The United Arab Emirates (UAE) has not been known for its restraint in real estate in recent years – or in much of anything else for that matter. From $11 million Christmas trees draped in fine jewelry to artificial, palm-tree islands (that are slowly sinking into the ocean[1]), “real estate glitz” has been the byword in that area of the world for quite some time. However, in the wake of a dramatic market crisis, “location and quality construction have re-emerged as critical factors in the residential and office segments,” observes Saeed Hashmi, who points out that despite the building frenzy of past years, there is still price stability and “no oversupply” of high quality builds[2]. Hashmi believes that profit for real estate investors and developers moving forward will lie in relatively “dull” budget hotels and malls that serve neighborhoods rather than regions.
Jones Lang LaSalle recently released a report on UAE real estate stating that “developers and managers are making the transition from return on ego to return on equity,” and predicting that the market should begin to stabilize this year. In retail, smaller, more stable supermarkets are replacing the “super-regional” malls that boast indoor ski slopes and other opulent amenities. While the Jones Lang LaSalle report was largely positive, it did emphasize that there would not likely be a recovery this year thanks to “unrealistic prices and a lack of attractive investment properties.”
Experts in the United States commercial and residential markets have made similar analyses of our retail, multifamily and resort sectors as well as single-family neighborhoods, saying that good quality construction fell by the wayside during the “boom” as people with little or no experience in development jumped on the bandwagon and started building. And many developers insist that there is still a market for high quality construction and unique building. Do you agree that there may be an untapped new-construction market in the United States, much as some analysts are claiming about the UAE?
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[1] http://www.boingboing.net/2011/01/26/dubais-artificial-is.html
[2] http://www.themedialine.org/news/news_detail.asp?NewsID=31627
March 17th, 2011 at 3:03 PM
Spending continues to be strained among our middle to upper-middle classes; lower middle class wage-earners are extremely constrained in spending…lowering debt is the goal today. This leads to less profits for everyone…this “less profit” will show up just in time for the summer…right along with core and energy/food inflation numbers that will come out…not to mention that EVERYONE knows job creation will take two to three years to dent unemployment as a whole. Look at it this way: there may be alot of “rich” people out there, but no where near enough to buy ‘n drive’ all the cars in dealers’ lots nor enough to buy n’ wear all the clothes on the retail racks(designer or not). INTERNET SHOPPING TO THE RESCUE…sadly, “soft-shops” don’t need buildings…drop shipping takes care of that.
The only untapped construction will be rebuilding inner cities where people will want to move to in order to be close to all the things they can’t drive to anymore…not when gas prices hit 4 bucks this summer!
2012…there may be untapped construction then…for sure in Japan, not here.