< PreviousC OVER S T O RY / PROPERTY 30 AB/ Money October – November 2021 Q T HE MAIN REASON FOR HIGH DEMAND OF READY PROPERTIES DURING THE LAST TWO QUARTERS IS DUE TO THE CONFIDENCE OF INVESTORS AND END-USERS IN THE UAE” When it comes to the value of residential trans- actions, the secondary property market recorded the highest-ever transaction value in Q2 and Q3 2021. Meanwhile, the off-plan market is seeing a ‘V’ shaped recovery with transaction volumes up by 108 percent over Q3 2021 vs. Q3 2020 and 18 percent when compared to Q3 2019, signalling a return to pre-pandemic levels. As of August 2021, Dubai’s off-plan market saw 2,599 sales transactions worth AEDD4.95bn ($1.35bn), the highest value recorded in a month for off-plan properties since December 2013, according to a report by Property Finder. Top areas in off-plan demand for villa/town- houses were in Dubai Hills Estate, Arabian Ranches, Palm Jumeirah, Damac Hills 2 and Mohammed bin Rashid City. For apartments, Dubai Marina ranked as the top area for demand followed by Downtown Dubai, Palm Jumeirah, Business Bay and Jumeirah Village Circle. Close to 24,000 units have been delivered to date in 2021, with an additional 13,000 units expected by year-end, totalling 37,000 units, the highest annual number of residential deliveries in Dubai over the last decade. As apartment units constitute a major portion of the delivered inventory, accounting for 86 percent of the total residential handovers this year, this is further escalating villa price recovery due to limited villa stock. New project announcements so u Ripple effect The Expo 2020 Dubai is expected to boost real estate demand in the emirate over the short-termarabianbusiness.com 31 / PROPERTY Q IT WOULD BE INTERESTING TO SEE IF THE VILLA MARKET CONTINUES TO SEE A SHARP RISE IN VALUES OR WITNESS CORRECTIONS” $1.35bn The value of 2,599 off-plan sales transactions in Dubai as of August this year far in the year are 47 percent lower than 2020 and 79 percent lower than 2019 for the same period. While the villa sales market has been leading the recovery since late 2020, with the apartment sales market lagging, there has recently been a gradual rise in apartment-sale prices in certain communi- ties. However, the apartment sales market perfor- mance continue to be fragmented with seven out of 11 districts tracked by CORE witnessing a year- on-year rise while the city-wide apartment sales price average saw a nominal 2 percent rise. Meanwhile, eight of the nine villa districts tracked by CORE saw a 14 percent year-on-year increase in sales prices and the city-wide villa sales price average saw a robust 16 percent year-on- year rise. The rental residential property market also reveals this misbalance between villas and apartments, with the villa rental market seeing soaring rents while most of the apartment stock continues to see rental contractions and absorption challenges. Eleven out of the 23 apartment districts tracked by CORE continue to see year-on-year rental contractions with apartments in Palm Jumeirah being the only district to see a 12 percent increase. City-wide apartment rents are still 5 percent lower than Q3 2020. “It is imperative to note that while these rental and sale price increases are significant, they are compared to the lowest point in the market cycle over Q3 2020. All villa markets are still significantly lower than their 2014 peak values and are gradu- ally moving towards them,” says Gurrapu. “While the preference for private, open and additional spaces would remain in a post-Covid world, it would be interesting to see if the villa market continues to see a sharp rise in values or witness corrections as most Covid-19 related restrictions have been lifted with schools and offices resuming to near full occupancy,” she adds. Top reason for high demand The expo is not the only catalyst driv- ing Dubai’s real estate sector, with the emirate benefiting from the UAE’s handling of the global coronavirus pandemic – the city has remained relatively open during the pandemic, following an initial short lockdown. According to Bloomberg’s Vaccine Tracker, more than 75 percent of the adult population in the UAE is fully vaccinated. Government reforms have played a further part in attracting and retain- ing talent in the city, including the ten-year golden visa, remote work- ing visa and retirement visas, as well as allowing 100 percent ownership of companies. Dubai is also considered a relative bargain for buyers with deep pockets. $1m can buy 165 sq m (1,776 sq ft) of space in Dubai, around five times less than in London or New York, accord- ing to a report from Knight Frank earlier this year. Arjumand Niazi, managing part- ner at TurnKey Properties, says: “The main reason for high demand of ready properties during the last two quarters is due to the confidence of investors and end-users in the UAE as a long-term base for residence and business after amendments in personal and business laws to accommodate wider demographic lifestyle preferences.” u Palm Jumeirah ranks among the top areas in off-plan demand for villa/ townhouses in Dubai u Attraction Dubai real estate is considered a relative bargain for investors MARKET WATCH Property prices in Dubai during the second quarter of 2021 accelerated at their fastest pace since the summer of 2014, according to the latest research by Knight Frank.32 AB/ Money October – November, 2021 C OVER S T O RY / BUSINESS SENTIMENT BY ARABIAN BUSINESS STAFF u Emirate rising Dubai’s economy has steadily rebounded from the pandemic while Expo 2020 Dubai has provided a further boost, with business confi dence at its third highest level in 10 years Business confi dence in Dubai boosted by Expo effect Figures revealed by IHS Markit show Dubai’s non-oil private sector grew for a tenth-straight montharabianbusiness.com 33 / BUSINESS SENTIMENT Q EXPO 2020 DUBAI IS A TURNING POINT AND CATALYST FOR DUBAI’S SUSTAINABLE ECONOMIC GROWTH” 26,232 The number of business registration and licensing transactions completed in Dubai in September Business confidence in Dubai is at its third highest level in 10 years, according to the latest survey from Dubai Chamber, as companies in the emirate begin to feel the positive impact of the World Expo. According to the findings of the Chamber’s quarterly Business Leaders’ Outlook Survey, 76 percent of respondents noted improved busi- ness confidence in the fourth quarter of 2021, compared to 66 percent in the third quarter and 48 percent in the second. Hamad Buamim, president and CEO, Dubai Chamber, tellsArabian Business: “Over the last year, economic growth in the emirate has become more sustainable while business confidence has improved due to the positive impact of new regu- lation and business incentives and other major initiatives introduced by the government.” Around 78 percent of survey respondents said they expect Expo 2020 Dubai to benefit their businesses in the coming months. In addi- tion, 83 percent of business leaders expected an improvement in business conditions in Q4 2021 compared to 66 percent in the previous quarter and 51 percent in Q2. Expo 2020 Dubai opened its doors to the world at the start of October, with organisers forecast- ing 25 million visits to the global showcase over the next six months through to March 31, 2022, despite continued concerns over the coronavirus pandemic. Buamim adds: “Expo 2020 Dubai is a turn- ing point and catalyst for Dubai’s sustainable economic growth, while it will change the dynamics of Dubai’s trade relationships and business community. The impact of Expo 2020 will be reflected on all economic and non-eco- nomic indicators in Dubai, and we will witness a growth in the tourism, hospitality, travel and retail sectors, attracting quality investments in addition to attracting business delegations from all over the world. “It represents an unprecedented opportunity for businesses of all sizes, international organisations and govern- ment entities from across the world, to come together to foster a more diversi- fied and resilient global economy.” It comes as figures revealed by IHS Markit show Dubai’s non-oil private sector grew for a tenth-straight month. Its Purchasing Managers’ Index for the Middle East’s main business hub was at 51.5 in September, above the 50 mark that separates growth from contraction, but down from 53.3 the previous month. The Dubai non-oil sector saw a dip in demand during September, said David Owen, economist at IHS Markit. However, “the Expo 2020 has now begun, which should drive sales in the services sector over the next six months at least. Whilst IHS Markit predicts that the direct growth impact from the event will be modest, the latest PMI data highlighted a considerable impact on near-term business confidence”. The IHS Market report further reported: • Dubai’s construction industry led the overall fall with new work dropping for the first time since June. • Travel and tourism saw an uptick driven by demand from Expo 2020. • Employment levels rose only slightly and by the least in four months. • Input costs rose but the rate of cost inflation was marginal leading to a reduction in the price average. *With Bloomberg u Travel and tourism has witnessed an uptick driven by increased demand from Expo 2020 u Hamad Buamim, president and CEO of Dubai Chamber BUSINESS IS BOOMING Dubai Economy issued 6,928 new licences in September, a growth of 68 percent compared to the same period in 2020.34 AB/Money October – November 2021 FEATURE/ TOURISM Over 400,000 people visited Expo 2020 Dubai in its first ten days. Recent figures revealed that the event, the first World Expo to be held in the Middle East, Africa and South Asia (MEASA), welcomed 411,768 ticketed visits since opening its doors on October 1. Organisers have forecast 25 million visits for the duration of the six-month global event. Dimitri S. Kerkentzes, secretary general of the Bureau International des Expositions (BIE), says: “Expo 2020 Dubai’s opening week has undoubt- edly been a success. The numbers we are seeing are very encouraging and demonstrate the global desire for people to reconnect with each other BY GAVIN GIBBON u Global event Expo 2020 Dubai runs until March 31, 2022, with 200 pavilions in total for visitors to explore Tourists belonged to 175 nationalities – not far off the 192 countries that are participating in the event, each with its own pavilion Expo supercharges hospitality spending as visitors fl ock inarabianbusiness.com 35 / TOURISM Q THE NUMBERS ACHIEVED IN THE FIRST TEN DAYS REFLECT THE ENTHUSIASM OF THE WORLD TO ATTEND EXPO 2020 DUBAI” 62% The occupancy rate hotels in the UAE recorded in the fi rst six months of 2021 and to imagine a better future.” Visitors belonged to 175 nationalities – not far off the 192 countries that are participating in the event, each with its own pavilion. One in three has come from abroad, with this propor- tion expected to increase as international travel ramps up – while one in five visitors have already visited Expo more than once. Reem Al Hashimy, UAE Minister of State for International Cooperation and director general, Expo 2020 Dubai, says: “The numbers achieved in the first ten days reflect the enthu- siasm of the world to attend Expo 2020 Dubai. The coming days and weeks will be full of special events offering a visitor experience that will be rich, purposeful and entertaining, and we look forward to welcoming many more people from around the world.” The figures include all physical ticket-hold- ers. They exclude representatives, delegations and guests of international participants, partners and other stakeholders, as well as Expo staff. Expo 2020 Dubai runs until March 31, 2022, with 200 pavilions in total for visitors to explore. As well as the attractions at each location, there are multiple daily events, with panel discussions and cultural performances. Hotel industry reaping the benefi ts Dubai’s iconic Kempinski Hotel Mall of the Emir- ates is hoping to edge closer to 2019 occupancy levels in the fourth quarter of this year, according to general manager Slim Zaiane. Zaiane says demand was being fuelled by Expo 2020 Dubai, but warned an overall recovery in the hotel industry, back to pre-Covid levels, would not be witnessed until 2023. He tells Arabian Business: “We are aiming to target occupancy somewhat close to pre Covid levels in Q4 with Expo 2020 attracting a large number of tourists in the country along with a very exciting busy season ahead of us.” The hotel, one of the oldest five-star/luxury hotels in Dubai, offers 392 rooms and has been a mainstay on the emirate’s hospitality scene for 15 years. While the industry was hit hard during the global pandemic, with lockdowns followed by travel restrictions and social distancing guide- lines to curb the spread of the virus, Zaiane reveals that the hotelier is one of many to have benefited from the increase in staycations over the last 18 months. According to latest research from the UAE-based Global Hotel Alliance (GHA), which studied summer travel behaviour among members based in the UAE, 92 percent took a staycation from June to Septem- ber 2021, compared to just 68 percent during the same period in 2019. Zaiane says: “Although, the hospi- tality sector was heavily affected by the pandemic, we are feeling positive with an action-packed season ahead of us. With the ease in restrictions and travel and Expo 2020, we are focussing on leading the way in seeking new travel and leisure experience. “Another one of our main focusses is staycation and daycation packages. This has served as a key initiative to drive demand and offer Kempinski Hotel Mall of the Emirates a path to recovery. We are expecting a full recovery to go back to 2019 level not before 2023.” UAE hotels hit 62 percent occu- pancy in the first six months of 2021 as the tourism sector continued to rebound from the Covid-19 pandemic. Nearly 8.3 million guests visited the UAE’s hotels and tourism estab- lishments in the first six months of the year, a 15 percent growth compared to the first half of 2020. “We have been receiving a lot of interest from international and regional travellers including requests from Russia, Europe, India and GCC countries, and we are aiming to host several nationalities with Expo 2020 in full swing,” says Zaiane. u Slim Zaiane, general manager of Kempinski Hotel Mall of the Emirates36 AB/ Money October – November 2021 FEATURE/ NON-FUNGIBLE TOKENS BY LARA ABOUELKHEIRarabianbusiness.com 37 / NON-FUNGIBLE TOKENS We speak to industry experts who share their insights on the growing interest on digital assets and how it’s reshaping traditional business models38 AB/ Money October – November 2021 FEATURE/ VENTURE CAPITAL BY LARA ABOUELKHEIR u Deals Funding for startups in Saudi Arabia reached $168m in the fi rst half of the year Industry experts discuss the progress of the region’s venture capital and startup spaces and the factors required to sustain their growth SUPPORTING THE MIDDLE EAST’S BUDDING STARTUP ECOSYSTEM arabianbusiness.com 39 / VENTURE CAPITAL Q AS FUND MANAGERS AND INVESTMENT MANAGERS, IT IS OUR JOB TO EDUCATE AND HELP MOST OF THE INVESTMENT FAMILIES TO REALLY LOOK AT THIS AS THE FUTURE FOR THE MARKET” 21% Saudi Arabia’s proportion in the MENA region’s venture capital transactions for the fi rst half of 2021 The venture capital (VC) space in the Middle East has grown drastically over the past year, with MENA startups attracting more than $1.2bn in funding in H1 2021, a 64 percent year-on-year growth, according to MAGNiTT. And experts reveal they only expect this to increase further as the appetite for investing in the region’s startup scene continues to gather pace. “This year has been a lot heavier across the board in terms of exits, especially in Saudi Arabia. It has showed that we can create some really technology-driven MENA leaders,” shares Rabih Khoury, managing partner and chief exit officer of MEVP, at the 2021 AIM Summit. “I’m sure we’re also benefiting from the rota- tion of capital from China coming to our shores, but it seems that this is finally going to be the year of technology investments in the Middle East,” he adds. Sharing his optimism for the growth of the Saudi VC space, Essam Albakr, CEO of Ejada Capital says: “Based on recent numbers, we’re talking about a 65 percent increase in fund- ing in the first half of the year. I think Saudi is genuinely raising the standards for the VC market, which will naturally spill over region- ally, and the government is doubling down on their investments.” Saudi Arabia, the Arab world’s largest econ- omy, jumped from third to second place in the region’s venture capital market, according to the latest Venture Capital Investment Report by MAGNiTT. The value of capital raised in the kingdom for the first half (H1) of 2021 accounted for 14 percent of MENA venture capital funding. However, Albakr believes that there are still crucial gaps to be filled in this market. “There are problems in terms of deal flow - we’re talking about too much demand, but the supply is very much scarce,” he says. The difference in deals between the UAE and Saudi Arabia went from 41 deals in 2020 as a whole, to just 11 deals in the first half of 2021, closing the gap between the top three markets. However, Albakr cites the lack of ‘disruptive innovation’ in the region as a reason for Saudi’s deal flow issue, in which he says: “We’re plagued by a copycat system…. we’re not talking about disruptive technology here. “The Ministry of Investment has been coming up with entrepreneurial devices, startup programmes, and attracting a lot of expats to sell and scale in Saudi, but this is the market that we see. “The market is nascent, but there are a lot of gaps that still need to be filled. However, we see a very proactive government that is really trying to tackle every area of the market, so that we can progress to a mature one.” Too often the Middle East has been accused of a lack of innovation, with the majority of startups replicating ideas or business models seen elsewhere. However, Khoury argues that this is a natural part of the region’s startup market’s development. “When we look at China and India, they all started by copying local markets and solving certain technology pain points in their markets. Initially, innova- tion was not about the idea but on how you deliver the service,” he adds. Supporting the ecosystem Providing support along the entire startup cycle is crucial for the ecosys- tem’s overall advancement, according to Albakr. “If you look at the way that the econ- omy is traditionally structured, it is very risk averse. When considering invest- ments, there was traditional real estate and public equities – VCs were never part of the allocation, at least not until last year.” “For us, as fund managers and invest- ment managers, it is our job to really educate and help most of the invest- ment families to really look at this as the future for the market,” he adds. “Considering the issues with deal flows is really tapping into and under- standing the reality of the market - the right supportive environment needs to be developed.” On the growth of the Saudi and UAE markets, Khoury says: “There is a lot of opportunity – the market is getting much more institutional.” “Our market is one of the last great emerging markets. We are a very modern emerging market, but we emerge a bit late because our legacy services and our governments were actually pretty old.” “There are important issues that still need to be solved – as we improve local spirits, we’ll have much more talent emerge from the region that will need our support to grow,” he adds. u Essam Albakr, CEO of Ejada Capital u Rabih Khoury, managing partner and chief exit offi cer of MEVPNext >