March of e-commerce may impact on retail space, but demand for warehouse and logistics space is heightening
The real estate industry has continued to evolve throughout 2018; and 2019 will indeed raise similar challenges. There are, however, ample opportunities for growth as we enter the new year, particularly in the sub-sectors of commercial real estate, retail and logistics, and warehousing. Efficiency, optimisation and cost effectiveness will be key themes across all sectors in 2019, and the industry’s ability to provide solutions that achieve such objectives will be instrumental to its continued success and advancement in the UAE and the wider region.
In 2019, we expect to see an increase in build-to-suit office space. In order to attract new occupiers, developers will be required to build customised premises that enable tenants to adopt the latest world-class workplace standards. The market will remain highly competitive, and thus the onus will be on landlords to provide attractive incentives including rent-breaks, longer-term leases and discounted rents to ensure they maintain high levels of occupancy.
Reforms to the laws that govern dual licensing will become increasingly important to the commercial real estate sector, allowing occupiers to co-locate within a single-premise leading to operational synergies and cost reductions. Wellness in the workplace is increasingly becoming a key consideration in terms of choosing and designing an office space, and this will continue to be an important trend throughout the new year.
Retail will be an important sector for the region’s real estate industry in 2019. KSA, in particular, will witness a rise in entertainment assets being incorporated into retail malls. This will be especially important to mall owners following the lifting of the ban on cinemas, with a predicted 350 cinemas set to open across the country by 2030.
‘Edutainment’ in malls will also be a key trend as we continue to see a range of family entertainment concepts being introduced to the region. F&B will be a key area of growth for malls - the average family in KSA spends 46 percent of their monthly expenditure on retail (GAS and Oxford Economics), more than half of which is spent on F&B.
Health food concepts will continue to infiltrate the market, as will casual dining outlets. The rise of APAC (Asia-Pacific) brands will be especially notable in 2019 – and this is particularly true of the F&B sector. As in the commercial sector, landlords will continue to demonstrate increased flexibility to support them through a softening market. The rise of the omni-channel platform will continue as shoppers increasingly look for an integrated brand experience that seamlessly brings together on and off-line retail.
We will continue to see the rise of e-commerce, which will fuel an increased need for urban warehousing in 2019. A number of speculative developments that commenced in 2017 and 2018 will come to market next year. Consequently, we can expect to see the rise of longer-term rents for high quality warehouse space. Small, regional hubs will grow in popularity as occupiers look to reduce their travel costs and transit times. Demand versus supply for customised, large-scale warehousing will continue to be a challenge throughout 2019 and beyond, in part due to access to land.
Overall, 2019 is set to witness an increased focus on profitability and efficiency across all real estate sub-sectors. Landlords and developers will be looking to optimise their portfolios and retain existing occupants as the costs of relocation continue to pose a challenge.
Innovation and digitisation will positively impact the industry in terms of the manner in which contracts are drawn and enforced, and also by enhancing the consumer experience to better match companies and individuals to the most suitable properties. 2019 will certainly face similar challenges to those that have arisen in previous years, but there are a number of key opportunities that landlords, and developers alike, can utilise to continue to drive the region’s dynamic real estate market forwa
Saudi Arabia, in particular, will be an important country to watch due to the impressive transformation that the nation is currently undergoing. Entertainment, hospitality, retail and tourism industries are expected to witness a number of reforms that will provide great opportunities for growth, and which will, undoubtedly, have a positive effect on the wider real estate industry.
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