World Expo 2020 win to boost UAE economy
Dubai, November 26, 2013
The '2020 World Expo' bid, if successful, will benefit the UAE economy in a big way, especially in the hotel, logistics, residential and retail sectors, said Alan Robertson, the CEO (Mena) of Jones Lang LaSalle, a leading property expert.
However, the short-term impact needs to be managed carefully to avoid the inevitable boost in sentiment translating into excessive price growth or over development,” warned Robertson.
“While the Dubai real estate market is poised for growth regardless of the 2020 World Expo, the success of this bid will act as the single most important influence on the real estate sector across the UAE in 2014, said the JLL chief.
The impacts on the real estate sector can be classified into three groups, prior, during and post the 6 months event itself. While the immediate and short term impact is likely to dominate the headlines and define the shape of the market in 2014, the most important and strategic benefits will be the long term ‘legacy’effects of the Expo on the UAE economy, the expert added.
Robertson pointed out that the Expo 2020 would not benefit all sectors of the Dubai real estate market to the same degree. "The hotel and logistics sectors being the biggest winners, while the residential and retail sectors will also derive significant benefits," he stated.
According to him, sentiment is a major factor driving the UAE real estate market. "Despite the Expo being 7 years away, we would expect the news of Dubai’s successful bid to result in a major boost in short term sentiment and increased interest in the real estate sector," said the JLL official.
"The most immediate impact of this improved sentiment is likely to be an increase in the asking price for both land sites and existing villas / apartments in developments close to the Expo site. While prices in the Jebel Ali area will almost certainly increase, the availability of significant new supply will temper this increase and could result in a widening gap between asking prices and those the market is willing to pay," he added.
Robertson pointed out that the supply levels in the corridor to the South of Dubai were likely to increase as a result of a successful Expo bid.
"A number of developers have major land holdings around Dubai World Central and plans to develop these are likely to be ‘kick started’ on the back of the improved sentiment resulting from the World Expo decision," he revealed.
"Nakheel has recently launched 500 new land plots in their Al Furjan project at Jebel Ali and we would expect a rash of further announcements over the coming weeks, as other developers seek to sell either land plots or ‘off plan’ residential units," he said.
There remains significant levels of new residential supply planned for Dubai over the next two years (with 45,000 units scheduled for completion by the end of 2015).
While few of the new projects around DWC are likely to be completed within this timeframe, significant levels of off plan sales could add further competition to those projects already announced., he stated
According to Robertson, the hosting the 'World Expo' will have a significant positive impact on the Dubai economy and therefore the demand for real estate, with estimates that the event could add as much as two per cent to Dubai’s GDP and result in the creation of up to 277,000 additional jobs.
"If these estimates prove correct, the real estate market would be a major beneficiary, through increased spending and higher demand for housing, hotels and commercial accommodation," said the JLL chief.
However, Robertson had a word of caution for the developers and real estate owners. "The challenge for them is twofold, to phase projects in line with increased demand (and therefore avoid flooding the market with excess space in the short term) and to find long-term uses for the real estate after the event itself," he noted.
In case of a Expo 2020 bid win, Robertson said the hospitality sector will clearly be the major winner in terms of real estate demand during the period of the event in 2020.
"This sector has been driving the recovery of the Dubai market over the past two years, with the emirate currently registering one of the strongest levels of any market globally," he pointed out.
Recent data shows that average hotel occupancies over the first 10 months of 2013 have averaged 79 per cent (up from 76 per cent in the same period of 2012), resulting in a 6.5 per cent growth in RevPAR compared to the same period of 2012).
With up to 25 million visitors expected to attend, the World Expo forms a major plank in the Governments vision to attract more than 20 million foreign visitors annually by 2020, said the property expert.
Estimates of the additional hotel supply necessary to accommodate these visitors vary (with a number of alternative accommodation strategies being considered), but could be as high as 45,000 additional rooms.
This demand is likely to spillover from Dubai to other centres within the UAE and even to surrounding countries such as Oman. Not all the guests will be seeking hotel rooms and the Expo will therefore broaden the tourist accommodation offer of the UAE, he added.
Chiheb Ben Mahmoud, the head of JLL’s Hotel and Hospitality group in Mena said winning World Expo 2020 will be the single biggest driver of activity in the UAE tourist market over the next five years.
"With existing hotels in Dubai trading at high levels of performance, there is already demand for additional rooms, we now expect an additional surge in proposed supply in all sectors of the market, with DWC emerging as a third major cluster of hotels in Dubai, complementing the existing clusters along the beach and in the CBD/downtown area," stated Ben Mahmoud.
According to him, the retail and leisure sector will also benefit directly from the high level of visitors during the event itself.
The Dubai retail sector is well placed to cater for tourist spending and the 'World Expo' is likely to strengthen demand for the additional F& B and tourist-related retail malls in the future supply pipeline, Ben Mahmoud added.
On the legacy impact, Robertson said: "Perhaps the greatest benefit from hosting major global events - be they Olympic Games, Soccer World Cups or World Expos - lie not in the immediate impact on the host economy during the event itself, but in leveraging these short-term factors to create positive long-term legacy benefits to the economy and the urban structure of the host city."
In terms of the real estate market, the most significant legacy benefits of hosting Expo 2020 will be to bring forward the timing of a number of major infrastructure projects and to provide the impetus to develop a whole new urban district (Dubai World Central) to the south of the existing urban area, he pointed out.
The Al Maktoum International Airport (AMIA) forms the centerpiece of Dubai World Central and is one of the largest and most ambitious airport based cities (or Aerotroplis) planned around the world.
The airport has been open for Cargo operations since 2010 and passenger services commenced from the new airport in October 2013. World Expo 2020 will act as a major catalyst, accelerating the expansion of passenger facilities at AMIA, which is ideally located to cater for international visitors to the Expo.
A key component of the Dubai Expo bid is a commitment to extend the existing red line of the Dubai metro to Dubai World Central by 2020. As with other proposed infrastructure improvements, this extension may well have proceeded at some point, but the timing will be brought forward by the need to serve the Expo in 2020.
Multi-modal freight facility
A less publicized infrastructure benefit of the World Expo 2020 would be the creation of an integrated sea and air freight facility at Jebel Ali. The proximity of the new airport to one of the world’s largest existing seaports at Jebel Ali allows for the creation of a single freezone for the shipment of goods,acting as a major boost to the already significant re-export sector of the Dubai economy.
The World Expo will result in the creation of a major new conference and exhibition facility within DWC. This will provide Dubai with a world class purpose built facility to cater for the growing meeting, conference and exhibition market. It will also allow the phased redevelopment of the existing convention and exhibition facilities on Sheik Zayed Road for alternative, higher value, land uses.
JLL said it had played a key role in the Expo Bid through its contribution as part of the Dubai bid team led by Deepak Jain, the head of strategic consulting team in Mena advising on strategic real estate components and its subsequent legacy.
"Hosting the Expo will not only strengthen Dubai’s position as a regional business hub but also contribute to its continuing success as a trade and tourism hub from a global perspective as well as an emerging link between Asia and Africa – the south-south trade corridor," stated Jain.-TradeArabia News Service