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The lure of Gulf commercial real estate for
international investors remains strong
The residential and commercial
segments of the real estate sector are
not entirely distinct from one another.
Both have the ability to affect the
other, negatively or positively. After all,
people with jobs – users of commercial
real estate – must live in homes –
making them users of residential real
estate. Typically, during good times
both segments flourish, and during bad
times the opposite is true. Where both
commercial and residential segments
in the Gulf region were adversely
affected by the global financial crisis of
2008, for example, we have seen both
claw back losses up to 2014. However,
where residential has since weakened,
we have seen commercial prices and
yields hold firm thanks to the global
centrality and logistical capblities of
the region, which make it an attractive
place from which to do business.
One aspect of commercial real estate that
sets it apart from residential real estate is
the level of investment required upfront
before a development can begin, a factor
thatmakesinvestorsnaturallycautiousand
keen to carry out multiple viability studies
ahead of construction commencing.
Commercial real estate is typically more
expensive to create than residential real
estate, thanks to the cost of the materials
that are needed to build it. However,
the returns on commercisal real estate
are typically higher than for residential.
Mazaya Monthly Real Estate Report
Week 4 - October 2015