According to the Market Statsville Group (MSG), the GCC Commercial Real Estate Market size is expected to grow from USD XXX million in 2023 to USD XXX million by 2033, at a CAGR of XX% from 2024 to 2033.
The GCC commercial real estate has been experiencing great growth due to the economic diversification policies, rising urbanization levels, and the accommodating foreign investments. Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain- these countries are working hard to diversify their economy to depend less on oil hence, more investments in infrastructure and holiday facilities have seen demand for commercial property such as offices, shops, industrial units and others rising. Cities such as Dubai, Riyadh, and Doha are growing to be world cities hosting global firms and investors. Government policies such as eased restrictions on foreign ownership and taxation have been assisting the growth of the market. However, there are always risks which include volatility in oil prices, political instabilities, and a shift towards Sustainable Development. However, its favorable geographical location and continuous economic liberalization make the GCC an attractive market for commercial real estate investment in the future years.
Commercial real estate involves properties exclusively used for business for instance; offices, shops, factories, and apartment buildings for instance. However, commercial properties on the other hand are developed to make revenue for the owner by leasing them out to other businesses or individuals. This sector comprises all types of properties such as retail outlets such as shopping malls, office complexes, hotels, industrial buildings, and clinics. Commercial real estate is an important sub-sector in the economy as it fosters employment, investment, and economic growth.
The GCC region’s commercial real estate market is fueled by urbanization and population expansion in cities such as Dubai and Riyadh. The population in these cities is rapidly increasing due to natural increase rates and through the immigration of expatriates who are in search of economic opportunities. With the development of the modern population density more and more territories are occupied by large commercial areas that are necessary for the growing business facilities and services demands. These demands are office space for newly established businesses, shops targeted at the end consumer, and factories for logistics and production. Moreover, the continued arrival of new stakeholder communities, and improvement of the urban infrastructure, for instance through the construction of transport links and other utilities drives the demand for commercial property. The governments spend in smart cities and business cities where multinational companies are set up and enhancing the commercial property market. Thus, growth in urban space and the population is the main reason for the development of commercial real estate in the GCC.
Environmental issues related to sustainability are emerging as critical discusses in the GCC commercial real estate due to the globalization of the environment, conservation consciousness, and legislative requirements. The upgrade of existing properties to meet environmental codes and standards is a concern for developers and investors as it entails considerable costs through individual upgrades and modifications all for enhancing the energy efficiency of the building structures and materials and for an efficient waste disposal system. Conventional buildings that were constructed in the past without incorporating sustainable design features are especially challenging, as the retrofitting process can be challenging and expensive. Furthermore, there is increasing pressure from the tenants and investors who are willing to occupy green-certified buildings hence the pressure to implement sustainable practices. Non-achievement of such expectations results in low property valuations, high vacancy levels, and poor returns on investment. Besides, the legal requirements within the GCC region are changing progressively as local authorities tend to set sustainability standards for compliance as well, which makes the environment even more challenging for real estate companies. Managing these factors is crucial to sustaining the competitive advantage and, thus, sustainable revenue in the market.
The study categorizes the Commercial Real Estate market based on property type, end-users, and ownership type at the regional and GCC levels.
Based on the end-users, the market is divided into Corporates, Retailers, Logistics and Manufacturing Companies, Hospitality Industry. The corporate segment accounted for the largest market share in the GCC Commercial Real Estate market. This dominance is due to the region’s desire to become the center for business and commerce, especially in such cities as Dubai, Riyadh, and Doha. Multinational companies have in recent years established regional offices and expanded elsewhere in the GCC which in turn has led to significant demand for quality office spaces. Most of the countries have adopted sound business policies such as taxation exemptions, liberal policies on foreign equity, and special economic zones that lure many companies in the fields of financial services, IT, and BPO. The demands for new stylish working space to house huge organizations and cater for business expansion has spurred investment on executive offices tailored for lease. Furthermore, continuous economic diversification across the GCC countries encourages the growth of corporates extending the dominance of this segment in the commercial property segment.
Based on the regions, the GCC market of Commercial Real Estate has been segmented across Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The United Arab Emirates and more specifically Dubai control the largest market share of GCC commercial real estate. The factors include; physical location, developed physical infrastructural base, and enabling business environment which are an attraction to multinational companies/ investors. The city’s strategy for strengthening its position as a business center has led to a focus on investments in the commercial property sector, significant architectural projects, the Dubai International Financial Centre (DIFC), and numerous towers for offices, shops, and hotels. Moreover, the government in Dubai has encouraged foreign investors through policies such as liberalization of foreign ownership acts and provision of incentives to investors hence creating a demand for commercial properties. Investors find the city appealing since it is home to innovations such as smart cities and green buildings among others. Current infrastructure especially in the port, airports, and transport has enhanced the commercial property and made UAE at the forefront in the GCC region.
Competition in the GCC commercial real estate market is intense especially due to the leading local and international developers who are interested in obtaining strategic locations and project opportunities. Some of the key players in the market are Emaar Properties, Aldar Properties, and DAMAC Properties are market leaders, especially in the UAE. The rivalry stems from significant and multifaceted projects, spectacular architectural concepts, and ideas of smart and sustainable cities that are popular in the region.
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