_Insights into investor sentiment in the UAE
During the course of the last couple of years, we have seen buyer demographics change within the market with family offices starting to be slightly more cautious over their investment programs.
This has been offset by a number of new institutional investors entering the market, with the intention of creating real estate funds – both private and listed. This theme follows the trend we have seen in Saudi Arabia, where we have seen 16 REITs listed since the end of 2016, with a current market cap of circa USD 3bn.
However, more recently we have seen some private groups return to the market as there are opportunities to acquire assets at significant discounts to historic valuations.
"During the course of 2018 we saw upwards pressure on yields throughout the UAE. "
Office sector
The office sector has seen a widening in yields between prime and secondary, with well located, best in class assets still commanding a premium to the wider market and continuing to attract robust interest from investors.
Industrial & Logistics sector
Investments in logistics and industrial assets continue to be perceived as an attractive proposition by the market, though during the course of the year we saw minimal transaction activity in this sector, mainly due to a dearth of credible investment opportunities.
Education and healthcare sector
Education and healthcare also generally remain attractive as investment targets, in part due to the extended lease structures on offer, which are not prevalent in other sectors. However, with fundamentals in some instances under pressure and some recent insolvencies in this sector we see investors taking a much more granular approach to the covenant strength of the tenant.
Retail sector
The retail sector continues to face headwinds, though we see a divergence between the wider retail market and well located community retail with established catchments, which continue to perform reasonably.
Hospitality sector
The hospitality market continues to be challenging and whilst we have seen resiliance to a degree in occupancy, Average Daily Rates (ADR) have been under pressure across the UAE.