Dubai emerges as global hub

In recent years, Dubai has further cemented its position as a regional hub. The growth of logistics, tourism, financial & business services, as well as the emirate’s image as a luxury lifestyle destination, have all been central to this – so much so that others in the region are emulating some of the elements that make it a success. But how does Dubai – and indeed the UAE as a whole – stack up against other global hubs?

Although Dubai prime residential property prices have fallen 4.5% in the year to Quarter 2, 2015, new residential supply pipeline for the prime segment is not significant, suggesting that prices over the next 12-18 months should hold up better.

Between 2004 and 2014, manufacturing activity in the United Arab Emirates (UAE) increased at an annual average rate of 3.1%, according to World Bank data. On the same basis, while Singapore (6.1%) outperformed, Hong Kong (-1%), Australia (-0.4%) and the UK (-0.3%) did less well, says leading agent, Knight Frank.

Even more significantly, the UAE saw cumulative growth in exports of almost 117% between 2004 and 2014 – around twice as fast as Germany (58%) and Singapore (61%), according to The Hub Report, which has just been published.

Undoubtedly, the UAE’s strong export performance has been helped by the excellent quality of its transport infrastructure – the World Economic Forum ranked it 1st globally in its 2014-15 report, ahead of Singapore (2nd), Hong Kong (3rd) and Germany (7th).

This suggests that the federation’s prospects as a regional logistics hub are secure in the short to medium-term. Partly because of this, as well as Dubai’s continued success in leveraging its strategic position between East and West, tenant demand for quality industrial and logistics property in the UAE has been outpacing supply in recent years. As a result, rental returns have been rising.

James Lewis, Head of Knight Frank Middle East, says, ‘‘Unsurprisingly the impact on real estate has been positive, with higher levels of occupier demand being generated across the office, industrial and hospitality sectors, respectively.

“Moreover the emirate has established itself as a safe, family-friendly and low tax environment – which combined with its connectivity to other global centres – has been attracting the world’s growing population of high-net-worth individuals. Naturally then, demand for luxury residential property has been gathering momentum.”

In the residential sector, prime home prices in Dubai saw an uplift of 59% over the five years to end-2014 – a better performance than London (52%), New York (47%), Hong Kong (31%), Paris (18%), Singapore (7%) and Sydney (2%).

Dubai’s residential sector has faced headwinds over the past year, leading prices to see a downward adjustment. In annual terms, prime home prices fell by 4.5% in Quarter 2, 2015; however, this was a smaller decline compared to the mainstream segment’s 12.2% decrease, says Knight Frank.

“Finally, Dubai remains one of the safest locations in the world, with excellent connectivity, strong economic prospects, a low tax regime and a stable political system – combined, these factors will undoubtedly play an important role in paving the way for its success as a global hub.”

Looking forward, forecasts from the International Monitory Fund, suggest that the UAE’s economy will outperform the likes of the UK, US, Germany, Hong Kong and Singapore from 2015-2020.

“This, alongside the fact that the federation is among the easiest places to do business globally, should help to extend Dubai’s lead as a financial and business services hub in the Middle East. All else equal, this suggests that tenant demand for good quality, Grade A office space will remain healthy in the short to medium-term,” says Knight Frank.

Stuart Beaty

Celsium, Birmingham, UK