Work on residential projects in the UAE has continued despite the coronavirus pandemic, but developers and contractors are likely going to face some delays.
The majority (90 percent) of housing projects that kicked off in the UAE prior to the crisis are still proceeding, a recent Knight Frank survey showed.
The study that was conducted in May covered more than 2,000 UAE clients across the residential development, retail and commercial office sectors.
While work on most projects continue, the survey showed that contracts for residential/mixed-use developers may see completion delays due to developer-induced postponements or interruptions in logistics of both labor and construction materials.
For projects that were under planning, a many of them are either being put on hold (50 percent) or proceeding with expected delays (37.5 percent).
For office leasing deals that were under negotiation at the start of the pandemic, 53.5 percent face delays while 30.8 percent are on hold. Only 15.4 percent of signed leases are proceeding as planned.
According to 69.2 percent of the respondents, tenants have successfully requested rent deferrals and renegotiation of terms on existing leases, while 61.5 percent of landlords said they are likely to offer further concessions to maintain existing tenants and attract new ones.
Nearly half (46.2 percent) of the respondents said the general uncertainty in the market is the greatest challenge to their real estate portfolios, followed by concerns that tenants may not be able to pay their rent (30.8 percent).
The market has also seen a drop in off-plan sales, with at least a quarter of the respondents seeing a retreat of over 50 percent in transaction volumes compared to the first three months of the year.
“The key question developers need answered prior to moving forward with planned projects is whether the fundamentals of the market will change in the post-COVID era,” P.P. Varghese, partner, real estate strategy and consultancy at Knight Frank Middle East said.
“The residential populace’s embrace of the return to normalcy following the recent easing of lockdown in Dubai may be a very early indicator of the market’s resilience and ability to bounce back,” Varghese said.
Office landlords, tenants
Organizations intend to implement social distancing policies upon resumption of business according to 90.9 percent of respondents, while 54.5 percent of the respondents strongly believe that companies will consider implementing flexible workspace policies and remote working.
“The current crisis has been a tremendous test for all types of corporate occupiers, from multinational to local business, as the vast majority had to adapt to remote working within a matter of days,” Umberto Bevilacqua, commercial agent at Knight Frank Middle East said.
“It is likely that we will see a shift in occupiers demand from large offices to smaller and more calculated solutions where collaboration, creativity and privacy will have to somehow co-exist,” Bevilacqua added.