GCC Real Estate Development – Prepare yourself to succeed
While macro-economic conditions are improving in GCC countries, investors still remain cautious regarding new real estate projects. Development opportunities will have to be carefully selected, taking into account a developer's experience and capabilities. "Successfully dealing with increasingly demanding clients, reacting to stronger competitive pressure from skilled international players and getting access to land banks will determine the winners and losers," says Dr. Tobias Plate, Partner at Roland Berger Strategy Consultants.
There are of course real estate development opportunities throughout the GCC countries. Nevertheless, a selective development approach based on thorough assessments will be crucial to avoid repeating the negative experiences of the past crisis where purely opportunistic development was paramount. "Overall, the competitive landscape is intensifying, forcing GCC real estate developers to rethink their strategic positioning," says Dr. Fabian Engels, Principal at Roland Berger Strategy Consultants Middle East.
Increasingly demanding clients are requiring more from developers, expecting that total completion time, cost and especially quality be on par with international standards. Taking the approach "if you can't beat 'em, join 'em", local companies are already partnering with international players – a clear sign that these international players are adding to the rising competitive pressure. Finally, land bank access is controlled by only a few institutions. As a result, GCC land prices are very high, accounting for up to 60% of total development costs, in turn putting pressure on proper development planning and execution in order not to jeopardize profits.