When you consider the increased transparency and regulations in Dubai’s real estate market, the fact that it is attracting interest from institutional investors should not come as a surprise. From banks to REITs to insurance companies—almost everybody appears to be considering the opportunity presented.
Over the years, these institutions have been known to make investments in Dubai’s Grade A office buildings. However, now that the returns after taking debt have become extremely lucrative as compared to the established markets, schools, industrial units, hotels, medical facilities and shopping malls appear to be drawing interest as well.
When you speak of institutional investors, however, you have to remember that they rarely take on build risk, as part of their measures for the protection of Dubai property investments. This is the reason why the Dubai property market has generally been dominated by small individual investors—at least as far as the strata segment is concerned.
Currently, the developers who take on build risk in Dubai property see no need to dispose of off their properties, considering how the Dubai property returns far outweigh the returns from other investment opportunities. These developers have deep pockets to sustain the build risk and the leasing cycle, while the high rates of returns present them no incentive for selling off their investments.
Institutional investors, who are looking for Grade A investments, find it difficult to get their hands on them, considering how the current owners simply do not want to sell. This is the reason why off-plan Dubai properties and Dubai distress property are the only options available for most institutional investors.