Dubai’s brokerage firms feel the squeeze

Dubai’s brokerage firms feel the squeezeImage Credit: Ahmed Ramzan / Gulf News Archives

For the many independent — big and small — real estate brokerage firms in Dubai, they have a fight on their hands. It could be a tussle where many of them will find they are not favourably placed.

Of late, Dubai’s leading developers are showing an inclination to sell direct through their in-house sales teams rather than appoint a handful of third-party brokerage firms to do so. Some, like Dubai Properties, have upgraded this side of their operations to offer a holistic set of solutions to clients, while, just recently, Nakheel entered a strategic partnership with Engel and Völkers to set up a company to sell and lease properties. Deyaar for its signature launch, The Atria, earlier in the year handled most of the transactions in-house and a top official said this side of the business will be developed to its full potential.

More developers, as they prepare to launch off-plan launches in the months ahead, plan to take a similar approach. A leading investment company with real estate development interests has just expanded its sales team and in the process hand-picked agents from one of the leading local brokerage firms.

Their reasoning on this score is straightforward — why would they want to share finders’ fees or commissions with brokers for the sale of the properties when they can do all of that themselves?

On a parallel track, some developers have chosen to go exclusively with a single brokerage firm to find buyers for their offering. If that becomes standard practice, the smaller or mid-sized brokerages will get muscled out.

Independent brokerage firms are aware of the scale of the looming threat. If developers take on the onus of selling the bulk of the off-plan projects in the pipeline themselves, there would be little left for brokers to get a hand on. They would then be confined to handling secondary market purchases or even leasing. (Even here, there could be a problem as developers are simultaneously beefing up their leasing services.)

“In general, I think that during the next five years we will see an overall pattern emerge of larger developers keeping things in-house and smaller developers striking up strong relationships with brokers,” said Iseeb Rehman, who heads Sherwoods Property. “We have several such relationships at Sherwoods — to the extent that we’ve become almost an extended arm of several developers.

“I think brokers will need to provide the whole package for their clients, from initial research to marketing materials to the big launch of a new project and after-care. The success for both developers and brokers will lie in the strength of these relationships.”

According to Rehman, while the “handful” of big developers can “fare reasonable well with their own teams, it is far more likely independent developers will need to ally themselves with good brokers. It is the only way that they can continue to keep up with the big boys — they need that special edge to compete.

“Developers have become increasingly cost-conscious. They’ve looked at the partnerships they’ve had with brokers and scrutinised the level of commissions they have been disbursing. As a result, a lot of the larger developers have been quick to stop referring to brokers and taken everything in-house.”

After an extended lull of inaction in recent months as Dubai’s property value shed their exuberance, industry sources are hopeful of a marked improvement in the coming weeks. The annual Cityscape series is due this month and it is a given that a slew of new launches will take place.

But will there be enough going around to keep all brokerage firms in action? “The big brokerage firms will not have much to worry about — their client database and networking is an asset that developers will always have a need for,” said a real estate agent. “Those kind of contacts — especially of high networth buyers — were built over years and cannot be replicated easily.

“But smaller estate agencies may have to compromise on fees or offer major incentives to land a buyer. But if they keep doing that it will shortchanging themselves and that’s always harmful to a business.”

Click on Dubai’s developers for more related stories

Source: Manoj Nair, Associate Editor,


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