GCC real estate market outlook ‘remains bleak’
MANAMA: The GCC real estate market outlook remains bleak with signs of transactions bottoming out prolonged further into next year, according to a new report.
Kuwait-based financial powerhouse Kamco Invest’s GCC Real Estate Update indicates recovery next year will depend on both cyclical and structural catalysts.
As of end-October 2020, real estate sales in the GCC declined from a year ago, as total value transacted receded by four per cent year-on-year (YoY) to $72.1 billion from $75.5bn in the same period in 2019, while transaction volumes fell by 11pc YoY over the same period, the report said.
However, the average value per transaction in the GCC increased by 7.6pc YoY to around $166,105 during the period from January to October from around $154,365 in the same period in 2019.
The lower YoY transaction volumes and value transacted was largely due to the impact of Covid-19 on real estate demand and its various sub-segments.
The signs of transactions bottoming out witnessed in 2019 will now be prolonged further into next year.
This suggests that recovery gets pushed ahead until normalised demand conditions arrive post-Covid next year.
However, Kamco expects the supply-side to tighten cyclically next year, in terms of lower number of upcoming project announcements from developers, which should aid in arresting the ongoing steep declines of prices and rents.
On the flipside, it sees the need for newer catalysts to cater to changing consumer habits and clientele within each sub-segment of the real estate market, mainly in the areas of digital communication and e-commerce.
The contrast between demand for industrial and retail spaces is set to continue, and represent the strongest and weakest segments of the market respectively, shows the report.
Demand for industrial spaces will continue to be driven by e-commerce, third-party logistics, pharma, vertical farming and cloud kitchens.
Whereas retailers prefer to expand via omnichannel strategies, as consumers prefer to engage with the brand through many routes, thereby impacting demand for retail real estate.
Kamco expects entertainment and F&B tenants to remain the main drivers of incremental demand for mall spaces within the region, as against demand from retailers witnessed in the past.
Commercial office spaces will likely need to be transformed to absorb the newer flexible and hybrid office models to generate incremental demand.
Office spaces could also be repurposed as data centres, as Covid-19 has expedited the move to digital infrastructure for industries that are major users of technology and financial services.
