You have been at the helm of CBRE MENA for almost two decades. How have you seen the cities in the region transforming during this time?
I arrived in the UAE near the end of 2004 to open CBRE's office; we were extremely fortunate with our timing because the UAE had just decided that real estate would be a relevant part of its investment model going forward. We had four years of growth prior to the onset of the 2008 global financial crisis; despite the difficulties that year, markets recovered quickly and are now two to three times bigger.
There are huge opportunities for this country on the horizon, particularly because of the momentum of international investment in a way that has not been seen historically.
The success of the country has reflected in the success of our business, and while we had good growth previously we expect very strong growth going forward.
A look through the region’s population charts shows a surge in population growth. What is driving it?
Our population has grown rapidly indeed (the UAE now has a population of nearly 10 million people), and we expect this trend to continue for a variety of reasons. We have a dynamic government that allows opportunities to come to fruition - no income tax for instance, which attracts businesses and encourages an entrepreneurial environment. Big companies and young entrepreneurs alike are able to find capital and global talent here.
To note, Emiratis make up only about 10% of the 10 million resident population, so the region is attracting significant international talent. This blend of different religions and nationalities creates a very attractive mix of ideas from all over the world.
What do you consider to be the main development hotspots at this point in time, across the Middle East?
Saudi Arabia is the fastest growing country for us, due to the expansion of their real estate sector and the modernization of their decision-making processes. The UAE, of course, remains extremely important to us; there is a level of dynamism here that I believe other parts of the world envy. The entrepreneurial-driven government has been essential in ensuring that people have places to live, schools for their children, and offices for their businesses. This naturally feeds the development of the built environment.
The imagination surrounding future cities is inevitably linked to sustainability and technology. To what extent are these already being used across the Middle East?
Countries in the region are at various stages of development, and the rate at which they progress is largely determined by their financial strength. In the UAE, there is a strong commitment to the journey toward sustainability, and they embrace new technologies to accomplish this. All governments in the region in fact understand that the future of hydrocarbons is uncertain, and that it is an interesting time to diversify their economies. Seeing where oil and gas prices are currently, countries are using this opportunity that they have been given to fund the transition to more sustainable fuels and carbon neutrality by 2050.
Which real estate segments tend to receive the most attention from investors presently?
The residential market is seeing a lot of activity, because it is the most easily accessible for people from all around the world. However, there is growing international interest in commercial investments. Part of the opportunity that this country offers is that the amount of commercial international capital that comes in is still relatively small. Nevertheless, with the government launching IPOs for many of its businesses (water, power, roads, etc.), we are entering a new stage that attracts international capital.
This, I believe, will have an impact on the commercial real estate market, particularly the office sector, possibly followed by logistics and industrial. There is currently a significant disproportion of owners-occupiers, which stems from a cultural mindset - family businesses prefer to own real estate, and they haven't seen it as a trading asset, but rather as something to buy and hold long term. The tides are changing, and I anticipate that this segment will become significant within the next decade.
What are your thoughts on the challenges of doing business in the Middle East?
One of them is undoubtedly the cultural unwillingness to sell assets, which results in a relatively small capital market. Furthermore, there is still a need to develop the legal framework through which people can own property here or enforce lease clauses; I must note that there are fundamental differences compared to five years ago, and things are changing relatively quickly. Consider for instance what has happened in Saudi Arabia in recent years, they have been transformational not only from a legal standpoint, but also from a social one.
What objectives is CBRE pursuing with priority in the coming two to three years?
We are cautiously optimistic about the market at large; global issues make their way here slower, but they do arrive eventually and they can be impactful especially if they are related to trading.
Overall at CBRE we are bullish - we have been growing more than 20% per year, and the only thing that could slow us down is the labor pool. The single weakness is the amount of people we can hire to do the work, so I do encourage everybody to come over; we have brilliant sunshine and no income tax. Come have a look for yourself.
