New look at alternative real estate investment assets in Dubai

04.07.2017

What types of real estate assets, apart from residential, bring the highest ROI in Dubai: JLL, Core Savills and ValuStrat share their data.

While residential real estate in Dubai remains in the main focus of attention of the most of property buyers, institutional, and both small private investors are considering ways to diversify their investment portfolio in search of more stable market segments and higher returns.

Grade A and B offices in central locations and on the periphery, fully equipped warehouses in free zones, hotel rooms and service apartments under hotel brands management are the main categories investors should pay attention to when planning to expand their field of interest beyond residential real estate market. Such advice is given by experts from the UAE’s leading analytical and consulting companies JLL, Core Savills and ValuStrat.

“Institutional investors prefer low asset management intensive real estate with long-term leases, which is only available with alternative asset classes,” Gaurav Shivpuri, head of investment at JLL MENA says.

“These properties are more defensive in nature as compared to the core asset classes, hence, the investment stability is driven by the operating state of the operating company that leases the real estate more than the situation of the market. If the tenant is financially stable, then high investment yields are guaranteed, regardless of the changes in the housing market,” Shivpuri adds.

For his part, Core Savills CEO David Godchaux notes that centrally located mid-market Grade B offices, logistics facilities (warehouses and industrial or manufacturing spaces, retail units) are worthy of attention when seeking high investment returns. In this market segment there is a great shortage of rental offers, while the need and demand for such rentals are high enough. “This market is primarily purpose-built, and ready warehouse rental is still in the nascent stages,” says Godchaux.

Declan King, director and group head of real estate at ValuStrat confirms Godchaux’s suggestions: “Offices in areas such as Jumeirah Lakes Towers and Business Bay may offer good prospects for rental income with the city’s expanding economic base [JLT] a growing services sector,” says King. “While retail units in Dubai’s acclaimed malls are not made available for individual purchase, single shops can be bought in towers in Dubai Marina and JLT. Suburban offerings are also available in locations such as Jumeirah Village Circle and International City,” he advises.

Hospitality is another desirable sphere for investments rapidly gaining momentum in Dubai. Now this market is open not only for large institutional investors buying ready-made operating hotels and buildings, but also for small private investors, who can buy rooms in hotels or services apartments and rely entirely on management companies to secure their returns of about 10-12% per annum. Such developers as VincitoreViceroy and DAMAC now offer rather lucrative options for investing in hospitality real estate units in different areas and price spectrums, from luxury apartments and villas on Palm Jumeirah and in Dubailand, and to middle-priced offers in the suburban areas.

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