Lack of plots gives Palm Jumeirah added air of exclusivity

Alamy via Reuters

• Few untouched plots left
• Status symbol for richest buyers
• Scramble to renovate properties

Palm Jumeirah, Dubai’s world-famous man-made island, is running out of undeveloped land.

Developer Nakheel’s announcement earlier this week that it will pay nearly $500 million to Alec Engineering & Contracting to build the new 75-storey Como residential tower on Palm Jumeirah is bound to be one of the last of its kind.

Since it will be years before other high-end waterfront developments in Dubai, like Palm Jebel Ali or The World, are ready to live on, a “scarcity” mentality is likely to draw even more interest to Palm Jumeirah’s few untouched plots and, increasingly, older properties that can be upgraded or rebuilt.

“There is a shortage. If you really want to live on the water – and most people do when they are spending that kind of money – there is not much on offer,” says David von Rosen, founder of luxury villa developer 25 Degrees. 

“You can see the influx of not only capital, but also people coming to Dubai for the lifestyle, for the great business opportunities, and they are ready to spend for a nice place to live, and for me that’s only on the Palm at the moment.” 

In January 2022 Sharjah-based developer Arada spent AED240 million ($65 million) on the Palm’s last beachfront plot available directly from master developer Nakheel. 

What remains now are two or three pieces of land big enough to erect apartment towers and a smattering of villa plots, all from the secondary market, according to sources. 

Andrew Cummings, head of residential agency at Savills Middle East, says there are approximately 1 million square feet, or 33 acres, of undeveloped land still available on Palm Jumeirah – less than 3 percent of its total size.

“Some of these are super premium parcels of land that will reach prices of more than AED6,000 per square foot, depending on how much of a sea view the plot or frond can provide, and whether it is located on the Crescent or the Crown,” Cummings says.

In addition, other sources say many plots, especially the larger ones, have been long-held by wealthy local or GCC families, almost like a land bank, and are very hard to come by.

“The beauty is because there are so few plots left on the Palm, the prices that they are achieving are incredible, and it doesn’t matter whether they are on the trunk or one of the top fronds,” says Imran Sheikh, a partner at BlackOak Real Estate in Dubai.

Alamy via Reuters

The number of sales on Palm Jumeirah dropped nearly 50 percent over the past 12 months, while the average price per square foot grew 8.5 percent, according to Bayut.

Even accounting for increasing land valuations and the investments required to build luxury properties, Sheikh says developers still stand to profit lavishly from the Palm as the costs they can pass onto the consumer leaves plenty of margin. 

In December 2023 a five-bedroom 22,000 square feet penthouse at Nakheel’s yet-to-be-build Como Residences went for just over $136 million, a new record. 

Palm Jumeirah has also set multiple records for the most expensive villas, with a pair of properties fetching $82 million and $76 million, respectively, in 2022.  

As opportunities for brand new projects disappear, owners, investors and developers are increasingly turning to renovating – when not tearing down and rebuilding from scratch –  some of the oldest properties on the nearly 20-year-old development.  

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“There are many villas which were bought many years ago and have become rundown, so there are huge opportunities to acquire these, refurbish them and resell them at a profit,” says Mona Jalota, founder and managing director of Krypton Global Real Estate.

That strategy too has some limitations. 

Nakheel has long maintained restrictions on making significant changes to the facade or external structure of a Palm villa. And while some sources say the developer has recently loosened those rules, making it easier to undertake extensive upgrades, the fees it demands for expanding a property’s original footprint have grown exorbitant, almost prohibitive. 

Overall, the picture points to Palm Jumeirah becoming even more of a status symbol, accessible only to the residents with the deepest of pockets.

This, says BlackOak’s Imran Sheikh, can only help Palm Jebel Ali’s prospects as buyers frantically look for the next beachfront residential community in Dubai.

However, Krypton’s Mona Jalota says it is hard to imagine for now that the new man-made island will be capable of going toe-to-toe with its more prestigious predecessor, as people have a tendency to value more what is not available than what is.