Middle East Real Estate Highlighted at World Economic Forum

In January, the World Economic Forum (WEF) convened in Davos and brought together leaders from around the world to discuss current economic trends. Real estate featured prominently in many conversations. During the event, the global chief executive officer and president of JLL called special attention to real estate in the Middle East and its continued development as several massive projects are in construction throughout the region.  

In particular, the region has excelled not just in the luxury side of the market, but in virtually all real estate verticals. This fact has drawn the attention of investors globally and generated buzz during the WEF event, as well as at other recent international gatherings, such as the CityScape Global Property Conference  

Saudi Arabia Stands Out among WEF Attendees 

One of the real estate markets that has gotten the most attention in the Middle East is Saudi Arabia. The Saudi government has worked hard to make businesses feel comfortable investing in the Kingdom, and the economy and workforce are diversifying as a result. The property market now contributes substantially to the Saudi GDP. Real estate is a domestic job creator that also drives growth in other sectors, like construction, materials, and the many other industries that contribute to major development projects.   

Financing Challenges  

Ahmed Galal Ismail, the CEO of Majid Al Futtaim Holding, noted a few challenges in the regional real estate industry, emphasizing that these challenges affected financing, rather than the assets themselves. He spoke of concerns that a positive economic environment may lead to lowered standards in terms of underwriting. Meanwhile, David Steinbach, global chief investment officer at Hines Interests Limited Partnership, talked about the importance of investors taking a long-term view in real estate, since business plans typically look ahead five to 10 years.  

Speakers also touched on the role of AI in real estate. Christian Ulbrich, global CEO and president of JLL, expressed his opinion that AI may be the first industrial revolution to affect white collar labor—in other words, the tenants of the commercial real estate sector. The effect of this revolution will play out over the decades to come.  

Driving Factors for Future Real Estate Growth 

Steinbach also laid out what he sees as some of the driving factors in the real estate sector in the region. These factors were described as the four Ds: deglobalization, shifting demographics, market deleveraging, and decarbonization.  

The Middle East is a perfect encapsulation of these four demographics, which could point to why there has been so much investor excitement within the region. These factors will influence how investors allocate their funds in the coming years and may attract even more attention to the Middle East. This region has largely invested in itself in recent years, with the United Arab Emirates (UAE), Saudi Arabia, and others emerging as some of the biggest investors in Turkey, Egypt, and similar nations undergoing rapid periods of development. Such intra-regional investment increases the confidence of investors from other parts of the world.  

The demographics of the Middle East are rapidly changing, with Saudi Arabia diversifying its economy, Egypt completely relocating its administrative capital city to allow for more space, and the UAE continuing to attract new residents from around the globe. Furthermore, with the pandemic exposing many of the weaknesses of real estate markets and causing rapid dips in prices, nations across the Middle East are rethinking their approach and rebuilding resilient markets that are more resistant to inflation, especially as they seek to diversify away from oil and place more emphasis on real estate.  

Finally, the Middle East has made laudable efforts toward decarbonization. Saudi Arabia, in particular, has introduced several entire developments with the goal of a net-zero carbon footprint. Likewise, the UAE has led the charge in green construction and Egypt has introduced cutting-edge green practices in its new developments.  

Rishi Kapoor, CEO of Bahrain’s Investcorp, spoke to the press at WEF about his company’s new $750 million climate investment platform. He noted the Middle East’s favorable environment for investors interesting in supporting the technologies and strategies needed to decarbonize the global economy. In particular, Kapoor described the Gulf region as both a “major customer” for climate solutions, as well as the “ideal launchpad” for these solutions to gain global adoption, especially in the Global South, where there is a major market for them.  

The Overall Outlook for Economic Growth at WEF 

Overall, the economic outlook at WEF was mixed—many chief economists surveyed for the Chief Economists Outlook report predict a downturn in the global economy. Weak growth is anticipated for Europe, but the outlook for South Asia and East Asia regions is sunnier. However, confidence in China has fallen. This is due to significant real estate market concerns coupled with an overall fall in domestic production. Still, the Middle East has seen strong growth in the real estate sector and is thus set on a path for continued economic development in the year to come.