Special Report Contents
- Dubai real estate slowdown affecting property markets in northern emirates
- Analysts question market appetite for major project in emirate of Sharjah
- Rental market in northern emirates being undermined by falling prices in Dubai
On 26 August, the local Sharjah Oasis Real Estate Development revealed ambitious plans to develop a major waterfront project in the UAE emirate. The 18 million-square-metre Sharjah Waterfront City will be built along 36 kilometres of coastline, with the first phase expected to cost about AED9.3bn ($2.5bn).
The work involves constructing 200 residential and commercial towers, 95 apartment buildings, a hotel and serviced apartments, and up to 1,100 waterfront and park-side villas. A water theme park, shopping mall, entertainment centre, schools, mosques and restaurants will also be built during phase one.
The local Darwish Engineering has started construction work for connecting islands, while Canada-based WSP Parsons Brinckerhoff is executing studies for the project. We are already working on the infrastructure and are almost ready to finalise our agreements with investors, says Haitham al-Masry, president of Sharjah Oasis Real Estate Development.
But analysts following the real estate sector in the UAE have raised questions about the market appetite for the project, given the current conditions.
As the UAEs property market as a whole continues to weaken amid depressed oil prices and subdued investor sentiment caused by a strengthening dollar and regional instability, there are concerns over the ability of the northern emirates to ride out this slowdown.
The real weakness can be seen in the rental segment, with Sharjah feeling the impact of declining rents in Dubai
While Sharjah continues to lead in terms of real estate development and investment, the decline of sales and rental prices in Dubai has meant many people are finding that living in Sharjah no longer offers the savings that once justified tiresome commutes across the emirates. Rents fell in the second quarter in Sharjah and the other northern emirates. Developers remain defiant, however, looking at the longer-term prospects of the market.
Sharjah Waterfront offers a new and different solution for real estate in the emirate, says Al-Masry. The economic climate may slow down the progress of the project, but it will not stop it. According to Al-Masry, the scheme, which was previously branded as Nujoom Islands, has received tremendous support from the government of Sharjah, although he confirms it will not be developed in partnership with the authorities.
Several other major developments are moving forwards in Sharjah. In July, MEED reported that Sharjah Investment & Development Authority (Shurooq) had revived the $136m Al-Hisn Island project, which was originally announced in 2012.
The leisure and tourism scheme, which will be located on a reclaimed island initially developed for a residential area, will comprise a water canal, and retail and dining units, as well as a cinema.
These developments are aimed at the sales market. The real weakness can be seen in the rental segment, with Sharjah feeling the impact of declining rents in Dubai and high-quality developments being delivered in neighbouring Ajman, according to a report published in September by US real estate firm Cluttons.
The constant ebb and flow of tenant requirements in the face of rising supply in Dubai, Sharjah itself and Ajman has undermined the emirates rental market, which recorded a 2.3 per cent dip in average rents during the second quarter of this year, following no change in the first quarter, says the Cluttons report.
This now leaves average rents across the citys main central submarkets just 3.3 per cent ahead of the same period last year. Apartments registered a 4.2 per cent decline during the second quarter, while villa rents edged up slightly by 1.4 per cent.
The $136m Al-Hisn Island leisure and tourism project in Sharjah has been revived
This view is echoed by Zahra Alvi, research analyst at the local Asteco Property Management. Ajman saw a decrease of 3 per cent in rents during the first half of this year because of new supply being delivered, Alvi says. The [movements] in Ajman and Sharjah are related to what is going on in Dubai; if you see a decline in Dubai, you will see the impact in the northern emirates.
Sharjahs office market remained relatively steady during the second quarter of this year, following a changeless first quarter, according to Cluttons. This is mainly due to the scaling back of demand and reduced take-up as several industries reassess their expansion plans in the face of low oil prices and economic volatility.
Despite this, the local authorities are keen to press ahead with Sharjahs development, with a focus on growing the tourism, education, health and environmental services sectors. Shurooq, meanwhile, is actively seeking equity partners for several real estate and hospitality projects in the emirate. It has $420m of projects in the design stages or on hold, according to regional projects tracker MEED Projects.
The other northern emirates remain marginal markets, where the focus is largely on tourism developments.
Investing in infrastructure and transport schemes in the northern emirates is a requirement if the UAE wants to develop emirates such as Ras al-Khaimah and Ajman, but the demand for residential, office and hospitality space remains limited, says a Dubai-based analyst.
In May, Ajmans tourism department said it was aiming to attract 5 million tourists a year by 2021. Last year, the number of guests who checked into the emirates hotels and hotel apartments totalled 850,000, according to Ajmans tourism department.
India-based hotel operator Oberoi and Mauritius-based Lux Resorts & Hotels are looking to open properties in Al-Zorah in Ajman in the next two years. In July MEED reported that R Hotels, the hospitality management division of the local R Holding, plans to develop a new 182-key hotel in the emirate.
Construction on the $41m project is expected to start in the third quarter of this year, with completion expected in the first quarter of 2017. The hotel will be located next to the Ramada Beach Hotel Ajman, also owned and managed by R Hotels.
We are expecting higher room demand in the next couple of years, as confirmed by the opening and announcements of new hotels in Ajman, said Sumair Tariq, managing director of R Hotels, in a statement during the launch of the project.
Overall, as the UAE endures a period of economic uncertainty, its smaller emirates will see both residential and commercial property demand weaken, and new projects may struggle to find the interest to raise the required funds. Despite this, the authorities maintain that a long-term vision is in place for Sharjah and Ajman in particular, which could mean projects may be delayed rather than put on hold.