Dubai real estate becomes a magnet for institutional investors
Institutional interest has been steadily rising in Dubai real estate since new players have been introduced to the market. Institutional investors, such as banks, real estate investment trusts (REIT), and insurance companies have been keen on Dubai realty that is picking up in light of Dubai Expo 2020.
Grade A office buildings have been their main interest as they present high-quality standard finishes, state-of-the-art systems, exceptional accessibility, and a definite market presence. However, investors are also diversifying as they set their eyes on industrial units, schools, community shopping malls, medical facilities, and hotels.
Residential property hasn’t been traditionally an area of exposure for funds and organizations, who usually prefer lower turnovers and long leases. Serviced apartments or corporate accommodation with long-term contracts, however, is a market of institutional interest.
Nonetheless, institutional investors rarely take on build risk; they prefer to purchase the property once it is complete.
“Private equity players have progressively taken a more aggressive stance in the freehold real estate space since 2012 onwards, and these have been for a number of reasons, not the least of them being superior regulation and a more moderate and mature price cycle. The recent passage of the mortgage law and the allowance of private debt having locus standi vis-a-vis the underlying asset has further spurred interest,” describes Hussain Alladin, head of IR and research, Global Capital Partners.
2012 was a crucial year for private equity players who really dived in the freehold real estate space, after the change in mortgage law and the allowance of private debt. Not so long ago, the lack of investment-grade stock available for sale was highly criticised as small individual investors dominated Dubai real estate.
Institutional investors generally look for freehold buildings with a single or small number of tenants, long-term leases with all building operational costs covered by the tenants, and high annual yields relative to established markets such as London, New York, Singapore, etc. They form a strong covenant due to long lease terms with blue-chip corporate occupiers, giving asset managers steady yields over a longer investment horizon.
Freezone designated areas and popular freehold areas such as Downtown Dubai, Marina, and Jumeirah Lakes Towers have been attracting institutional investors who search for the sweet spot generally between $50 million to $100 million.
Copperstones is particularly active in Dubai, with an expanding residential portfolio of luxury properties in Downtown and Palm Jumeirah. While the market is regaining its strength, our team provides intelligence and investment consulting services for those looking to repurpose their assets in the UAE or abroad.
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