MANAMA: Real estate sales in the GCC jumped to $137.4 billion last year, eclipsing the previous two years largely due to opportunistic buying in the residential segment.
Analysis by Kamco Invest shows that the value of real estate traded in 2021 increased by almost 52% year-on-year, from $90.5 billion in 2020, when it was $96.7 billion in 2019.
The number of transactions in 2021 increased from 570,080 in 2020 to 663,323, while the average value per transaction in the GCC bottomed out in 2021 ($207,000) and was only 7.1% lower than the 2017 average.
Along with opportunistic buying, among the main drivers of activity last year were mortgage investors looking to profit from falling mortgage rates amid talk of the impact of potential rate hikes on lending rates. continued to emerge.
Government initiatives in home ownership and mortgage lending also contributed to the momentum.
However, the Kuwait-based market research firm expects opportunistic buying to be slower for the residential market in 2022 as investors are likely to watch interest rate decisions and scrutinize the path of stabilized net operating income and steady state growth. ceiling rates.
He notes that the segment’s fundamentals appear to be holding up over the medium term, supported by government initiatives such as visa programs, while the mortgage market develops further to improve home ownership.
“We still need rents to move into a late recovery phase of the cycle. The more affordable segment of the residential rental market should continue to see tenant migration, as supply increases, which should prevent large rent increases, in our view,” said report author Thomas Mathew.
“In terms of pricing, growth is expected to be more subdued than 2021 as more inventory from developer supply pipelines emerges, and significant price increases are likely to be limited to the high end of the premium property market. high-end and luxury.”
In the office space market, Mathew believes that 2022 will be the new benchmark year for demand going forward, with technology, media and telecommunications (TMT), healthcare and legal becoming the new drivers of growth.
“Office spaces have seen the greatest disruption in terms of demand in 2021 due to the impact of Covid-19, which has led to the growth of remote work and work from home (WFH) models”, he explained.
“Additionally, new sources of demand have emerged such as TMT, healthcare/pharmacy, legal and occupiers preferring more sustainable built environments. This has led office operators to optimize their office space portfolios between traditional spaces and flexible spaces. Others have had to reallocate some space to meet demand from alternative sources such as data centers. »
Kamco’s research also shows that in the industrial warehouse segment, leasing has become a two-tiered market, as secondary assets face significant challenges in maintaining stable occupancy rates and rents. Going forward, he expects industrial demand from e-commerce, 3PLs, pharmacy and FMCG, especially large hypermarkets, to continue for bespoke, temperature-controlled automated centers. controlled and refrigerated.
Stabilized demand trends should also be seen from conventional sources of industrial warehouse demand such as building and industrial materials, high value items such as cars, white goods, as economies look to operate in a normalized economic environment.
“While we expect competition to remain, the limited supply of institutional-grade industrial warehouses with modern logistics facilities such as ample office parking will maintain demand for such space.” Retail rents in the GCC have been corrected by up to 9% year-over-year in various markets in 2021, according to data from consultants.
Retailers persisted in negotiations over lease restructuring, negotiating additional rent-free periods. Consumer consumption habits continued to change throughout the year, and retailers drove expansion plans through omnichannel strategies such as click and collect to maintain profitability and market share. “Unlike the office space segment, we believe demand for commercial real estate will continue to evolve beyond 2022,” Mathew said.
Retail developers should review their floor plans for upcoming projects to combine social experiences spanning retail, dining and entertainment to stay ahead of the competition.
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