tied into the system. “The metro locations are now having a positive effect on the land prices in these areas,” Christopher Seymour, head of property for the UAE at ARCADIS, said.
Dubai has a relatively high population density, at 2650 people per sq km, and while its development model has been premised on building density, ranking third globally in terms of the number of buildings over 150 metres, the residential demands of its growing population have inevitably led to lower-density developments on the periphery of the city. “In the previous cycle, you did not have the outer circle of developments, but now you have a substantial amount of infrastructure built and people have the opportunity to move to the suburbs in order to save on rent,” Rehan Akbar, an analyst for EMEA corporate finance at Moody’s Investors Service Middle East Department, told OBG. Areas such as Discovery Gardens and Dubai Sports City have seen considerable interest. The former was the best performer out of all Dubai developments in the last quarter of 2013, with sale prices on apartment units in the project increasing by 83% year-on-year. Dubai Sports City witnessed price increases of 6% for two-bedroom units and 5% for one-bedroom units in December 2013, following the announcement that Dubai won the Expo, while much of the market outside the area of the Expo site remained relatively flat. Further to this, many of the residential units delivered in 2014 and 2015 will appear in the high-growth zone in the city’s east. Developments such as Liwan in Dubai-land, Jumeirah Village and Dubai Sports City brought more than 10,000 units to the residential stock in 2014.
The situation has picked up since the crisis: Dubai Properties Group signed a land sales agreement with the local developer Pacific Ventures for a new residential project in October 2013. The Pacific Village Project, which is expected to be completed by 2019, will bring 65 villas, 102 four-bedroom townhouses and several two-bedroom apartments to the market. As developers move into new areas of the city, they must now accommodate the visitors expected in 2020.