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Investors urged to explore ‘less visible’ opportunities

Opportunities in Dubai’s less visible sectors, such as Education, Hotel Service Apartments and Industrial, are gaining traction among investors.

While they may not receive the media attention of the Emirate’s Residential and Office markets, the in-depth H1 2016 Dubai Investment Sentiment report, from Core, UAE associate of Savills, highlights a growing appetite from investors, predicted to remain over the next five years.

CEO, David Godchaux, says: “Traditionally people look at the residential and office markets, while the other key sectors in Dubai can often be overlooked. However, when you look at the returns in the Emirate, where there is a shortage of supply, relatively strong demand, and quality infrastructure in place, it is clear that these are sectors which should not be disregarded.”

According to the report, the depth of underlying demand for Grade-A warehouse/logistics facilities is sufficient to maintain rental levels even if a significant amount of new supply is delivered in the market.

Mr Godchaux says: “We see interesting opportunities for investors looking to invest in newer industrial areas such as DIP, Dubai South and JAFZA, unsurprisingly for purpose-built assets, preleased by high profile tenants on long-term leases of 10 to 15 years, thus neutralizing the inherent risk.”

In the Hospitality sector, ADRs (Average Daily Rates) for four and five-star facilities, have significantly reduced over the last year, opening the door for more three-star accommodation in central and new Dubai catering for more cost-conscious tourists. An upcoming asset class developing between the intersection of prime residential and high end hospitality is Serviced Apartments.

The report says: “Typically serviced apartments are priced almost at par with hotel rooms although offering larger floor space than their hotel counterparts, making them ideal for the traditional larger family units visiting the Emirate from within the region and for corporate expat housing. It is, however, critical that investors choose properties that are well managed, centrally located with easy access to public transport to maximize returns.”

While in Education, figures from the Knowledge and Human Development Authority reveal Dubai will need more than 45 new private schools by 2020. The report says: “With lease terms as long as 28-30 years, investing in education is traditionally considered a safe avenue, however, banks do prefer to pursue shorter terms of 7-10 years. This gap opens this sector to a pool of investors and institutions looking at a long-term, yet relatively steady, investment horizon, with annual returns typically in the region of 11-15%.”

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