Novel ideas to bridge a market gap

Nick Maclean says owners must be willing to trade their property for the market to tap into new sources of capitalNick Maclean

Nick Maclean’s succinct reply - “I’m hopeless” — threw away any hint of extravagant artistic pretensions from the outset as he explained why real estate firm CBRE hosted a recent art exhibition to celebrate its tenth anniversary in the Middle East. He collects art, but he’d rather “leave it to other  people” to create artworks.

Maclean, however, takes inspiration from the avantgarde when doing what he does best — sell property. And while conceding the local market has not yet warmed to some of the new ideas he is trying to introduce, Maclean believes imagination and creativity will give a further boost and spur a positive transformation in Dubai’s real estate sector.

Excerpts of PW’s interview with the Managing Director of CBRE Middle East.

Why hold an art exhibit to mark your anniversary?

The key why our business has been successful here is because our consultants show imagination when they’re given a problem or a topic. We thought that fitted nicely with art.

What’s the difference between Dubai real estate nowand ten years ago?

There are two principal differences. Firstly, the government is taking much more interest in what happens in the real estate market now and we’ve seen that through the new  regulations, which make this a much more interesting place for new investors. And we’ve got some organisations specifically designed to settle disputes between landlords and tenants or investors and developers, etc., which wasn’t there when we first arrived.

We also see all the dynamism that was here in 2004-2006, but in a slightly different context now. The key difference, and the key opportunity, is that we see foreign institutional investors bringing capital into the country. Historically we’ve had retail investors, highnet-worth individuals and ordinary people investing in Dubai [property]. They’re still here, but what we also now see are institutions, sovereign wealth funds and pension funds from overseas.

How will Dubai capitalise on this?

The issue the investors are facing at the moment is that actually there’s not much for sale. They come here, they want to invest in large buildings, which are income producing, but these almost don’t exist in this market because traditional Middle East investors hold their investments. Despite their background as trading families, they tend not to trade real estate.

So what we hope to happen is that there’s going to be such a weight of money coming into this market that some of the traditional holders will then trade their buildings and reinvest their capital.

What part will the government play in attracting these investors?

We think the government is the occupier of between 15 per cent and 20 per cent of all buildings. It also happens to be the owner of a lot of real estate. Many government entities own the buildings they occupy. If they were to sell some of those buildings, but with the benefit of their own occupation, they can act as a catalyst for a new capital market in the UAE, as governments elsewhere in the world have done.

How confident are you that they’ll do that?

I think it’ll take some mindset change. It hasn’t happened yet, but we’re having some interesting conversations with quasi government entities who are considering it. The concept of selling or commercialising buildings is not really tried here yet, but it will come in due course, especially once the government realises how much money they can tap into from overseas.

How important are institutions such as CBRE in the market?

I think we’re critical because the relationships that we have in [markets such as] Seoul, Manila, Tokyo, London, New York allow us to bring investors to this market. Particularly for investors who have not operated in this market before, they need to feel safe by talking to people they have worked with. So we think we have a key role to play in the transformation of the marketplace.

What challenges hinder this transformation?

The challenge for firms like mine is that there isn’t enough stock available to sell. What we’re trying to work on at the moment is freeing up the market and allowing some stock to come to the market perhaps from people who wouldn’t contemplate selling two years ago.

We’re talking to families and investors here and explaining that they don’t have to sell freehold — they can create leases, they can be imaginative and ultimately retain ownership of the property [while freeing up capital].

What is the response?

If I knock on your door and I just ask you, please sell your building, you’ll shut the door in my face. But if I say I can release the capital in that building, you retain the freehold and you get capital to invest into your core businesses, everybody’s happy. So we think the concept is very interesting, it’s just not yet been tried.

I think the reception has been sceptical and suspicious, because it looks quite an interesting proposition, so [they think] there must be something wrong with it.

It’s too good to be true?

Almost. So what we’re trying to do is take some of the property owners here and show them estates overseas where other governments have done this or other developers and property companies regularly trade their stock.

We’ve seen that the quality of services [in these overseas markets] improved because you have to satisfy the developer, the occupier and the investor. Our general view is that some of the services in the market improved when you’ve got extra capital value available.

Source: Nick Maclean, Special to PW

Nick Maclean is Managing Director of real estate consultancy CBRE Middle East


For Rent


View more properties

For Sale


View more properties