Colliers International releases GCC Overview Report
African Manager

Colliers International, the global real estate consultancy,  releases the GCC Overview Report, which indicates that the impact of the global economic and financial crisis on Gulf real estate markets has been swift and dramatic leading to a decline in real estate capital values and rents.

Against this backdrop, Colliers has identified a fundamental change to the regional market dynamic as speculators, end-users and occupiers have fallen away and professional investors become the dominant drivers of transactional activity.
The report's findings indicate that the extent of the impact of the global crisis is primarily dependent on each market's exposure to global economic drivers and the level of speculation that occurred prior to the price peak last year.

Explaining the contraction in Gulf real estate markets Ian Albert, Regional Director, Colliers International said, 'The impact of the global crisis continues to be a lack of liquidity and stricter lending criteria when compared to last year. Most importantly, sentiment has deteriorated further as corporate downsizing has become more pronounced and greater job insecurity has forced end-users and occupiers away from the market.'

'In the last six months, a relatively short space of time, we have witnessed the switch from speculators to end-users and occupiers, and now to professional investors as the main type of purchaser in these markets,' he added.

Albert continued, 'The consequence is the increasing importance of investor yield in the market place, and as long as a significant price/yield gap exists, we foresee difficult times ahead in terms of price stability and transactional activity.'
Colliers' analysis concludes that while the price/yield gap remains a dominant issue in Gulf markets the probability of the establishment of price stability for real estate assets, and for the resultant prospects of recovery, remains a long term probability.
Key findings:

Dubai
• 39% decrease in average office sales prices between Q3 08 and Q1 09
• 40%-42% decrease in average residential sales prices since Q4 08
• 20%-40% decrease in residential rental rates dependent upon the circumstances of the landlord
• Average yield of 8.9% on residential property and 8.8% on office property
• Demand projections for Dubai retail property can only absorb a further 140,000 m² of GLA before being oversupplied.
Abu Dhabi
• 20% average decline in capital value of residential property launched in Q2 08
• 24% decrease in office rentals between Q3 2008 and Q1 09
• Average yield of 9.9% on residential property.
Doha
• Rentals for newly constructed office space have softened by 10%-15% over the last 4 months
• Sales of residential properties have collapsed due to the lack of finance and a wait and see attitude on the part of buyers
• The total shopping mall supply is still on track to increase by 100% between Q1 09 and Q4 10
• $17bn has been earmarked to boost the infrastructure for tourism over the next 5 years.
Riyadh
• Average yield on office property is 11% and average yield on residential property is 10%
• Average residential sales prices have dropped 23% due to negative market sentiment and the positive impact of falling construction costs
• Newer retail developments show a shift towards the presentation of an overall entertainment destination
Makkah & Madinah
• Growth of religious tourism buoys the Kingdom's hospitality sector accounting for 51% of the country's total tourist arrivals in 2008.
Jeddah
• Average yield on office and residential property is 10.5%.

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