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Allowing foreigners to fully own a business in the UAE will give a fillip to the local property market, particularly the office sector, which is still reeling from low demand due to the coronavirus pandemic, experts said on Thursday.
The UAE announced on Wednesday that, effective June 1 this year, foreigners who intend to start a business in the country will no longer be required to seek a local sponsor or shareholder.
The move, which aims to attract more foreign investments and strengthen the UAE’s position as a business hub, complements other key initiatives announced recently, including the UAE citizenship and long-term residency visa schemes.
“Confirmation of the 100 percent company foreign ownership law that comes into effect on June 1 will undoubtedly have a significant impact in the medium to long term for demand for office space in key markets such as Dubai and Abu Dhabi [which] are still experiencing quieter conditions in the aftermath of the global pandemic,” said Faisal Durrani, head of Middle East research at Knight Frank.
Demand for office space has been subdued since the pandemic began last year, especially after millions of workers worldwide cocooned in their homes to avoid contracting COVID-19.
With many offices left empty, rents have fallen as a result. Within the prime office segment in Dubai, rates continued to decline in the first quarter of the year, averaging just over 200 dirhams ($54.45) per square foot, the lowest since the third quarter of 2012.
However, by introducing “landmark” changes to the UAE’s Commercial Companies Law, the country has “unlocked its potential to emerge as a key global contender business headquarters,” according to Durrani.
Prior to the amendments, foreigners were only allowed to claim 100 percent ownership of select businesses, as well as those set up in the free zones.
"These new regulations will create a huge demand on space, as it will attract foreign investments to come to Dubai and set up here," said Ayman Youssef, vice president of Coldwell Banker.
Office market
Haider Tuaima, head of research at ValuStrat, said the health outbreak has indeed negatively impacted the office market.
Based on ValuStrat's research, office occupancy in Dubai alone fell from 83 percent prior to the pandemic to 77.6 percent, which means that nearly a quarter of office spaces across the emirate have been empty.
“The new changes to the Companies Law will have a positive impact on the office market, particularly for smaller offices sized between 1,000 to 2,000 square feet, and would also create further demand for shared and flexible office space,” Tuaima told Zawya.
“No doubt these changes are welcome by the market, as they are expected to fuel further demand for office space, as well as residential space,” he added.
Once foreigners are allowed 100 percent ownership, Youssef said a lot of foreign direct investments and businesses will come to Dubai and this will then attract more talent from overseas. "People will also need places to live in which will in turn positively impact the residential sector also as it is connected. The economy will also see a huge positive impact with the influx of individuals and businesses," Youssef said.
Apart from introducing new initiatives, the UAE has been among those leading the world in the vaccine rollout, as it looks to return to normalcy and restore economic activity.
Dubai has recently eased its COVID-19 restrictions after daily COVID-19 infection rates slowed down to just under 2,000 cases this month, compared to nearly 4,000 in January this year.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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