Dubai investors scramble for prime development plots

Jumeirah

• Most of the emirate’s ‘master communities’ have few sites left  
• Prime beachfront plots are particularly scarce, pushing up prices 
• Offices and industrial development presents untapped opportunities 

Dubai’s dwindling number of prime development sites is keeping prices high and competition fierce in this segment of the emirate’s property market. Waterside plots connected to existing infrastructure are in especially short supply, experts have said. 

Earlier this month an undisclosed Dubai-based developer bought three adjoining plots spanning 1.7 million sq ft in Dubai Marina for AED690 million ($187.6 million).

Its brokers, Metropolitan Premium Properties, part of Metropolitan Group, and Mallorca Properties, described the deal as the emirate’s single biggest residential land transaction to date. 

The waterfront site has unobstructed views of the sea and Palm Jumeirah and is expected to be developed into ultra-luxury apartments and penthouses at a time when Dubai’s high-end residential market is reaching an all-time high, the agents said. 

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Metropolitan’s head of institutional sales, Ahmed Abou El Naga, told AGBI that the land in question was one of “only a handful of these kinds of prime development sites available in the whole of Dubai”. They are usually sold in off-market deals for hefty sums. 

“In general, there is a lack of prime sites that are already connected to existing services and infrastructure because most of Dubai’s master communities are built out and there are only a handful of plots left,” El Naga said.

“It’s difficult to even find out when one of these goes up for sale, as they are all sold off market.” 

Prime beachfront plots are in particularly short supply, according to El Naga. “These kinds of sites are scarce and any prime beachfront plot – or even waterfront, like those in upmarket inland neighbourhoods such as Business Bay and along the Dubai Water Canal – are in demand among investors,” he said. 

“If you look at Google Earth you will see that most of the beachfront areas in Dubai are already developed.”

Many remaining parcels of land along the coast are owned by private entities. 

Ali Hussein Sajwani, managing director of operations and technology at Damac Properties, one of Dubai’s largest residential developers, said: “When it comes to beachfront land, it is scarce – that’s where there is potential for the land to actually run out, because the beachfront is quite limited.

“And with property, it’s all about location, location, location. So, if you focus on prime real estate, it will, of course, hold its value because the land is so scarce.” 

Nick Maclean, managing director of property consultancy CBRE Mena, said the Mallorca/Metropolitan development plot deal “is an example of infill land with services and infrastructure already attached – making it a rare and extremely valuable opportunity as there aren’t many of those sites left [in Dubai].”

Further inland, the Dubailand neighbourhood “has a few plots available and I think we’ll see a lot of development there in the next 10 years”, he added.

“Demand for this sort of development site is high, but an actual sale depends on the developers’ capability for borrowing. 

“We’ve seen lots of demand from those that want it but can’t fund it, and there is a slight mismatch currently between buyer expectations and price.

“Whether the seller is asking too much, or the buyer is offering too little, it remains to be seen who’s right and whether prices adjust in time.”

For now, Maclean thinks the Dubai prime real estate market has yet to peak.

“Demand is continuing to outstrip supply. Prices across all segments of the market are growing as a result and I think the market will keep heating up in terms of residential and commercial values and rents,” he said. 

This is partly because supply lagged during the pandemic “so we are catching up”, he said.

Pipeline stock is unlikely to be built until 2024 or 2025 which will keep prices high for at least the next year or so. 

CBRE’s Q3 Dubai Residential Market Snapshot report published last week found that total transaction volumes rose 60.8 percent year-on-year to 10,505.

In the year to November, a total of 81,919 residential deals were recorded – exceeding the record highs registered just before Dubai’s property crash at the end of 2009. 

Average prices for the quarter rose by 9.5 percent year-on-year, according to CBRE, with apartment prices standing at AED1,161 per sq ft and villa prices at AED1,374/sq ft.

These average rates remain below the highs recorded in 2014, Dubai’s most recent market peak, by 22 percent and 4.9 percent, respectively. 

What could hold back escalating residential values in the coming year is the rising cost of living, noted Maclean.

“Salaries are not keeping up with this, so at some point this could put downward pressure on sales prices and rents,” he said. “But we are not seeing any evidence of this at the moment.”

Sajwani said Dubai’s central hub tends to move every few years, altering what is considered a prime location and creating a cycle of luxury property peaks.

“It used to be Dubai Marina then it became the Burj Khalifa area. As these master developments come to life, the heart of the city sort of shifts around. It’s not been the same for over the last 20 years,” he said. 

Demand for more office space

In the development market specifically, there are plenty of untapped, high-value opportunities, the experts said.

Office development is one, said Metropolitan’s El Naga. 

“Dubai is really lacking Grade A office space. If you’re a big multinational and you’re looking in DIFC (Dubai International Financial Centre) or somewhere similar, there’s hardly anything on the market right now. If you want 20,000 sq ft, you might find 3,000 sq ft,” he said. 

“There’s been virtually no off-plan commercial development in Dubai for almost a decade.”

The planned expansion of DIFC by Investment Corporation of Dubai (ICD) and Canadian asset manager Brookfield – a joint venture known as ICD-Brookfield – was the last major commercial development to be brought forward in Dubai.

Industrial development is another untapped opportunity, he said.

Despite the boom in e-commerce, there are virtually no large warehouses on the market or under construction in Dubai and it is hard for new or growing businesses in this sector to find suitable space. 

“There is a major lack of supply in warehousing despite there being a lot of land in Dubai fit for this purpose. Yet nobody is doing this [kind of development] on a large scale,” El Naga said.