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