Recovering Real Estate Markets

A.T. Kearney’s Real Estate Global Opportunity Index Helps Property Developers To Focus

 Dubai (21st December 2009) —  A.T. Kearney, a leading global strategic consulting firm, recently published its 2010 Real Estate Global Opportunity Index. The Real Estate Global Opportunity Index is designed to help property developers decide where to expand outside of familiar markets. Focused on emerging markets, the Index weighs real estate development potential, based on construction spending and growth, and risk avoidance, a combination of a country’s risk and the ease of doing business there.

When A.T. Kearney issued its last Real Estate Global Opportunity Index in 2008, the real estate crisis was in its early stages in the UAE. Since then, prices have plummeted worldwide, creating a downward spiral that has devastated economies. Promising projects have been cancelled or downscaled, and developers are coping with previously unseen financial difficulties. Today, however, the market is gearing up for a comeback. For developers active in emerging countries and with capital to invest, what is the next move?

“The countries of the Middle East and North Africa (MENA) continue to improve in the Index, even as they are hit by the economic crisis. The United Arab Emirates jumps significantly, from 31st to 18th place.” said Dr. Dirk Buchta, Partner and Managing Director, A.T. Kearney Middle East.

Since the beginning of the economic crisis more than a year ago, most real estate markets—emerging and mature—have seen plummeting prices, as much as 40 to 50 percent in some Middle East countries. According to a report by Real Capital Analytics, volume on global real estate transactions plunged 67 percent year-overyear in the second quarter of 2009. Recently, conditions in most emerging markets seem to be improving, thanks to government stimulus, infrastructure investment and a resumption of lending.

For the markets of the Gulf Cooperation Council (GCC), and specifically the UAE, which had great price declines in 2008-2009, the Asian recovery following its 1997 crisis offers reason for hope. Low real estate prices could put the UAE back on track for attracting foreign investors, who are already interested in the region for its other advantages. Gulf oil reserves, amounting to more than $5 trillion, give the area ample financial strength, and the region’s lifestyle, particularly in the UAE, is attractive to foreign companies. As development projects are temporarily or permanently halted, the oversupply will begin to diminish. For developers with some cash, the first step at this point is to reconsider whether to invest in geographic expansion or the transition towards a business of specialization with the opportunity to improve operational excellence and develop ancillary revenue opportunities through asset management.

“Apart from looking to geographically expand to markets where there is currently undersupply, developers in emerging markets may increasingly consider asset management activities and attracting additional capital through REITs. For developers who want to emerge stronger from the current crisis it is key to take these strategic decisions early on in order to maximize revenue and increase profitability from existing assets and developments by following best practices in property and facilities management.” said Buchta.

###

About A.T. Kearney

A.T. Kearney is a global strategic management consulting firm known for helping clients gain lasting results through a unique combination of strategic insight and collaborative working style. The firm was established in 1926 to provide management advice concerning issues on the CEO’s agenda. Today, we serve the largest global clients in all major industries. A.T. Kearney’s offices are located in major business centers in 33 countries. During our 80 year history, we have provided management consulting services to most major corporations and governments around the world. From our fast growing Middle East offices in Abu Dhabi, Bahrain, Dubai and Riyadh, A.T. Kearney actively contributes to the operational excellence and profitable growth of industries and services in the region. For more information, visit www.atkearney.com or follow A.T. Kearney Middle East on Twitter profile: AT_Kearney_ME.

About Our Experts

Dr. Dirk Buchta
Vice President – Managing Director
Experienced in projects concerning profitable growth, efficiency improvement, and sustainable economic development for government and private sector companies, such as various players in the real estate sector of the Middle East.

Mr. Olivier Laroche
Senior Manager A.T. Kearney Middle East
Significant Middle East experience focused on corporate strategy for leading master developers and asset management companies. He has worked on various strategic projects in the region from economic development to real estate strategy development. He has worked with regional clients in the real estate sector on how to improve the top line through growth and diversification strategies, portfolio optimization and organization best practices, as well as how to improve the bottom line through optimizing operational excellence of players.