Commercial Property in Dubai - Latest Property Investment Approach

The debate relating to whether or not Dubai’s residential property market is overheated and about to become oversaturated now that units bought purely for investment purposes are fast coming to completion and to the market has been raging for a sufficiently long time, so much so that pretty much everyone is convinced that there are no more fast bucks to be made out of residential real estate in Dubai.  Basically, anyone who buys residential property stock today needs to commit to the much longer term to turn a profit or see sufficient ROI to make the property investment commitment decision a worthwhile one.

This means that there’s quite a high percentage of investors out there looking for a more secure and high returning property investment approach, and these people are scanning the globe to find the latest emerging market with bucket loads of potential for growth.  But what if I was to tell you that instead of looking further afield there is a relatively under-explored property market sector in Dubai that’s actually still worth considering?  Indeed, commercial property in Dubai is the latest property investment approach to consider.

It’s quite ironic really that in a location as unique as Dubai - which has built its recent and massive success largely on the foundations of its international business reputation and standing – little large scale focus has been placed on the commercial property market as a sector for property investment success. 

Surely it’s unlikely that this situation will continue – after all, as Dubai continues to develop, prosper and look to the future so it becomes a location in which more companies have long term confidence and to which many more companies will relocate and establish centres of operation – and every single business that comes to Dubai or starts up in Dubai will require commercial premises meaning that demand for commercial space will intensify, and rental and lease rates can and will go up.

Naturally there are many multinationals and large corporate investors with their fingers in plenty of commercial premises pies in Dubai already, but for the smaller investor or the individual purchaser, commercial real estate as an investment commodity has been overlooked so far.

In part this is because commercial space is often far more expensive than residential space - and in part this is because mass media coverage was given to stunningly luxurious residential property for sale in Dubai, marketing it as not just an investment must have but as a luxury object to boot.  With all the marketing hype who could see past the glitz and the glamour of owning a luxury penthouse or an exclusive villa to consider owning a share in an office block or a factory? 

At this point it is worth mentioning that some people say commercial property investment is a completely different kettle of fish which cannot directly be compared to residential property investment – the people saying this are probably just trying to put the rest of us off tapping into their investment niche though because the saying is not entirely accurate!

Many of the core fundamentals of successful commercial property investment relate directly to the core fundamentals of successful residential real estate investment, for example: -

1) Location – you have to choose commercial premises that are located appropriately for their function and for the target tenant market demand.

2) Affordability – a property bought has to realistically be able to return strong enough yields to make it profitable. 

3) Understanding Tenant Demand – tenants are often crucial to the success or failure of a property investment approach – with commercial property a buyer needs to understand who the tenant market is and what they need, want, demand and require from commercial premises.

4) Utilising the Power of OPM – wherever possible it makes sense to gear an investment with finance to protect an investor from personal financial overexposure.

These are just a few ways residential property investors can see how similar their approach has to be to a commercial real estate investment venture.

Other critical factors to consider, bear in mind and factor in when looking at commercial property in Dubai as the latest property investment approach for your portfolio include: -

- Is a given property for sale available leasehold or freehold to non-UAE residents?  Many are leasehold, only a few offer freehold ownership potential

- Commercial property is far more illiquid than residential stock, so a purchase has to be considered a very long term hold

- If finance is required it can be raised on the prospects for the property rather than the income of the buyer – this is a key and cool fundamental difference to raising finance to buy commercial over residential!

- Tenants can be made liable for building maintenance and upkeep as well as insurance.

- Yields can be lower but more sustainable.

- Property price appreciation percentages can be smaller but on a larger initial figure!

- Tenants tend to have a more mature and responsible attitude to commercial premises unlike residential property tenants who make excuses, miss payments and are often a liability.

- The amount of commercial property coming to the market in Dubai is slowly increasing and keeping better pace in relation to demand than the residential property sector.

- Developers offer buyers the chance to buy pre-construction at reduced rates to give them at least some finance towards the build – those investors who commit to this slightly riskier approach do stand to make more when the property is completed in terms of their yield, but they need to be aware that they are still investing into a slow to sell form of property and that they will not be making any real money until the property is completed.

If you’re still hot on Dubai – and let’s face it, it remains an incredibly exciting and fast developing market with long term sustainable success potential – then why not look more closely at the commercial premises available for sale and see if you can see a profitable investment approach presenting itself?

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