Welcome to Zawya Markets. Each Sunday we will be featuring an interview with a different analyst or markets expert from around the region.

If you would like to participate please email gerard.aoun@refinitiv.com.

1) How is e-commerce affecting the industrial and logistics space worldwide?

E-commerce is rapidly transforming industrial and logistics real estate globally. Besides driving overall demand, e-commerce is shaping physical space requirements and characteristics. Increasingly, we are seeing demand for fulfilment centres closer to population centres, warehouses with taller ceiling heights to accommodate new technology and even former retail locations within city centres being transformed into logistics space or warehouses.

2) What type of regulatory reforms would help Saudi Arabia become a logistics hub?

Key areas that drive the competitiveness of a country as a logistics hub include optimising customs procedures, incentivising foreign investment and facilitating the establishment of a reliable supply chain. Saudi Arabia has taken key steps over the past few years to enhance its competitiveness in this respect, including facilitating import – export processes and announcing the creation of special zones, such as the Integrated Bonded Logistics Zone in Riyadh. These and other initiatives are expected to play a key role in the Kingdom’s wider logistics strategy moving forward.

3) In January this year, the Saudi government announced plans to spend $28 billion in 2019 and 2020 as part of the National Industrial Development and Logistics Program (NIDLP). What do you expect from this plan?

In addition to generating employment and greater economic activity within the key sectors of industry, mining, energy and logistics, there are key initiatives within the wider plan which will play a central role in enhancing Saudi Arabia’s positioning as a global industrial and logistics hub.
These initiatives include enhancing funding systems to enable industrial development and improving the Kingdom’s regulatory environment. If implemented successfully, these initiatives and others are expected to increase investment and demand in industrial and logistics across the kingdom, thereby creating opportunities for real estate development in these sectors and in complementary sectors, such as staff accommodation, commercial space and others.

4) What is the general outlook for the real estate sector across the Gulf?

The real estate sector in the region, much like in the rest of the world, is undergoing a transformation. Disruptive technologies and changing human dynamics are playing a big role in shaping real estate needs. Despite large supply deliveries across key markets, it is expected that those projects which provide the right type of offering and those which are able to quickly adapt to changing tides will witness strong performance. Efficient and quality office space, unique experiential retail and affordable lifestyle hotels, are some of the real estate products which are likely to continue being well-received in the marketplace.

5) What is the outlook for the hotel industry in the GCC?

Countries across the GCC are continuously creating new attractions and tourist offerings in order to entice visitors, extend their average lengths of stay and bring repeat visitors to their shores. We have increasingly witnessed across the GCC, and in Saudi Arabia in particular over the past year, a range of new events – from art shows to sports tournaments to music concerts – with the same objective of expanding the tourist profile of a destination. Key events, such as the Expo 2020, for example, are expected to boost the wider hotel industry. Furthermore, the hotel markets across the GCC are expected to increasingly feature more budget and midscale hotel offerings as well as boutique, lifestyle brands, which cater to millennials who place a great value on unique, travel experiences.

6) What are the biggest risk factors facing the real estate sector in the region?

One of the key risk factors potentially impacting real estate markets in the region is the global economic outlook. Trade tensions coupled with the tightening of global economic conditions may impact growth, and thereby, business and real estate in the region. The evolution of oil markets is also key, highlighting the continued importance of economic diversification for long term economic stability and, by extension, a stable real estate market.

7) What is the outlook for the property market in the United Arab Emirates?

From a residential perspective, we expect the UAE to continue being preferable across the region for investors and end-users, with increases of potential new buyers in the market as affordability increases. Furthermore, the introduction of new residency visas is expected to have a positive impact on the residential market moving forward. As we get closer and closer to Expo 2020, we expect an uptick in investment and economic activity which will have a positive impact across all markets, followed by the actual event creating significant anticipated demand for hotel rooms, serviced apartments, retail and entertainment attractions.

8) What are your views and expectations for Expo 2020?

Expo 2020 will be an outstanding opportunity to showcase Dubai’s offering to the rest of the world. Being the first city in the Middle East to host such an event, the Expo is testament to Dubai’s global positioning as a unique and competitive place for business, lifestyle and tourism. The most obvious impact that we expect Expo 2020 to have on the real estate sector is in hospitality and retail, with increased visitor numbers bolstering spending in these particular areas. However, moving forward and beyond the Expo, we expect that the legacy development of the expo site, coupled with the presence of new infrastructure established to service the event, will further enhance Dubai’s offering for residents and visitors alike.

9) How is technology expected to change the dynamics in real estate going forward

Technology, coupled with rapidly-shifting customer expectations, is likely to revolutionize real estate dynamics moving forward. Real estate stakeholders – occupiers, end-users and investors – will be increasingly focused on the productivity, efficiency and experience of their spaces, thereby impacting the real estate typologies sought-after in the market as well as the technologies enabling them to develop and manage productive, efficient and experiential space. Based on our research, more than 50 percent of occupiers desire a more tailored workplace environment that adapts to the needs of their employees. Increasingly, workplaces which put people at their centre through the use of technology will be at the forefront of this evolution and are expected to outperform the competition.

10) How is Vision 2030 in Saudi Arabia affecting the property market in the kingdom?

Vision 2030 is shaping the Kingdom’s property market in a variety of ways. From spurring new, mega developments such as Qiddiya, the Red Sea Project and NEOM, to creating opportunities for specific types of asset classes, real estate represents a key pillar of the vision. Specific assets which are increasingly being looked at in line with wider vision objectives include entertainment, healthcare, hospitality and affordable housing, to name a few. We expect there to be greater development activity in these particular segments, in line with increased demand for and initiatives related to these sectors. Furthermore, as the economy continues to diversify away from oil, it is expected that the economic sectors driving demand for office and industrial space in particular, will evolve, and so too will the types and characteristics of the real estate offering tenants are looking for.

(Editing by Gerard Aoun and Michael Fahy)


Any opinions expressed here are the author’s own.

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