Market Update

The Dubai Real Estate Market continues to soar The commercial property market right now is the strongest it’s been since 2016, with office, warehouse and retail units in high demand for both sales and leasing according to our recently released commercial property market report for Q1 2022.DOWNLOAD THE REPORT HEREAs Dubai opened back up to the world and the majority of restrictions were lifted, the trust in the commercial property market recuperated, resulting in increased demand for properties for sale. New policies issued by the government at the beginning of 2022, such as modifying the working week to Monday – Friday to align with the rest of the world, have made Dubai even more attractive to investors looking to grow or expand the business.Overall, it can be expected that the commercial property market will continue on an upward trajectory, supporting growth in Dubai’s property market and the economy as a whole. Here are the headline statistics from the report:Commercial SalesQ1 2022 has followed on from the trends we saw in 2021, with prices, demand and transactions continuing to rise. The commercial property market has experienced a 107% increase in sales value for Q1 2022 compared to Q1 2021. The Dubai property market had a total sales value of nearly AED 56 billion in the first quarter of 2022, according to DXB Interact, a record breaking quarter compared to previous years. At CRC, our invoiced transactions rose 62% in Q1 2022 over Q1 2021. Office and retail sales remain at the forefront of the growth, with offices experiencing a 31% increase and retail a 104% increase for units sold over Q1 2021. The total sales value also continues to rise, as offices have seen a 71% increase and retail units a 49% increase over Q1 2021.Increasing demand combined with the limited supply of Grade A commercial spaces is an ongoing trend visible through the first quarter of 2022. As businesses have successfully rebuilt after suffering from the impact of the pandemic, the objective is now to expand, the need for larger office spaces is rising, and as the occupancy of these spaces increases, so does the shortage in stock.Commercial LeasingThe commercial property leasing sector has maintained steady growth in the first quarter of 2022. The multitude of new businesses opening their doors across Dubai has increased rental prices throughout all sectors, creating greater demand for those seeking new premises for their growing businesses.According to CRC data, the number of leasing transactions is up 7% for Q1 2022 vs Q1 2021, with the highest increase in the warehouse sector, which is 88%.  The overall number of registered tenant leads for CRC increased by 32% compared to the same period last year. In line with the spike in demand, the highest increase came in at 128% for warehouses.This quarter, we’ve witnessed a continuous demand for commercial property, as businesses that downsized during the pandemic started getting back to bigger office spaces. As well as retail and warehouse businesses benefitting from a surge in demand due to a boost in the economy.While prices rise and the demand grows, tenants who would previously shop around year on year, in order to secure high-quality units at the lowest price, are opting to lock down long term leases at lower rental values instead.Seemingly, the trust in the market has bounced back in the first quarter of 2022, with CRC recording a 17% increase in payments with 4 cheques and 1 cheque payments decreasing by 7%.

Download Report Following a strong  Q4 2020, optimism started increasing in the market, with signs of recovery visible in the economy in general, but in the real estate market as well. The pandemic forced businesses to question how they work, where they do business, and whether to adopt a work from home or office model or a hybrid.  Although employers offer more flexibility, it is clear that many businesses have and will continue working from the office. In addition, increasing number of new businesses registered in Dubai has helped increase the demand for commercial space. The number of transactions in commercial space has more than tripled in Q2 2021 compared to Q2 2020 and the total transferred sales price of ready units by over AED 2 billion in H1 2021, compared to H1 2020.  We are also seeing that buyers are gaining confidence in the market and looking to start investing again. As such, we saw a 13% increase in the number of investors, which is expected to rise as the market resumes normal activity. In regards to location, we have seen an overwhelming increase in both Business Bay and JLT. It has been interesting to see that JLT has outpaced Business Bay, making it the most popular area for office sales this year. What’s more, average sales prices increased by 9% with average office sizes also increasing by 19%, showing that companies are becoming more willing to spend more on nicer, bigger office spaces for their business.  In terms of retail, the highest number of transactions was seen in International City, with a year on year, the area that saw the most growth was Mohammed Bin Rashid City. With that being said, units in MBR have primarily been off-plan sales that are due for completion within the next few years. When looking at the leasing sector, we saw an 82% increase in tenant leads, showing there is growing interest within the market. This was especially the case for retail which saw a very significant increase of 186%. Whilst there was a lot of uncertainty surrounding retail units last year due to the heavy restrictions and curfews imposed on the population, as these are being lifted, there is increasing demand for retail and subsequently growing confidence in the market.  The well anticipated Dubai Expo 2020 is likely to keep the media eye focused on Dubai and it is likely that the confidence in the market will remain.  For more market insights into Dubai’s commercial real estate market, take a look at our latest report, which gives a detailed and in depth look at the state of the industry throughout H1 2021. Download Report

Download Report The commercial real estate market is recovering Whilst the Dubai economy faced severe disruptions last year; it is clear from Q1 that the commercial real estate market is making a steady recovery. As Dubai eases its lockdown restrictions and we navigate our way out of the pandemic, there is increasing consumer confidence, with Q1 seeing investors come back into the commercial real estate market. When it comes to office and retail spaces, the market was booming in the past quarter, which saw significant growth in transacted values and the number of transactions, with a 12% and 45% increase, respectively. However, if we also take into account hotel apartments and land data, the overall market actually showed signs of slowdown with a 4% drop in the total number of transactions. Decline in demand for land and hotel apartments Hotel apartment and land transactions saw a steep decline over the past three months. Hotel apartments had difficulties in attracting buyers due to the general uncertainty surrounding the tourism industry post COVID-19. The decline in land transactions is not surprising when you consider the steep drop in off-plan transactions and the fact that many off-plan projects have been put on hold. As such, we can expect that both the demand and value of land will continue to remain low in the short term. Business is booming in Business Bay and JLT  The two most prominent areas for commercial office space were Business Bay and JLT, both of which saw continued growth in demand. CRC’s transactions increased in JLT by 60%, while Business Bay had a 50% increase. These two areas combined accounted for 82% of the total number of transactions in Q1, showing they are the two key areas for commercial office space investment. The popularity of these two areas can be attributed to their unbeatable location and their easy access to the city’s metro network and arterial roads.  The increase in demand for office spaces can also be down to the fact investors are returning to the commercial real estate sector. We saw the number of investors in the market up 19% since last quarter, with returning confidence in the market as the country begins to navigate through the other side of the Coronavirus pandemic. The average size of offices leased increased in Q1 At the beginning of the lockdown, many companies made a knee jerk reaction, reduced the number of staff and decided to downsize their office space. However, from the start of Q1,, companies started hiring again, increasing the number of staff and deciding to return to bigger offices. With the market for offices currently at attractive prices, we can see companies securing bigger offices for longer contract terms in a bid to lock in these more affordable rates. As competition increases in Dubai’s business hubs, with new major commercial developments such as ICD Brookfield in DIFC, which has just recently opened its doors for tenants, we can expect prices to remain competitive. For more insight into the Q1 2021 real estate market, then take a look at our full report. Download Report

The UAE and the rest of the world faced a tumultuous year in 2020 as everyone struggled in the face of the coronavirus, and both the health and economic adversities it brought. Dubai saw an economic decline in 2020, with both oil and non-oil sector GDP declining in real terms, however, the rate of decline reduced towards the end of the year. The UAE, like other GCC countries, faced both sharply lower than expected oil revenue in 2020 in addition to the impact of the coronavirus on the non-oil sectors.  Due to the global lockdown demand for oil dropped dramatically, meaning cuts in oil production were necessary. With that being said, the price of oil did increase and stabilise throughout the second half of 2020, with price starting to rise again by the end of the year. Oil prices saw a sharp increase in 2021, providing a positive outlook for the economy. ADNOC will spend $122 billion over the next five years to help boost its capacity to 5 million barrels a day by 2030 from around 4 million now. Last year, the UAE was at odds with OPEC, arguing against the steep cuts to oil production.  Despite this, Abu Dhabi is taking the initiative and working through the downturn to expand its ability to pump crude oil,  with the Emirate announcing earlier on in the year that they have awarded Japan’s Cosmo Energy Holdings Co. the right to explore for offshore oil and natural gas as the UAE seeks to expand its output capacity. Yet despite these promising outlooks, it has been said that it is unlikely that oil activities will be able to return to pre-pandemic levels for 2 years at least.  The pandemic significantly impacted the real estate market in Dubai, which was disrupted with the lockdowns, restrictions, and the growing trend of working from home. Recovery in the commercial market was slightly slower compared to residential real estate, but it has also enjoyed a boom towards the end of the year. The fact that the total value of commercial units has decreased will likely mean that investors looking to take advantage of the economic situation will make 2021 a good year in terms of the number of transactions. This can be seen from the fact that despite buyer leads seeing a year on year increase of 79% throughout 2020, this was not reflected in the number of transactions. This might indicate a growing interest in purchasing a commercial property, with buyers waiting for 2021 to see what happens in terms of the economic situation.  Whilst it is undoubtedly true that the UAE and the rest of the world will need time to recover from the unprecedented events of 2020, from the onset of the pandemic, the UAE Government took great strides in monitoring market conditions and went to great lengths to ensure a quick resumption of economic activity. The UAE introduced a strict lockdown in March of last year in the interest of public safety. Whilst the decisive measures by the government last year meant business activity was strictly limited, during the period between March and October this year, the Government of Dubai launched four stimulus packages worth Dh6.8 billion to mitigate the impact of these measures and to reduce any repercussions in the form of job losses or disruptions to businesses. In late 2020, we saw the government introduce a number of new laws that promoted the country as a pro-business environment with Dubai ranking third in the latest Global Cities of the Future list compiled by FDI Intelligence, which measured foreign direct investment flows across the world. From announcing that foreign nationals can now have 100% business ownership to the introduction of work from home visas that allow expats working abroad to live and work in Dubai, it is clear that the government is going to great lengths in cultivating an attractive location for businesses. Another initiative that the government launched was the Virtual Company Licence, which allows global businesses to access a regulated e-commerce platform populated by Dubai-based companies, while also exploring new markets and investment opportunities digitally. The introduction of trade relations with Qatar and Israel will also open the doors to new markets and will continue to encourage business and trade.  Whilst it is too early to tell about the success of these initiatives, 2021 had a promising start in terms of business, with a 9% year on year increase in the number of business licences issued by DED. January also saw Dubai’s private sector returning for the first time in 12 months particularly at the entry level, as companies expressed optimism toward future business. With UAE’s fast rollout of the Coronavirus vaccine, the launch of Dubai Expo expected later in the year, as well as the country’s economy looking to grow 1.3%, according to the IMF  this renewed business activity looks to be just the start of a successful year for the UAE.

The new laws brought out earlier this quarter, which allowed 100% foreign ownership of mainland business in the UAE, came as welcome news to foreign investors and expat business owners in the country. Until now, foreign ownership of businesses was only permitted in the specific free-zones that are distributed throughout the city. So what does that mean for free zones now? Whilst 100% ownership of businesses can now be had in both mainland and free-zone areas, it is still important for companies to do their due diligence when checking whether they should opt for mainland or free-zone license.  Industry specific free-zones  It may be beneficial for a company to operate in an area that is specific to their industry. There are multiple free-zones throughout Dubai, although many of them are specific to a certain sector. Healthcare City has a focus on medical services. Dubai Media City features mostly media companies such as publishers, TV, Radio and media agencies. By having one area dedicated to the industry means that there are other similar businesses in close proximity that can complement each other in their products and services, help gain new clients and contracts, or even work together. Established business areas Dubai free-zones have been hosting businesses for years, and as such tend to have a well-established infrastructure in place to aid businesses. Dubai free-zones tend to have excellent trade links and are in highly convenient locations, depending on their industry focus.Dubai airport free-zone has direct access to Dubai International Airport, meaning it has easy access to customs as well as making import/exports more efficient. DMCC is conveniently located next to Sheikh Zayed Road, with great transport links, meaning it has easy access to the rest of the city.  Further to this, free-zones in Dubai have their own regulatory body that oversees business operations in the area. Not only do they allow certain business activities that a mainland licence would not permit, but they often have different regulations and rules to the mainland, meaning it can still easier to set up a company within a free-zone.  Free-zones also enjoy tax and duty exemptions, meaning that they can be a more profitable area for companies to set up.  Mainland requirements  Businesses applying for an operating licence on the mainland need to be aware that there are rules in regards to business operations that differ from free-zone rules. As not all business activities are allowed to be conducted under a mainland license. As such, business owners need to know if they have the necessary permissions to operate on the mainland and if their activities are allowed. There are also different educational requirements for staff and stakeholders for mainland companies. Managers may need to complete a certain qualification or university degree.  Mainland business licences also need to be registered to an address, which differs from free-zone licences, which allow flexible desk options. Therefore a mainland office does not allow the same flexibility as a free-zone license in terms of how a business operates. Another big difference between free-zones and mainland licenses is that a free-zone allows a 3-year visa, whilst mainland companies are only allowed 2-year visas. With that being said, companies with a free-zone licence are only allowed to operate within their free zone’s jurisdiction and are unable to conduct business on the mainland. Businesses with a mainland licence on the other hand are able to operate freely throughout the mainland completely independently, meaning they have greater freedom in how they conduct their business.  Whilst there are obvious attractions to a mainland visa, businesses currently operating under a free-zone licence need to be aware that they are unable to transfer their business to the mainland. If a business owner decides that a mainland licence will be more beneficial, then they will have to gain a branch license and create a new branch on the mainland. There are inherently large costs associated with this, so careful consideration should be made before making this decision.  Both mainland and free-zone visas offer attractive incentives for businesses. Company owners should make careful consideration of the opportunities and drawbacks of both before making a decision. Whilst it can be a difficult decision to make, our expert specialists are on hand to help and offer any advice on what would be the best choice for your company.

This week, Dubai hosted the biggest and most influential real estate event in the Middle-East, Cityscape. The event is designed so that industry professionals can network and learn from each other, through talks, panels and exhibitions. Despite being held in the middle of a pandemic, the event was carried out successfully and safely, with strict social distancing rules put into place. This included employing social distancing ambassadors who ensured participants adhered to the rules, enhanced cleaning of all areas, non-contact registrations. This stringent safety measures put in place shows that events like this, whilst very different from what they were like pre-pandemic, can still be held.  The director of CRC, Ben Bargh, was part of a panel at Cityscape, discussing the new reality of the commercial property market. Despite a turbulent 2020, the commercial real estate market will survive, thanks to an increasing amount of importance being placed on 360-degree digital portals and building management.  Due to the circumstances brought about by the lockdown, real estate companies have been forced to turn to digital solutions to show off their properties. More companies are moving towards a multichannel approach and expanding their online marketing. Rather than traditional brick-and-mortar estate agents, companies are adopting online marketing campaigns, boosting their SEO, and using social media, which keeps in line with the digital mindset that is becoming an expectation for modern brands. As technology moves forward, real estate companies are also looking to better, more advanced property portals, such as Houza, which offers an optimal user experience in searching for properties in Dubai, especially when it comes to bringing the property to life online.  Behnam Bargh, Director at CRC, echoed similar thoughts, as he said the first impression of a commercial property for a client is looking at the picture of the property. In that sense, portals become very important in a customer’s journey when looking for an office, retail space or warehouse. This is especially the case now that we have seen a shift in people searching for properties on their desktop to their phones.  Whilst nobody expected for the market to depend on technology as much as we have, it is something that we need to take in our stride, allowing for commercial real estate companies to develop a more rounded marketing effort as we head into the New Year. 

After several challenging months during the pandemic, the commercial property market has started stabilizing in Q3 and reached pre-COVID levels in September 2020. As per Dubai Land Department reports, the market has reached its lowest level in terms of total value and number of units transacted in May this year – only AED504 million. Since then, numbers have continued to rise each month with 635 units transacted in September 2020 with a total value of AED3,645 million. That being said, CRC has seen a 5% increase in sales transactions year-on-year, accompanied by a significant increase in buyers leads. The number of buyers registered at CRC has increased by 89% compared to Q3 2019. This can be attributed to the fact that we have some of the lowest prices that we have seen in a long time, coupled with an increase in consumer confidence after commercial activities resumed and stabilized in Dubai. A significant number of prospects are not interested in buying immediately, but instead, they are shopping around and waiting for good deals. These low property prices will certainly keep the market active in the following months. In terms of the top sales communities, Business Bay is still one of the leading communities, with prices per square foot ranging from AED 550 to 900. JLT is the second leading community and the most popular free zone in Dubai with the price range per square foot, going from AED 300 to AED 800. Sales prices per square foot in Barsha Heights are ranging from AED 600 to 700. Behnam Bargh, Director at CRC commented “The current commercial property market trend in Dubai is that companies are mainly looking for fitted and furnished offices to reduce the set-up costs. We also have noticed a higher demand for “A” quality property as clients are looking for better value and higher quality. Finally, an improvement was visible in certain sectors such as e-commerce and healthcare industry after the pandemic.” The commercial property leasing department has had a particularly active quarter, with a 52% increase in the number of transactions compared to Q3 2019. However, this does not mean we had an influx of new tenants; on the contrary, the number of visitors and new residents has not been increasing over the past few months. The market was kept active by existing tenants looking for better value, upsizing, consolidating smaller offices into one large office, and unfortunately, due to COVID-19, some offices had to downsize. This activity is especially visible in the number of new tenants registered at CRC – 89% increased compared to the same period last year. Nonetheless, we have to keep in mind that many of these tenants are using the market conditions to shop around, and finally extend their contracts with their current landlords at a lower cost. When it comes to the preferred type of payment, payments with 4 cheques remain to be the most popular option, accounting for 45% of leases in Dubai. This is followed by contracts with one cheque (22%), usually accompanied by more bargaining power for the tenant – paying the lease upfront usually guarantees a better deal on their property. Overall, with the government restrictions being lifted and economic activities getting back to normal as restaurants, cafes, and retail shops opened for business – the commercial property market has also revived. Whilst there is no denying that there has been a significant disruption in the property market, after such a successful third quarter, we have a much more positive outlook for the future of the market.

The coronavirus pandemic has undoubtedly caused a shift in the way we live and work. It has also caused major concerns regarding the safety of employees in shared office spaces, which have the potential for the virus to spread across a company. That being said, companies need to take on increased responsibility and take certain precautions and measures to help mitigate the spread of the virus and make their office spaces as safe as possible during the pandemic. Here are some tips and advice on helping make your employees feel confident and secure working in the office.  Support your workers  These are definitely some unprecedented times that we are currently experiencing, with everyone facing new struggles and difficulties. That is why it is so important to be extra compassionate and flexible with our employees and fellow co-workers. If you are implementing work-from-home, there should be consistent communication between employees and employers. With reduced or lack of face-to-face interaction, it can be hard to keep in constant contact with each other. Therefore a deliberate effort in making phone/video calls and daily check-ins should be made.  You should also support your employees in a practical sense. Have a box of masks handy for each employee, as well as plenty of hand sanitizer available. You might also want to consider giving your employees a COVID-19 safety kit. This might include a pack of facemasks, hand sanitizer, pack of disinfectant wipes, and a leaflet on safety measures and precautions, as well as any rules that the office might have in place. Clean, clean, and clean some more! This is probably the most important thing you can do!  Ensure you are constantly washing your hands, keep a bottle of hand sanitizer at your desk, and clean any workspace you come in contact with. Make sure to cover your mouth with your elbow or a tissue when you need to cough or sneeze instead of using your hands.  Wash your hands thoroughly with soap and water for at least 20 seconds regularly throughout the day, especially after touching any public surface or being in a communal office area, such as a shared kitchen or conference room. It should also be remembered  to disinfect high-touch surfaces daily in common areas (e.g. tables, hard-backed chairs, doorknobs, light switches, phone receivers and keypads, remotes, handles, touchscreens, desks, toilets, sinks, elevator, and elevator buttons There should also be a thorough daily office clean, which involves properly disinfecting every surface. Employees should also be encouraged to thoroughly wipe down their own desk and work area when leaving, especially if your office practices flexible seating with no set seating plan. Employees should remember that to properly disinfect something, they should clean only one item at a time, using enough wipes to ensure the surface stays wet for 4 minutes.  Keep your distance and embrace technology  In order to stick to the social distancing guidelines, employees should always keep between 6ft or 2 meters apart at all times. This, however, can be difficult within an office setting, especially if meetings need to be conducted and desks are already set up. Therefore, face-to-face contact should be kept to an absolute minimum.  With modern technology, meetings and conferences no longer need to be in person. Companies should try and avoid unnecessary face to face contact by encouraging virtual zoom meetings.  This also means there is less need for employees to come into the office every day. Therefore companies might want to consider staggering work times implementing reduced capacity in offices. This might mean encouraging working from home, with half the workers to come in one day and the other half the next. If a company is going through with reduced capacity, companies might also want to consider creating a new office floor plan. In creating a new plan, certain desks might need to be put out of use, ensuring a sizable gap between each worker.   That way employees can have their own space without the need to share desks.  If at all possible, install touch-reducing amenities. This might be double swinging doors that can be opened with a shoulder/foot, motion sensor lights, or hands-free signing in/out machine.  This will reduce the number of surfaces that employees will have to touch. Companies should also limit the guests that come into the office to an absolute minimum. This applies to both guests who will be coming in for meetings, as well as people delivering items into the office. Discourage employees from ordering food or receiving personal packages into the office. The fewer people that come into the office, the less likely the chance of spreading the virus.  Communal spaces  This is an area where the virus is most likely to spread between. Rather than using reusable mugs, cutlery and plates, use single-use. This will reduce the chance of the virus spreading when your employees are on their lunch and coffee breaks. Make sure to regularly wipe down and disinfect communal areas, and limit the number of people that can enter at one time so to ensure everyone can maintain social distancing.   Communication is key  Make sure all of your employees are kept up to date on all the latest updates. This might involve sending a weekly newsletter letting employees know all the latest information in regards to COVID-19 and to reinforce any rules put in place to reduce the spread of the virus.Visible signage around the office should be put up that will raise awareness about how employees can ensure their safety. This might include information on good respiratory hygiene, cleaning recommendations, social distancing guidelines, and symptom checks, as well as information on what employees should do in the event that they start showing symptoms. You should encourage regular COVID checks, and if anyone is unlucky enough to contract the virus, employees should know the correct procedure that they should follow. This would include the infected person and anyone who had contact to self-isolate until they receive a negative test result. Companies may also want to create a platform where employees can communicate and raise their concerns, and be more flexible and accommodating in regards to their personal circumstances and needs.  We understand that employees may have concerns for their safety when working from an office space, with concerns over contracting the virus. That being said, we hope that these tips and advice will help encourage employees to feel more confident about working in a shared environment again.

The current pandemic has meant that there have been massive changes in the way we work. The biggest change is the increasing trend in working from home.  Safety concerns and government regulations have meant that now more than ever, employees are being told to work from home.  This new working style has brought some welcome benefits, or ‘home comforts’. Casual clothing, even pyjamas, can be worn every day and during breaks, employees can just veg out on the sofa. Employees are afforded the opportunity to work in an environment that suits just them. It has suddenly given workers flexibility and freedom that has not been afforded before in the same way. Whilst it might be nice to get a bit of respite from the office, a study by The Khaleej Times found that UAE residents are struggling with some aspects of these measures, such as feelings of being disconnected, lack of opportunities to learn from colleagues and in some cases, an increase in workload. There is also the problem that for many people right now, working from home measures means that there is no distinction from work-home life and therefore turns the home into work. There is no escaping it. That is why, keeping in mind the benefits of working from home, it might be time for managers and business owners to make some much-needed changes to the working environment. When offices do finally decide to open again fully, it is important that managers and business owners take into account everything that has happened in this year and to learn from both the enjoyment and grievances that employees have in regards to working from home. That is why, after bringing the office into our homes, it might be time to consider doing it the other way around. Whilst no-one is saying that employees should suddenly start coming to work in their pyjamas and lounge around in the office all day, the experiences of working from home have certainly started conversations and new ways of thinking about how we see office spaces.  We spend so much of our time in the office, that it is perhaps time we start making it a place that we genuinely enjoy going to, a sentiment echoed by Betterhomes Managing Director, Richard Waind, who claims “the office of the future needs to be more than just a place to work. It will need to entice workers back with some of the comforts of home and create spaces that are truly collaborative”. If the problems that people are having with working from home are anything to go by, people are longing for more collaborative environments. The days of individual, isolating office cubicles are over. With falling office prices, now is absolutely the time to invest in offices that have shared spaces that really encourage collaborative working. Companies can even afford bigger offices that have bigger break rooms, and entertaining spaces, in order to transform them into comforting and relaxing spaces. At the end of the day, the office is supposed to be for the employees. Find out what they want. Allow them to bring their home into the office, encourage photos, and plants. Invest in some comfy chairs for the break room. Ask them about how the office can be a more lively, and enjoyable place, which in turn will create a great company culture.

The coronavirus pandemic has marked the first half of 2020. Government restrictions imposed in order to contain the spread of the virus have caused significant disruptions across different sectors, including the commercial property market. To mitigate the sometimes dramatic negative impact, the UAE government has introduced substantial relief packages, while the Central bank offered lower interest rates.However, even with these relief packages, the market was significantly disrupted by this pandemic, and we can see a significant dip in April and May, with transactions going down from 3,398 million AED in February to just 504 million AED in May. On the positive side, the market started recovering rapidly in the following months – the total value of transactions increased to 1,610 million AED in June, and the trend continued in the coming months.When we look at the selling prices of the properties in the top communities for commercial real estate, there were not many significant changes compared to the previous period. The prices in Jumeirah Lakes Towers range from 300 to 900 AED per sq.ft., Business Bay 600 to 1,100 AED per sq.ft., and 400 to 800 AED per sq.ft. in Barsha Heights (TECOM).Interestingly, the number of buyer leads have increased in June 2020 by 8% compared to the data from the beginning of the year. We have seen an even more significant increase in the number of tenants registered with CRC – 14% more compared to the data in January 2020. In the commercial property leasing department, one of the trends we followed closely is the number of cheques in rental agreements. The most popular options in this quarter were contracts with four cheques (55%), followed by those with 1 (21%) and 2 (15%) cheques. Leasing price ranges in H1 2020 in the most popular areas at CRC were as follows, Jumeriah Lakes Towers 35 – 75 AED/sq.ft. Business Bay 40-100 AED/sq.ft., and Sheikh Zayed Road 80-130 AED/sq.ft. Overall, It has been quite an exciting market since we came back after the lockdown. We have seen an immense amount of inquiries from both tenants and buyers alike, which came as a surprise since we did not anticipate the market will pick up so fast. You can download the full report here

As our norms and routines significantly change towards a “new normal”, that is yet to be defined, many questions and concerns have arisen for the individual, both professionally and socially. With the social and sectorial restriction in place in the UAE, companies, and businesses have had to act quickly to ensure the health and safety of their staff, while implementing new operational strategies and approaches to allow business continuation. Inevitably these changes have had a material impact on cash flows, with liquidity pressures rapidly increasing. These challenges have created uncertainty within the real estate sector, although there are still deals coming to fruition, many acquisitions, disposals, and developments are now on hold. Sales volumes, as a result, have significantly slowed with forecasts predicting the may drop to the levels of the 2008 market. In the malls’ segment, groups such as Al Futtaim are putting in place a range of initiatives, including rent holidays and rent relief funds to help their tenants. However, with no clear indication from the government around when policies will be relaxed and the UAE economy re-opened, many businesses may require further support in order to weather this unprecedented storm. It is still unclear if there has been any significant change in property prices as transactional data and price discovery within the first quarter is still limited. If we look east to markets that are further along the curve of this pandemic, markets in Asia are beginning to lift restrictions. These markets have sustained a significant slow-down in market growth, they have also had to withstand second waves of viral outbreaks, Hong Kong and Singapore being the prime examples. However, as they look to re-start their real estate markets it is imperative that the UAE learns from the best-practices they establish and the mistakes they make over the coming weeks and months. The real estate market presents many challenges to restart safely; strong reliance on close contact between customers and professionals create challenges for remote-work and make the sector difficult to safeguard. The sector also relies on consumer confidence which as previous market shocks have demonstrated is difficult to overcome quickly. The UAE will learn from the protocols put in place in Asian markets as well as globally, where leading economies are creating “back-to-work” frameworks and protocols that are sector-specific. Looking forward, it is challenging to predict when regional and global markets will return to pre-virus levels, however, comparing to historic viruses such as SARS, we saw a “V” shaped recovery, with temporary and short-term impact. COVID 19 has had a much wider global impact, for example Asian markets rely heavily on buyers from the west, this global connectedness is likely to make the impact of this shock more sustained, so a “U” shaped recovery is more realistic, with some lasting economic effects.  CRC has seen asset classes with high levels of social interaction hit the hardest, such as malls, retailers, restaurants and hotels. In contrast to this, sectors such as industrial and logistics facilities have been more resilient, where many consumers have continued to move to online shopping with the UAE government classifying many supply chains under these classes as “essential” to serve the public. We have also seen different approaches from investors within the market, many are looking to mitigate and consolidate risks in their existing portfolios, while those with cash available are seeking to capitalize on the drop in prices and making discounted investments. The majority of investors will look to survive the next 3 months and wait for real data to emerge on the true extent of the damage to the market, prior to making any acquisitions or disposals. It is also likely that landlords will see amendments to future lease terms, to cater for potential similar global shocks including future pandemics, with tenants becoming more savvy and negotiating for more lenient break clauses.        Once all restrictions on movement and work are lifted it is unlikely we will go back to the “old normal”, rather a “new normal” will define how we assess and occupy real estate. For example, many office occupiers previously opted for open plan environments and may now shift to contained areas, to separate staff. The UAE Government could review laws that outline the number of staff per sq.ft, the required distancing between desk space and air conditioning/airflow requirements, to name a few examples.  During this crisis, many businesses have also migrated to remote working and increasingly deployed technological solutions to empower their staff to work from home. These new approaches may better suit company operations and staff in many sectors, and in turn, this may lead companies to down-size, right-size or in some cases move to a fully remote model, this “physical” office may increasingly become part of the “old normal”. In the longer-term, co-working and flexible-working spaces could become more prevalent, albeit with new government policies place. For manufacturing and logistics, businesses disruptions to supply chains and businesses with reliance on international imports have seen inventory levels drop which has led to local sourcing. These newly built relationships may indicate potential deglobalisation of supply chains to mitigate risk and improve corporate responsibility in relation to sustainability. Robotics and automation may become more established, with more reliance upon e-commerce and reducing human interaction. This drive could result in larger e-commerce players to invest in upgrading and develop their existing facilities.  For further information and insights from our Valuation and Investments teams please visit crcproperty.com Our Valuation department is still fully operational, offering valuations on a desktop basis subject to deferred inspections.      Joe Titchner MRICS Head of Valuations

Legal experts largely agree that the new UAE Bankruptcy Law is an improvement on the previous law, but is it all good news for debtors and creditors? What is the UAE Bankruptcy Law? The Federal Decree Law No. 9 of 2016 (UAE Bankruptcy Law) provides a framework for companies in financial distress to avoid liquidation and protects employees, shareholders and directors of organisations going through court-led insolvencies. It contains 230 articles and primarily works to bring flexibility to those going through financial difficulty, providing more support for both debtors and creditors. Since its implementation on December 29th, 2016, it has removed the risk of facing legal prosecution and jail time, and special tribunals are no longer required for the insolvencies of large companies. Who does the UAE Bankruptcy Law affect? The UAE Bankruptcy Law applies to commercial companies, companies owned by the UAE or any Emirate’s government, individual traders and civil companies established in the UAE. It excludes companies established in the financial free zones and non-trader individuals, who will remain subject to the UAE Civil Code in the event of financial distress and who will therefore continue to be at risk of legal prosecution. What are the key changes implemented by the UAE Bankruptcy Law? The law is centred around the implementation of four new court-supervised procedures: The preventive composition A process for solvent debtors who are facing financial difficulties. Only a debtor may apply for this and it should be initiated at the early stages of difficulty before insolvency, to protect the debtor and provide more time and support to fulfil the debt with the court’s supervision. The unsecured creditors must approve this within three years of the court’s approval and it may be extended by three years. The restructuring process For an insolvent debtor facing financial difficulties that have led to failure to meet debts for 30 working days or more. This can be initiated by the debtor or by unsecured creditors who have issued a formal demand for a debt of Dh100,00 that is overdue by 30 working days or more. The debtor is allowed five years for restructuring the debts and this may be extended by three years. Insolvent liquidation process To be initiated by the order of the court, for the debtor to cease commercial activity if the previous two options are unsuccessful or are not approved. The court will appoint an insolvency trustee or official to oversee the process and monetise the debtor’s assets. Financial restructuring of financial institutions This may be initiated following preventative composition or restructuring and includes safeguards for existing secured creditors. Accordingly, greater flexibility is available for debtors and creditors. For the first time courts can amend loan terms and debtors can apply for support from the court during financial difficulties, which can potentially provide three to six years of protection and support. The UAE Bankruptcy Law provides more options for debtors in the UAE and this in turn brings greater protection of the debtor’s business, and of the creditor’s assets.  It creates more security and predictability and can help to prevent financial problems from growing and becoming unmanageable whilst there is still potential to fulfil the debts owed. To encourage debtors to apply for rehabilitation when facing financial issues, the law states that once the court accepts the application, all other claims and proceedings are suspended until approval. This is to encourage restructuring finances rather than leaving the creditor without their owed debts, but it means that existing debts are suspended, bringing risk of alternative liability. Designed by Freepik What are the implications for debtors? The UAE Bankruptcy Law helps to support debtors’ businesses maintain viability and aims to protect them during a restructuring. It can also protect Directors and Managers from arrest or being forced to flee the country as a result of their company’s debt. However, it’s important to note that the removal of the criminal offence of bankruptcy does not remove the criminal offence of fraudulent bankruptcy or any breach of the Commercial Companies Law. It is clear that using the UAE Bankruptcy Law as protection from such a breach will render the individual exempt from protection. This will lead to the member being held personally accountable for the debts and damage. Criminal proceedings regarding bounced cheques are suspended once a preventive composition or restructuring process has begun, which can help debtors maintain viability, although misuse of this protection can be a fraudulent insolvency offence. The UAE Bankruptcy Law states that members involved in the liquidation of the company are accountable for a Dh1 million fine and up to five years in prison if found guilty of altering records to harm the creditors, embezzlement, acknowledging unpayable debts, deceiving the court in their application for any of the processes in the UAE Bankruptcy Law, or sharing false information about the capital. It is important to consider the time frames enforced for new processes in the UAE Bankruptcy Law. There are time frames for approvals, appeals, and initiating processes that must be observed to maintain protection. For example if the debtor does not apply for bankruptcy within the thirty working day window of failing repayment, the liability can shift to the members and Directors and can leave them personally liable for mismanagement. A preventive composition is not available to a debtor that has already entered into the procedure in the past year and cannot be used by a debtor for which bankruptcy proceedings have initiated, so both processes should be carefully considered. It appears the best advice is to be prepared, act quickly and seek help at the first signs of difficulty to maintain business integrity and protection from greater difficulty further down the line. For debtors, the UAE Bankruptcy Law provides some leeway, but does not relieve the requirement to fix the debts owed and depends upon the handling of the court and the court appointed officials as to how effective a strategy it can be. Applications require preparation and time to complete and therefore it is necessary to undertake a risk analysis and keep the preparation process in mind when considering the time frames. The plan for preventive composition must be effectively prepared as, once agreed and in process, failure to comply can result in the court ordering for bankruptcy or liquidation. In addition to this, the debtor must have funds to cover the cost of the procedure and approval is required from shareholders. What are the implications for creditors? The UAE Bankruptcy Law appears to offer a debtor-centric approach but creditors also benefit from more security and legal rights than before. Creditor initiated insolvency proceedings will be useful in protecting assets and the removal of the criminal offence and more options to debtors means more likelihood that debts will be cleared rather than absconded from. Research by the World Bank has shown that insolvency processes in other countries have up to nearly 60% higher recovery rates than the UAE, so this is a much needed improvement for UAE creditors. As a result, the UAE also becomes more attractive to international investors and businesses and benefits the economy as a whole. Secured creditors are prioritised by the UAE Bankruptcy Law, and again must consider enforced time frames. Secure creditors require court approval to claim against the trustee regarding their secure assets. The court’s decision will be published by the trustee, then creditors have a window of 20 working days to bring their claims. Following publication the debtor has 45 working days to submit an initial preventive composition plan for a vote of approval by unsecured creditors. This gives unsecured creditors an understanding of timings and proposed chances of success, but to vote their debts must be accepted by the court and a majority vote requires at least two thirds relating to the value of the debt. After this the unsecured creditors, regardless of whether they voted, are bound to the agreement. This process appears to favour larger investors and may encourage more investment, but could discourage smaller investors from becoming involved initially. Whilst the debtor continues to run the business, the court-appointed trustee has rights to act for the debtor to preserve the assets needed to complete the process. Any activity that could impact the position of secured creditors must be approved by the court and the court may order for liquidation of the debtor’s assets if they do not comply with the agreed terms of the preventive composition. In summary, the law provides much more transparency and more confidence and predictability for creditors. Outlook and future developments The UAE Bankruptcy Law aims to improve the business environment and economy by offering debtors more opportunity to resolve debt without facing liquidation and prison. Investors can invest more knowledgeably and confidently, and those seeking investment will have better access and support to avoid liquidation. This should influence a further rise in investments and business growth in the UAE, particularly for entrepreneurs and SMEs. Further encouragement to debtors to seek support early on in their financial decline may help to prevent bankruptcy, however, it does not necessarily stop debtors fleeing the country to escape criminal sentencing in fraudulent cases. This also relies on debtors being financially aware and knowing their rights early on in, or before their decline. Whilst greater co-operation is possible between debtor and creditors, the processes are managed by courts and court appointed officials. Given its recent implementation, it is too early to know how successfully issues will be managed which creates uncertainty. It will work on a case by case basis and relies on there being an experienced talent pool with knowledge of the relevant industries. Experience and understanding of the issues and outcomes will come with time and there is no doubt opportunity for the law to evolve. Larger more structurally diverse companies may complicate the process and we are yet to see how these instances will pan out, but the new law looks like a step in the direction of a smoother, slicker business environment with more international appeal.