Demographics do not dictate real estate projects
A mixed-use development offers more sustainability and helps to mitigate risks of a developer, senior officials of real estate companies told Emirates Business.
Respondents of a survey, undertaken by this newspaper, felt both mixed-use projects and single-purpose developments could be profitable provided they were built according to the vision of the master development.
The Dubai property market is cyclical, like any other realty market worldwide, and favours those developers who build what is currently in demand, the respondents felt.
The developers also did not believe demographics play a significant role in the project they chose, whether in a mixed-use or single-use development. The motivation, they felt, was more about the demand for a combination of convenience and security that dictates the choices of buyers.
We posed specific questions to Abdulla Atatreh, Chairman of Bonyan International Investment Group; Khalid S Esbaitah, Chief Executive and Managing Director of Al Mazaya Holding; Rahil Aslam, Chief Executive of Select Group; Santhosh Joseph, Chief Executive and President of Pearl Dubai; and Roger Wakeham, Director of Development of CHI Development Group.
As developers, do you prefer to build mixed-use or single-purpose developments? Give us details of your property portfolio in the UAE?
Atatreh: We try to keep a balanced product portfolio, but ultimately the market dictates what type of product is needed, which is why we keep a watchful eye on what goes on in the market. We have a total of five projects in Dubai. Dubai Gate One and Dubai Gate Two are both residential projects with retail components on the ground and mezzanine levels. Discovery Garden is a residential project and Rose Tower, a hospitality one, is considered the world tallest hotel apartment building. Then there is Al Jadaf, which are multi-purpose plots.
Esbaitah: I will not say that we have a particular preference in any way to build either mixed-uses or single-use developments. The property market favours projects that cater to current public demand, and as a rule, as a developer, our aim is to deliver to those demands. The success of any project is ultimately determined by how successfully that project fulfils the requirements of the market. However, currently there appears to be a growing trend towards mixed-use developments.
Aslam: At Select Group, most of our projects are residential. The current combined value of our projects in Dubai is in excess of Dh12.5 billion, which is expected to go up once the developments in the pipeline come on stream. So far, we have announced 10 projects and two more are in the pipeline. In some of our projects, like the Bay Central in Dubai Marina and Aquitainia on 'The World', we do have hospitality components, which we believe add value to these developments.
Joseph: Dubai Pearl is an integrated mixed-use destination founded on the philosophy of 'work-play-live situation'. Our future are to ensure that these elements complement each other.
Wakeham: CHI prefers to build residential properties within a mixed-use environment because of the benefits to the end-users. Mixed-use is far more sustainable from an economic and social viewpoint. We own a property at International City and Jumeirah Golf Estates. The sales value of our current projects is worth circa Dh1.1bn. CHI's current two residential projects are both in mixed-uses, albeit both are on golf courses with less commercial mix than perhaps a typical urban project that mix up property types. Our latest project, to be announced soon, will be worth about Dh900m.
From a returns perspective and a profitability point of view, does it help to build in a mixed-use environment rather than a single purpose development? What about spreading your risk base, is it better in a mixed-use environment, is there more risk involved in a single-purpose development?
Atatreh: We believe that we are very fortunate in the UAE, the economy is very strong, demand for both residential and commercial properties is going strong and expected to keep the trend, investors' confidence is high, the government has taken positive steps to regulate the market for the best interest of consumers and developers alike.
Esbaitah: There are a great many more issues at play than just the purpose of a development, all of which have a role to play in the risk and profitability of a project. This is why research and feasibility studies are done by developers long before a development is even launched.
Aslam: Since all along we have focused on residential development, particularly on waterfront projects, we firmly believe that this type of investment offers high return on our investments. Before the launch of any project we undertake exhaustive research and careful planning to eliminate certain risk factors. We are confident about the residential market, and have seen strong demand for units.
Joseph: Mixed-use developments mitigate the risk to an extent, however, profitability may not vary highly. The objective of a mixed-use development is to deliver better lifestyle. We have already launched products, such as Baccarat Residences, which tend to take care of this.
Wakeham: Yes, a mixed-use environment carries attractive benefits to the end-user and to the ancillary investors and stakeholders. It is simply returning to basics of a good city/town planning; even more important in a city such as Dubai, where the car seems to dominate people's time with all the negative factors of that culture. Single-purpose developments have their obvious benefits, but these should be limited to industrial or technical uses. The obvious risk of single-purpose development is one of isolation. Examples of this in the United Kingdom in recent years, which have been well documented, are the proliferation of 'out of town' shopping centres.
Please elaborate your gains on a particular project, which is part of a mixed-use environment, and a project that is not? If you do not have mixed-use developments then tell us about profitability on your single-use developments?
Atatreh: We have managed to achieve very positive growth and expect a good return on investment from all of our projects
Esbaitah: Our mixed-use project Queue Point development in Liwan at Dubailand, has proved exceptionally popular with us so far.
Aslam: As a private luxury residential developer we do not want to divulge our profitability, but I can say that the company has strong financial foothold and is very proud with the growth it has experienced in the past four years.
Joseph: We are focused currently on Dubai Pearl at this stage. Our vision is to create a Dubai Pearl globally within the philosophy of work-play-live philosophy.
Wakeham: The obvious benefits of a well-planned mixed-use environment are that the residents/users have easy access to leisure, to shops, schools and nurseries, to parks, offices, healthcare facilities etc. Examples of this in Dubai include Dubai Festival City and Burj Downtown. If these places are well planned, the value of land increases along with added value to the properties plus residents and users want to live there.
As a developer, where have you felt demand from buyers coming from? Are people more inclined to live within a mixed-development or would they like to live in single-purpose developments?
Esbaitah: With so much economic growth going on in the UAE, especially in Dubai, demand for property is high across the country, in every sector. As for public preference, it's hard to determine with any sort of accuracy whether they prefer single or mixed-use developments, since the majority of the developers tend to build mixed-uses.
Aslam: Overall our experience is that a residential sector secluded from an office ambience is preferred most. Perhaps in cases where a mixed-use development offers an advantage of proximity to the workplace there could be a preference to invest in such developments. We, as pure residential developers, do offer retail components in order to provide basic amenities to our residential buyers.
Joseph: Definitely there is a huge demand with Dubai Pearl being a mixed-use development and a very wide consumer base, some of which will work, live or visit the development on a leisure basis. Our experience shows end-users prefer mixed-use development.
Wakeham: Our client base at present is based on their wish to live on a golf course with the added benefits of recreational facilities, local schools, parks, shops etc within the development.
Do you believe demographics of population is key to the choice that buyers make with regards to where they live?
Atatreh: As a developer whether we are building a mixed-use or single-use we have to ensure that all amenities are provided as per the customer's expectations and needs. There are many factors that determine where people live, income, prices, location social statues etc.
Esbaitah: I don't believe that demographics have that much to do with the preference of their buy in mixed-use or single-use. The motivation rather is modern day society's demand for a combination of convenience and security that dictates their choices when it comes to buying property.
Aslam: We do not subscribe to this view because if you take any residential community in Dubai, there is a vibrant retail component in close proximity. Developers of purely residential developments like us also have retail components so that investors or end-users have all their basic necessities taken care of.
Wakeham: People choose to live/invest in a place where they can afford to in the first case, then they choose to live where they want to if they can afford to and if their own particular needs are met. Safety and security, access to shops, schools, parks are priorities but only where affordable. Affordability is the main factor.
