MENA Real Estate Market Is Forecast to Move Toward Recovery in 2021
1. MENA Real Estate Market Is
Forecast to Move Toward
Recovery in 2021
Dr. Ehsan Bayat
2. MENA Real Estate Market Is Forecast to
Move Toward Recovery in 2021
The year 2020 proved challenging to real estate markets across the Middle East, as
the pandemic caused rapid changes in terms of where people wanted to live and how
they conducted business. Over the course of 2021, many of these markets will start
on the path toward recovery. Customers have new expectations for their homes,
offices, and retail spaces, and real estate developers are adjusting their approaches to
address these changes. While it is not impossible to forecast exactly how the various
markets in the Middle East will change in the coming year, particularly given the
tenuous nature of the pandemic and social factors, industry experts predict a gradual
recovery in key sectors.
3. Retail leases
Due to the pandemic, people relied much more heavily on online shopping in 2020,
which has transformed how they interact with the retail sector. Innovative operators
are beginning to enter the market, and many are seeking leases that offer flexibility. In
2021, flexible leases are expected to become more popular. While the definition of
flexible leases is quite broad, it could include everything from agreements with more
break clauses to spaces that are ready for retail use. In order to attract renters,
companies will need to become much more creative in terms of the agreements that
they offer for office space.
4. Dubai real estate
Dubai was already experiencing complexities in the real estate sector prior to the
pandemic, which has led developers to take a new approach to the market. Currently,
prices in the rental sector are about 4 percent less than the previous lows in 2010 and
2011 following the global financial crisis. While rental prices have dipped, sales prices
are still 20 percent higher than they were during those years. Industry experts believe
that while sales prices are expected to continue to decline in 2021, the overall
resiliency of the market and the fact that transactions increased toward the end of
2020 are both good signs. Many people want larger houses as a result of the
pandemic since they are spending more time at home. Currently, experts do not think
that the prices will decline to the levels of 2010 or 2011, and instead a single-figure
decrease is expected.
5. Cairo’s residential market
The residential market in Cairo saw a significant increase in stock throughout 2020.
Nearly 2,500 units were added, and the city now has an overall stock of around
162,000 units. In 2021, there will be a projected 26,000 additional units added to the
market. Despite this increase in supply, rental market demand has remained high,
particularly in the second half of 2020. Rental prices have actually increased in the
city of 6th of October and in New Cairo, and resiliency is expected to hold out in this
market given the high demand.
6. Co-working spaces within hotels
One trend that is expected to impact the development of the hospitality industry in
2021 is co-working. In recent months, the demand for co-working space within hotels
has grown among employees at large corporations. Mobile workers are also using
hotels for their touch-down points in countries where long commutes are common,
including both Egypt and Saudi Arabia. Throughout the second half of 2020, many
hotels have begun exploring the potential of co-working spaces as an alternative to
meeting rooms and event halls due to the changing conditions of the corporate
world. These types of spaces will likely become more popular throughout the Middle
East in terms of both new developments and existing ones as a means of attracting
guests.
7. Construction in Dubai
Dubai has about 600,000 residential units, with an oversupply of both villas and
apartments. At the same time, the real estate sector has witnessed a healthy demand
for these types of residences amid the pandemic. The market is expected to continue
to gain strength in 2021.
8. Office space
The demand for office space fell sharply due to COVID-19 and the push to allow
employees to work from home. In order to mitigate the effects of a drop in supply,
developers will need to become more creative in the type of spaces they offer. In all
likelihood, most companies will make do with what they have as a means of saving
cash, but real estate developers can lure them in by adapting spaces to the changing
needs of businesses. In terms of what this looks like, 2021 will likely see spaces with
less dense seating and more open space for collaboration. Offices will also likely need
more meeting rooms and will benefit from additional space dedicated to health and
well-being.