8 Tips for Minimizing the Impact of Poor Air Quality on Buildings

In the last two decades, Dubai has emerged as an epitome of elegance and a symbol of the elite metropolitan lifestyle. It has become a place where every person in the world wishes to be in. The vast credit of this monumental success goes to the city’s real estate sector for constructing world-class skyscrapers. Dubai is at the 4th spot in terms of the highest number of skyscrapers with 232 buildings above 150 meters and 102 buildings above 200 meters tall, according to the skyscraper center. Due to its exponential development pace, Dubai has also witnessed a huge rise in the number of people from across the globe moving to the city in search of a better lifestyle. Undoubtedly, the success achieved by Dubai has been impressive; however, this epic success has come at the hefty price of degraded air quality.

Where Does Dubai Stand Globally in Air Pollution?

Dubai is at 51 th place globally in the list of most polluted cities with a score of 60 US AQI (US -Air Quality Index) and UAE is amongst the top 20 most polluted countries in the world in 2020 in ‘Air quality and pollution city ranking’ – a global list released every year by the Swiss air quality technology company, IQ Air. Along with residents’ health, the degrading air quality is also taking a toll on the health of the city’s skyscrapers. The increase in air pollution also makes the natural & passive ventilation techniques unsuitable and opens the doors for several health risks. To overcome these issues, many building owners use air filtration. An increase in air pollution also has an adverse impact on the building’s performance and increases its energy usage which can later result in the pollution multiplier effect. 

How Does Poor Air Quality Deteriorate Your Building?

Air pollutants cause significant degradation on the surfaces of the buildings. The adverse effect of these pollutants on building materials is often irreversible. 

Here are the adverse effects of poor air quality on your building

1. Higher Usage of Air Conditioning

The rise in air pollution increases the humidity level and creates an urge for an increasing need for air conditioning. This increases the electricity bills and maintenance costs of the building. Furthermore, an increase in the usage of air conditioning also creates local microclimatic warming impacts basically due to the expulsion of hot air and aggravates the urban heat island effect. This process generates equipment noise which can decrease the practicality of natural ventilation.

According to research conducted by International Energy Agency (IEA), the global energy demand from air conditioners is expected to triple from 1.6 billion in 2018 to 5.6 billion by 2050. This is indeed scary news for the real estate sector as the buildings will face the brunt of deteriorating air quality. The impact of air pollution will also damage the indoor air quality which is damaging for both buildings and people inside it. The research by World Green Building Council (WorldGBC) reveals that most of our exposure to outdoor air pollutants occurs when we are inside buildings, due to infiltration through windows, apertures, or cracks in the building fabric.

2. Increased Need for Cleaning & Repairs

The smoke released by the industries contains carbon monoxide which is produced due to the combustion of fossil fuels. This results in the emission of a vast gamut of dangerous pollutants in the air such as: Nitrogen oxides (NOx) Sulfur oxides (SOx) and Carbon monoxide (CO). Exhaust fumes released by devices and smoke are the biggest sources of carbon monoxide which have a retarding impact on the exteriors of the building and makes them look dirty due to the deposit of dust, soot, and fumes. This increases the need for cleaning, repairs, and retrofitting resulting in a surge in the operational cost of the building.

3. Poor relationships & Reputation

Poor air quality adversely affects the building’s performance and also increases its cost of operations. Higher cost of operations results in rising in the service charges for the residents and often result in higher dissatisfaction. It also has a negative impact on the occupancy rate of the building, relations between building owners, management, staff, and occupants, and above all on the revenues and reputation of the asset manager.

Here are the 8 Tips for Minimizing the Impact of Poor Air Quality on Buildings:

Some of the best ways to minimize the impact of degrading air quality on the buildings are as follows:

  • It is always advisable to use surface treatments on all metals to protect them from airborne pollutants and minimize the impact of air quality on buildings to prevent corrosion. Furthermore, galvanizing all the building metal products will make them resistant to corrosion and will reduce the increased need for repairs.
  • Installing highly efficient air filters will assist in improving indoor air quality and eliminate the harmful pollutants which cause corrosion. 
  • Installing Specialized Filtration Equipment can play an instrumental role in protecting the building exterior from the aftermath of poor air quality by trapping the particles in the outdoor supply air. Furthermore, it also controls the adverse effects of gaseous and chemical pollutants. Specialized filtration equipment also protects the building’s indoor environment from the negative effect of poor outdoor air quality.
  • Installing Green Roofs can provide shade and remove the heat from the air through evapotranspiration to minimize the temperature of the building’s surface and the surrounding air. A green roof is a vegetative layer grown on a rooftop of the building to absorb the heat of the building and it acts as an insulator. The green roof also minimizes the energy consumption of the building by performing cooling of the building which has a deep impact on the energy bill. Furthermore, a green roof also reduces the heat stress which arises due to heat waves and improves indoor comfort.
  • Installing Cool roofs or reflective roofs on the building will reflect sunlight and heat away and minimize the overall roof temperature. This allows the building to stay cooler and also curtails the energy bills by minimizing the amount of air conditioning. Installing cool roofs also leads to higher energy savings which can be further invested in minimizing the impact of greenhouse gases on the building.
  • In scorching humid climates like Dubai, reflective roofs & walls, low emissivity window coatings or films, exterior shades can be instrumental in reducing the energy consumption & costs involved in cooling the building. 
  • The temperature of the building’s surface can reduce substantially if the neighboring buildings implement Bio-inspired Retro-reflective Façade, as it minimizes the energy required for cooling the building.
  • Another best practice to minimize the impact of poor air quality is Air Sealing. It restricts the passage of air through the building envelope and enhances its energy efficiency. This leads to better management of heat transfer.

Summary

  • The pollution level in Dubai is rising every day which is very damaging for its skyscrapers.
  • Some of the adverse impacts of poor air quality on your building & business include – corrosion, the higher need for air conditioning due to increased humidity, higher need for repairs increasing the operational cost, poor relations with the stakeholders, increase in service charges, higher tenant turnover, lower occupancy, the decline in developer’s reputation, poor building’s performance, lawsuits, and decrease in the lifespan of the building.
  • Using surface treatments on all metals to protect them from airborne pollutants and prevent corrosion
  • Installing highly efficient air filters to improve indoor air quality & prevent corrosion
  • Installing specialized filtration equipment to protect the building’s exterior from poor air quality
  • Installing Green roofs to remove heat from the air and reduce the temperature of the building
  • Installing Cool roofs or reflective roofs on the building to reflect sunlight and heat away and minimize the overall roof temperature. This allows the building to stay cooler and also curtails the energy bills by minimizing the amount of air conditioning.
  • Installing reflective roofs & walls, low emissivity window coatings or films, exterior shades can minimize the energy consumption & costs involved in cooling the building.
  • The temperature of the building’s surface can reduce substantially if the neighboring buildings are implementing Bio-inspired Retro-reflective Façade, as it minimizes the energy required for cooling the building.
  • Performing Air sealing in the building to restrict the passage of air through the building envelope and improve its energy efficiency. 

Hope you liked the Blog. For more informative content related to UAE real estate industry, please visit https://www.kaizenams.com/blogs/. Follow Kaizen AMS  on LinkedIn, Facebook, Twitter, and Instagram.

Top 7 Mistakes Corporate Tenants Make While Leasing Commercial Real Estate

Signing up for a commercial lease is the most complex financial commitment made by any entrepreneur. With the passage of time, leasing a commercial real estate activity has become even more strenuous. Thus, the corporate tenants must not refrain from asking any number of questions from the commercial landlord while leasing a property.

Before negotiating the lease, it is of paramount importance for the corporate tenants to consider their financial position and evaluate their requirements accordingly. Corporate tenants must also make sure that the lease terms align with their long-term business strategy. It’s always wise to plan for the future – for both good and bad times. Thus, lease terms must be flexible enough to have provisions for both. In case the business succeeds, the lease term must have an option for expansion and if it doesn’t, the lease terms must also have an option to counter any sort of uncertainty. It is vital to note that leasing a commercial real estate space is more difficult compared to leasing an apartment. A large number of commercial tenants end up getting into trouble in the later stage by not asking the requisite questions and taking the process lightly. To safeguard the corporate tenants from making costly errors while leasing commercial real estate, we have compiled a list of common gaffes they should avoid making it a win-win situation.

Here are Top 7 mistakes corporate tenants make while leasing commercial real estate –

Not Understanding the Lease Terms

It is always advisable to not sign a commercial lease agreement until you read & understand all the terms & conditions. This practice will allow corporate tenants to avoid any potential conflict with the stakeholders such as: landlords, agents, or other tenants in the property. Usually, several corporate tenants find it challenging to comprehend the legal language or jargon used in the agreement. To counter this situation, they must hire an experienced attorney who can provide them clarity on the type of lease term they are signing up for, the frequency & nature of rent increase, subletting obligations, and provisions related to repair & maintenance. 

Most of the landlords design the lease agreements which favor them or according to their interest. Thus, hiring an attorney becomes crucial to ensure the interests of the corporate tenants are not compromised. Negotiation is a very integral aspect while signing a commercial lease agreement. If the tenants come across any type of condition to which they don’t agree, they should negotiate with the landlord to get a fair deal that is in line with their business requirements.  

Not Planning Effectively

It might be surprising for many people to learn that most of the firms don’t have an idea about their exact space requirements. At times, tenants are also subjected to unforeseen circumstances which change their space requirements swiftly. The right property manager or expert can guide the corporate tenants in evaluating their exact space requirements. They can also forecast the dynamic space requirement of the tenants based on the current & future business climate. A property manager can also assist the corporate tenants in planning for any unforeseen circumstances such as – in case of outgrowing the space requirement before the lease expires or during the phase of downsizing. 

Not Conducting Preliminary Research

Many corporate tenants often lack in resources or expertise required to conduct preliminary research to analyze which commercial property will be the best fit for them to lease. They also procrastinate from spending time to search for the best property options, secure legitimate financing from financial institutions, negotiate the terms of the lease, and analyze the rentals. 

It will surely pay you either today or in the future. While shortlisting the property it is fundamental to start your search process 12 months before your existing lease expires. Negligence shown during this process can result in signing up for higher lease terms for less space.

Lack of Inspection

Many corporate tenants make this common mistake of shortlisting a commercial property in a rush as they are in rush to start their business. They often forget to conduct a detailed inspection of the property which costs them dearly in the later stage. 

While shortlisting any property, it is pivotal to check the condition of every part of the property, lighting, flooring, HVAC, and every minor snag and get it repaired from the owner before commencing the business. Identifying these snags in the later stage might cost thousands of dirhams which will hurt the cash flows of the corporate tenants.

To know more about how Kaizen performs inspection and ensure an impeccable handover, read our case study – The Ideal Property Handover Process

Prioritizing Price over the Location

Many corporate tenants make this common mistake of shortlisting the commercial property only based on its rent and ignore other important factors such as: location, accessibility, presence of basic amenities, infrastructure, closeness to competition, and versatility of the office space. They believe that they should choose those commercial properties with lower rents as rent is a fixed cost and must be kept minimal. However, that notion is miles away from the truth. 

Prioritizing a commercial property based only on the rent while ignoring other important factors often leads to choosing an unfavorable location. This results in ineffective targeting of the customers & hefty business losses. Thus, is of utmost importance for every business to be there where its potential customers are.

Not Considering the Future Requirements

A vast majority of corporate tenants often make the mistake of not considering their future requirements while leasing commercial real estate. What if their business succeeds and their requirements for space increase or vice-versa. Terms of the lease must always align well with the future prospects of the business to avoid any trouble in the future. 

Not Hiring a Property Management Firm

Unless you are an expert in the leasing space with years of experience, it is always advisable to hire an experienced property management firm that possesses knowledge of the prevailing market situation and future trends.  Property management firms can play an integral role in negotiating the lease terms to your advantage. To know more about the factors to be considered while hiring a property management firm, read our blogKey Factors to Consider When Choosing Property Management Firm

Kaizen AMSa tech-enabled property management firm in Dubai, possesses over 15 years of experience in serving some of the biggest corporates in Dubai on leasing commercial space or property.

The key highlights of the services offered by Kaizen AMS to the corporate tenants under commercial real estate leasing include-

  • Representing the client as its non-exclusive leasing agent and act as the representative in identifying and securing suitable tenants.
  • Managing, tracking lease critical dates, options, and renewals
  • Leasing collection, monitoring, and enforcing client/tenant performance against lease commitments.
  • Conducting full tenant profile verification (KYC)
  • Managing the registration of the lease agreements, assisting tenants with Municipality processes and certificates (Ejari, etc.)

Key Takeaways

  • Always read the lease terms thoroughly
  • Wisely plan your space requirements 
  • Do in-depth research on the pros & cons of the property you are leasing
  • Ensure your commercial property is well-inspected before you shift
  • Prioritize the location over rents
  • Always  make your decision based on the future requirements 

and the most important point to remember is –

  • Always remember to hire the expert that can save you from making costly mistakes –because ‘One Stich at right time saves another nine’

Hope you liked the article. For more informative articles, visit https://www.kaizenams.com/blogs/

How Dubai Land Department is Leading the Real estate Sector Towards Digitalization

Dubai Land Department (DLD) is embracing digitization like never before. The year 2020 marked a landmark year for the real estate legislative body surpassing 1.4 million digital services for its customers through its smart channels including – DLD website and Dubai REST app. Digital services are a fundamental aspect of DLD’s digital transformation process.

This exponential surge in the number of digital services is perceived as a big boost for the Dubai Land Department in its commitment to establish Dubai as the world’s premier real estate destination. The increase in the number of digital services will play a vital role in fostering digitization and bringing more efficiency and transparency in the operations of the Dubai Land Department.

How is Dubai Rest is Fostering Digitalization in the Real estate  Sector?

Dubai REST  app. is an integral aspect of promoting digitization at the Dubai Land Department. This revolutionary platform was launched during Cityscape Global 2018, as a comprehensive smart solution to facilitate a vast array of real estate services. 

DubaiREST is a smart real estate platform that provides quick access to all real-estate services to the associated parties. It is a mobile application that offers valuable insights into the UAE real estate market including property verification through facial recognition. DubaiRest application is widely popular among property owners, real estate brokers, developers, tenants, real estate valuators, investors, property management firms, and all beneficiaries of the real estate sector. 

What Makes DubaiRest App. Distinctive?

The unique features of DubaiRest App. Include:

  • Empower all the beneficiaries of the off-plan projects to obtain real-time information about the projects such as:
    • The percentage of completion, the actual pictures of the project
    • Payments due on the owners in the projects that they invested in addition to the possibility of activating the feature of the favorite projects to be able to follow-up the details of these projects.
  • DubaiRest is a full-fledged real estate wallet for real estate owners available on smart devices includes all the services that enable them to conduct property transactions (sale, purchase, lease, and mortgage).
  • DubaiRest provides comprehensive information about real estate brokers and their performance levels, data of real estate offices and their classifications, valuation companies, management companies, consultancy companies and certified developers.
  • The real estate services offered by DubaiRest includes: selling, leasing, submit rental dispute cases and follow up them, submitting applications for issuing a valuation certificate, letter To Whom It May Concern and issuing map through the application.
  • The application provides for all of the real estate market beneficiaries with multiple services such as: the rental index and the sale house price index in Dubai and the service charges index of the property with the ability of payment through the application.
  • Electronic payment through the electronic payment portal – Noqodi
  • The system is available in Arabic and English on iOS and Android.

Launch of Electronic No Objection Certificate (e-NOC):

In its revolutionary decision, Dubai Land Department (DLD) has made it much easier for the property owners to obtain no-objection certificates digitally by launching an e-NOC system at its office on 20 April 2021. 

e-NOCs are now only applicable for owners for the buildings where the budget of the current year is not approved or the current quarter of that building is not invoiced for any reason. Owners can now directly proceed with the transfer after clearing all the service charges which are invoiced through Mollak. The owners can go to the Trustee’s office directly since their employees have access to the Mollak system and they can check the system and advise accordingly.

The foremost reason for introducing the e-NOC system was to minimize the additional cost on the sellers as developers & strata management firms demand & get a fee for the NOC issue irrespective of how old the property is. Only ready properties managed by Owner association management companies and owners receiving service charge invoices from the Mollak system are eligible for e-NOC.

The  New Fee:

Dubai Land Department has not mentioned any fees yet for property sellers for e-NOCs in its press release. This is perceived as a welcoming move by the owners.  

Until now, developers & strata management firms charge between AED 1,500 – 3,000 for the service. In exceptional cases, getting the NOC can cost the owner up to AED 5,000.

Reason behind the Launch of e-NOC:

Owners were unhappy with the fact that whether its one-year-old property or 10 years, developers and owners’ association firms were demanding and getting a fee for the NOC issue. Many of them were charged with AED 1500 even though they didn’t have any outstanding payments with the developer or the property management firm. Owners perceived as an unwarranted charge and as an additional burden on the seller.

Documents required:

The service will be provided by the Real Estate Registration Services Department – Real Estate Registration Assurance Services.

The key documents required for e-NOC includes – sale contract, copy of the owner’s ID or Passport for non-residents, certificate of settlement of payments for the property, attendance of the owner in person, or attendance of an attorney authorised by the owner pursuant to an official notarised document, no objection certificate from the maintenance company, in case of resale of the property in addition to a copy of the ID or passport of the buyer and the sale contract agreement MOU.

The Process:

To obtain e-NOC, the customer must complete the registration assurance application form by visiting the Dubai Land Department Website through electronic services. Alternatively, customers can visit the Dubai Land Department main Office at the Registration Assurance Section, enclosing the documents. DLD  will notify the customer of the readiness of the certificate by email. The time period for e-NOC service is between 14-18 days. There are no updates on the service fee. This link will take you to the PDF which provides instructions on obtaining e-NOC.

The Impact of DLDs Digital Measures on the Real estate sector:

This exponential surge in the number of digital services will also boost Dubai Land Department’s confidence in swiftly adopting emerging technologies such as Artificial Intelligence (AI) & Cloud. This will lead the real estate sector towards complete digital transformation and will create a more supportive and transparent business environment for property investors. This increase in digital services will also strengthen the capabilities of the Dubai Land Department in supporting its ambitious ‘Smart Dubai’ vision in line with the goal of the Dubai Paperless Strategy.  

‘Smart Dubai’ initiative was launched with a vision to make Dubai the happiest city in the world. It involves participation from all city stakeholders which includes – residents, visitors, business owners, parents, and families. The primary goal behind the ‘Smart Dubai’ initiative is to foster a culture of innovation, and creativity in the nation. The initiative will fortify Dubai in keeping pace with the modern global systems.

Furthermore, the launch of the e-NOC system will facilitate the customers in the hassle-free transfer of the property. It will not only bring agility to the process but will also curtail the cost for the seller. At present, NOCs are issued by the developer or a concerned strata management firm.

e-NOC service will also facilitate customers in applying for issuing a No Objection Certificate to register a property in the interim or permanent registration system in case the developer refuses to register the same in the interim registration system (Off-Plan Sale – Initial Sale Form – Initial Sale Contract – Title Deed Issuance). In the case of resale, the No Objection Certificate may be issued if the developer refuses to issue the certificate without legally valid reasons.

Both the initiatives being taken by the Dubai Land Department (DLD) are welcoming news for the real estate sector. This will bring transparency in the process, ease the current legislative framework for the real estate sector and increase the number of transactions every month.

Summary:

  • Dubai Land Department (DLD) reached 1.4 million digital services in 2020 for its customers on its website and DubaiRest App. This is indeed a great step in fostering digitalization in the Real estate sector.
  • Dubai REST app. is a smart real estate platform that provides quick access to all real-estate services to the associated parties.
  • Dubai Land Department (DLD) has also launched electronic no-objection certificates or e-NOC system at its office on 20 April 2021 to minimize the additional cost on the sellers as developers & strata management firms demand & get a fee for the NOC issue irrespective of how old the property is.
  • Eligibility: Only ready properties managed by Owner association management companies and owners receiving service charge invoices from the Mollak system are eligible for e-NOC.
  • Fees: Dubai Land Department has not mentioned any fees yet for property sellers for e-NOCs in its press release. 
  • How to Obtain e-NOC?: To obtain e-NOC, the customer must complete the registration assurance application form by visiting the Dubai Land Department Website through electronic services. 
  • The time period for e-NOC service is between 14-18 days. There are no updates on the service fee. 
  • Both DubaiRest and e-NOC are welcoming news for the real estate sector. It will make the process of real estate transactions more transparent, simply the legislative framework to boost the real estate transactions. 
  •  The e-NOC system will also boost Dubai’s ambitious ‘Smart Dubai’ initiative in line with the goal of the Dubai Paperless Strategy and will allow the customers in the hassle-free transfer of the property to bring efficiency to the process and reduce the cost for the seller

For more informative articles related to UAE real estate industry, please visit https://www.kaizenams.com/blogs/ or Follow Kaizen AMS on LinkedInFacebookTwitter, and Instagram

Analyzing the Impact of Acquisition of Owner’s Association Firm on Relevant Stakeholders

The acquisition can be both blessing and a curve for an Owner’s Association (OA) company. An acquisition can strengthen the owner’s association firm client base, enhance the quality of the services, and can minimize the marketplace competition. It can also lead to technology transfer which can curtail redundant costs, increase market share, minimize competition, foster innovation, boosts profit margin, increases brand visibility, offers access to new resources & human capital, and can have a favorable impact on the stock prices of the owner’s association company. 
However, as once said by legendary English playwright & poet, William Shakespeare “all that glitters is not gold”, that’s exactly the story with the acquisition of an OA company. Despite its benefits, the acquisition of an owner’s association company also has manifold disadvantages. Some of them are discussed below –

Impact on the OA Company:

Cultural Differences:

 It can create serious problems if the culture and values of the acquired owner’s association company don’t align with the acquirer. There is a high possibility that the management of the acquired company has a completely different approach to managing the business, tenants, and all the stakeholders. It can create a conflict of interest and can increase the debt load of the acquirer.  

Conflict of Interest:

There can also be a conflict of interest in the plans and approach in the way to serve the stakeholders between the two companies. The acquirer OA firm might have plans to expand the business nationally & internationally while the acquired firm may consider savings or reducing costs as its growth strategy. This can result in bringing resistance within the acquisition that can undermine the great efforts being made.

Adverse Impact on the Building’s Performance & Property Value:

There is always a risk involved if the new management is unable to manage the building it was managed before the acquisition. A lot is dependent on the priorities of the new management of the OA firm.

Several bigger owners’ association firms have completely different priorities. They lay more emphasis on cost-optimization rather than operational excellence to quickly become an apple of the eye of the developer. To achieve this, these OA firms allocate fewer resources to each task involved in the building’s operation to reduce the cost. This practice might save some money but can maximize the workload of the employees which can adversely impact the performance of the building and can also take a toll on its property & rental value. Cost-cutting practices can also have a disastrous impact on the mental health of the workers which can hamper the quality of their output and building’s performance.

To know more about the other factors which are detrimental for the building’s value, go through our article – Why Your Building Won’t Last for 30 Years?

Impact on the Employees:

Acquisition of an owner’s association company can have a traumatic impact on the employees’ performance. Change of leadership can lead to poor management of employees which can hurt their performance. 

Here are the other challenges employees will have to face due to the acquisition of an OA company – 

Ideological Differences:

There can be immense ideological differences between the management of the acquirer and the acquired company. Their working styles might not sync with each other. This can also prove detrimental for the future of the acquirer irrespective of its gains derived from the acquisition. The move can also create resentment among the employees of both of the companies and can foster antagonism. 

Duplication of Job Responsibilities:

Acquisition of an owner’s association company can also lead to employees duplicating each other’s responsibilities. There can also be confusion on the new job profile with many employees performing the same responsibilities. This can also have an adverse impact on the cost of operations of the building and a decline in employees’ productivity due to a lack of clarity on the responsibilities.

Layoffs:

One of the most catastrophic impacts of an acquisition on the employees of the acquired company is layoffs. When the bigger owner’s association firm acquires the smaller, it performs restructuring at a very large scale which involves layoffs to bring process efficiency. However, layoffs have damaging impacts on the morale of the existing employees and they also start fearing for their job. This can have an ugly impact on their productivity as well as their well-being and also create employee dissatisfaction if they don’t like their new role.

It is always advisable to maintain 100% transparency with the employees in case of acquisition and clear any type of uncertainty in their minds which can negatively impact their performance. Provide them clarity on the merged corporate culture and offer them training on their additional job responsibilities.

Impact on Developers

Legal Challenges & Lawsuits:

Acquisition of an owner’s association company can also invite legal challenges for the developers. Without a doubt, developers have a vast involvement in the day-to-day management & operations of the building. They closely liaise with the owner’s association company to ensure the interest of the building and residents is not compromised at any stage. However, this involvement also invites legal challenges as the new owner’s association firm might not be convinced with the developer’s decisions on high operational expenses, lower budget for the building maintenance and common areas, low assessments on new units, and many other issues. This situation can create several legal challenges for the real estate developers and could result in hefty lawsuits.

Impact on the Relationship Management:

With the passage of time, developers form a great relationship with the executives of the owners’ association firms. This relationship works wonders for the residents in multiple ways. It assists in streamlining the process by efficiently fulfilling the expectations of the residents. Furthermore, better relationships between the developers & OA firms ensure faster implementation of the right technology, better governance of the property, transparent communication, and above all faster resolution of residents’ grievances, resulting in improved resident experience.

However, the change of management due to the acquisition of the owner’s association firm means developers have to invest more time in building those relationships again. This scenario can result in delays in the resolution of the resident’s issues and can impact the resident’s overall satisfaction with the property. Furthermore, it often leads to a substantial decline in the occupancy rate and lower revenues for the developers.

Impact on Owners

Fluctuations in Rents:

The entry of new owners’ association firms can lead to an increase in rents which might lead to more burden on the tenants & residents and can result in higher tenant turnover and a lower occupancy rate. This leads loweto r revenues for the owners.

Furthermore, there can be disagreements between OA and the homeowners on the different ways to maintain the property. Owners’ association firms might have contrary views concerning property should be maintained, implementation of technology or automation, or launching new initiatives to keep the look of the property modern & unique. However, such practices lead to an increase in the operational expenses of the building resulting in an exponential surge in the rents & the service charges which are not well-received by the residents & tenants. 

Poor Services:

At times, residents have to face the brunt of the acquisition of the owner’s association firm. The acquisition often leads to the change in management as well the employees dealing with their service requests and there is always a dilemma in their mind whether the new OA management will be able to deal with their issues professionally as they were dealt with by the previous management. In case, the new OA management fails to stand tall on its responsibilities or what is expected of them, it can lead to delays in the resolution of their issues or service requests, leading to an increase in the resident’s dissatisfaction.

In conclusion, most of the top executives in the real estate sector are only aware of the merits of the acquisition of an owner’s association company. The objective of this article is to make them aware of the demerits as well as to ensure they make a wise and calculated decision.

For more informative articles related to UAE real estate industry, please visit https://www.kaizenams.com/blogs/. Follow Kaizen AMS  on LinkedIn, Facebook, Twitter, and Instagram

District 2020: The Future of Expo Site Post-completion of the Grand Event

Hosting Expo 2020 was not a cakewalk for Dubai. Billions of dollars have been spent in building the infrastructure and thousands of workers have worked tirelessly to make this grand event a reality. If we look at the past, we will find that most of the expo sites across the globe were turned into entertainment venues or exhibition spaces once the event was over. However, that is not the case with Dubai Expo 2020. 

The UAE government doesn’t want Expo infrastructure for one-time use but to keep everything permanent. It wants to convert the Expo site into a place that can host other major Expo’s in the future and can cater to the rising demand of corporates, tech. firms, & the entertainment sector for the city’s expansion. The organizers are working on retaining 80-85% of the infrastructure developed for Expo 2020 to construct the next-generation smart city – District 2020.  

District 2020: Aim

District 2020 is aimed to create a sustainable way of living through smart infrastructure. It will be built from the infrastructure developed for Expo 2020 and reshaping it into high-tech, environment-friendly, and sustainable urban community living. The transformation plan of the Expo site also includes – developing green areas, residential areas, smart mobility, and coworking spots. 

Joining Hands with the Tech. Leaders for Seamless Functioning:

District 2020 is joining hands with the worlds’ best technology companies and entities to empower the community with emerging technologies like AI, IoT, Blockchain, 5G, Cloud, Big Data, Robotics, etc. for faster, and seamless functioning of the businesses and residential living. Some of the anchor tenants of District 2020 include – Terminus Group, DP World, and Siemens.

The partnership of the real estate firms based in the Dubai South area with these technology giants will lead to the development of advanced PropTech platforms which will ensure the property is well maintained every time and resident’s experience remains at the pinnacle. The technology will make the living experience better and will make communication swift and transparent with the help of advanced and innovative digital channels for better living. 

The partnership will also lead to technology transfer and will minimize the operating costs at the buildings and optimize their efficiency to create an ultimate value of money for residents, developers, property management firms, and all the associated stakeholders.

Scale2Dubai:

Scale2Dubai is a unique programme designed to foster the growth of the businesses in District 2020 with special emphasis on Startups. It is a global entrepreneur’s programme which provides an opportunity to successful startups, and small-scale businesses from across the globe to expand and scale their business in Dubai. Scale2Dubai also has a provision to offer a soft landing to the entrepreneurs to start & establish their business in District 2020. 

Which Industries are Eligible?

Scale2Dubai programme prioritizes those industries which align with District 2020’s ecosystem. These industries include – real estate & construction, logistics & transport, travel & tourism, and education. 

Priority will also be given to the companies which are in the business of technologies which is very crucial for the growth of District 2020.

Benefits offered:

The firms selected for the Scale2Dubai programme will be offered a list of benefits. These include – two years visa, business set up, two years of free workspace, community lifestyle, access to special rates for service providers, two years of subsidized urban living, and a chance to participate in various high-profile social & networking events.

‘District 2020’: When Will the Construction Begin?

The construction of District 2020 will start just after the completion of Expo 2020 on March 31 of 2022. It will be a smart city of its kind with the presence of several landmarks. The District 2020 area will emerge out of the Expo site which spans over 2.5 kilometers. 

How long will it take to Transform Expo Site to District 2020? 

The question for which everyone wants to know the answer is – how long will it take to Transform Expo Site to District 2020? The answer is within less than a year after the completion of the Expo.

In an interview with The National News, Mr. Ahmed Al Khatib, Chief Development and Delivery Officer for the Expo stated, “we will start handover of some of the permanent Expo 2020 builds immediately. Our buildings are built for the Expo and [thereafter] as its legacy. It will take about 4 to 6 months for the actual opening of the first phase. Within a maximum of 1 year, the entire city – District 2020 Phase 1 – will be available.” He further said, “we are putting together the strategy of how to phase in the other buildings,”.

The Impact of District 2020 on Kaizen AMS:

District 2020 is indeed a glad tiding for property management firms like Kaizen AMS – the top 3  property management firms in Dubai.  The initiative will lead to an increase in the number of companies and residential properties in the Dubai South area which will create robust demand for the services offered by the Kaizen AMS such as – owner’s association management, community management, property management, lease management, handover services, and investment advisory, etc. District 2020 will also improve our capabilities to onboard new clients to our vast clientele. 

The idea of District 2020 aligns with Kaizen AMS’ core philosophy & values to support the future of working and living and foster connection and collaboration. District 2020 is a boon for Kaizen AMS’ agenda of promoting an inclusive and diverse community to offer a more balanced and blissful life to our residents and make our managed communities a place that prioritizes the well-being and inspires new ideas for Creating Memorable Experiences for them.

The Impact of Positive Q2 Performance of Real Estate on Property Management Companies

Dubai’s real estate and property management sector is going through an interesting phase of transformation. Effective planning has enabled the city to navigate through the global economic slowdown and strengthen its property sector reforms. While the global property real estate sector was battling for its survival in 2020, Dubai’s real estate market was thriving like never before. The second quarter of 2021 has come up with more reasons to cherish for the real estate head honchos. Due to a decline in property prices & rental rates, the sector witnessed the highest number of transactions in the last two years. 

Dubai’s real estate market set a new benchmark, the highest in the last four years by value of real estate sales transactions. According to the Q2, 2021 Performance report by Dubai Land Department (DLD), 15,638 sales transactions worth AED 36.86 billion were recorded in Q2 2021. There was a quarter-on-quarter increase of 46.76% in sales value and 33.26% in volume.  A 5% of sales transactions were in the secondary/ready market and 38.5% were off-plan.

Dubai Real Estate Sector: Q2 2021 Performance Analysis

The bulletin issued by Dubai Land Department highlights the sector’s continued positive results in Q2 2021. Compared to Q2 2020, Q2 2021 showed an increase of 183.4% for volume and an increase of 237.79% for the value of sales transactions. When compared to Q2 2019, Q2 2021 showed an increase of 78.27% for volume and an increase of 102% for value.

In Q2 2021, 61.5% of all sales transactions were for secondary/ready properties and 38.5% were for off-plan properties. As far as volume of sales transactions is concerned, the off-plan market transacted 6,025 properties worth a total of AED 9.17 billion, and the secondary market transacted 9,613 properties worth a total of AED 27.68 billion. Comparing this to Q1 2021, the number of off-plan sales transactions in Q2 increased by 53.93% and the secondary/ready property sales transactions increased 22.91%.

June Performance Analysis:

Dubai’s real estate sector has maintained an increasing pace of performance, reflecting the vitality, flexibility, and attractiveness of Dubai’s property market by recording 6,388 sales transactions worth AED 14.79 in June 2021, which is the highest in value in eight years, specifically since December 2013 according to the 16th edition of Mo’asher, Dubai’s official sales price index, launched by Dubai Land Department (DLD) in cooperation with Property Finder

The sales transactions in June 2021 are 44.33% higher in terms of volume and 33.2% in value compared to May 2021. Compared to June 2020, June 2021 increased by 173.46% in terms of volume and 204.55% in terms of value. When compared to June 2019, June 2021 increased by 140.87% in terms of volume and 179.13% in terms of value. In June 2021, 62.2% of all sales transactions were for secondary/ready properties and 37.8% were for off-plan properties. 

The top areas of interest in terms of sales transactions for villas/townhouses in June 2021 were – Green Community, Mohammed Bin Rashid City, Dubai Hills Estate, Arabian Ranches 3, and Akoya. As for apartments for the same period, the top areas of interest were – Meydan, Jumeirah Lake Towers, Dubai Marina, Business Bay, and Downtown Dubai.

Dubai’s Skyscrapers are Standing Tall on the Expectations of New Investors:  

Despite all market uncertainties, the Dubai real estate sector has not lost its charm. The Dubai property market has been highly successful in winning the trust of both local & international investors. 

The areas that remained attractive for investors to buy villas/townhouses in Q2 2021 were – Mohammed Bin Rashid City, Dubai Hills Estate, Dubai Land, Green Community, and Town Square as per the bulletin. The areas that remained the top choice for apartment sales were – Jumeirah Lake Towers, Dubai Marina, Meydan, Jumeirah Village Circle, and Downtown Dubai. 

2021 has so far proved to be more positive for the industry as the demand-supply ratio is heading towards stability and is expected to remain relatively resilient to the effects of 2020.

Growth Drivers:

Rising cases of Covid-19, strict travel restrictions, lengthy lockdown phase, economic slowdown, and massive business losses due to lack of demand & job losses, were the top reasons for the global investors especially from Europe, India & North America to invest in the Dubai real estate market. There has been an enormous rise in the number of affluent investors from Britain, Italy, France, and Germany buying villas and holiday homes in Dubai due to rising cases of coronavirus in their respective nations. Even in the middle of the pandemic in 2020, the Dubai real estate market got a big boost from foreign investors. According to the data posted by Gulf News, in 2020, Dubai’s real estate market attracted 19,757 foreign investors, who concluded 24,666 investments worth over Dh35.6 billion.

The triumph of the UAE real estate sector is also attributed to its visionary national leadership for coming up with business-friendly measures like FDI laws, restoration of relations with Qatar, fastest and well-executed Covid vaccination drive, digitization, reduction of interest rates, Expo 2020, increase in LTV ratios for the first time buyers of the property, long-term residency visas, and launch of golden visa to offer a quick pathway to citizenship. 

What Does it Mean for Property Management Companies?

This exponential increase in the number of sales transactions to 15,638  worth AED 36.86 billion in Q2, means a large number of new properties will be ready to welcome their residents in coming months. Without a shadow of a doubt, it is a  sterling opportunity for the property management sector. The increase in the number of new units coming up will also create the demand for more property management and owners’ association services to professionally manage their communities & tenants. The glittering future belongs to those property management firms that can bank on this opportunity. Undoubtedly being a top 3 property management firm in Dubai with over 15+ years of industry experience and a brigade of over 100+ professionals, Kaizen AMS has an upper hand.

Kaizen AMS has always been well-prepared to cash this opportunity. The credit goes to ‘KAIZENers’ and  our continuous investments in adopting novel technologies such as: chatbots, AI, blockchain, Cloud, and big data to always be a front runner in the industry. Furthermore, Kaizen AMS hires world-class property managers who possess decades of industry experience to ensure the tenant satisfaction score in our communities always exceeds our expectations and industry benchmarks. All these efforts have enabled Kaizen AMS in becoming the first thought which comes to the mind of the developers when they think of an ideal property management firm.

Banking on its experienced, dedicated, and skilled workforce, brand image, and strategy, last year, Kaizen AMS witnessed a large number of prestigious real estate clients who came up with new units choosing us for their Property Management & Owners Association requirements in 2020. This is the reason that despite all market uncertainties due to Covid-19 & market slowdown, Kaizen AMS has witnessed a substantial increase in its profitability and new clients. We thank the UAEs visionary leadership for building a favorable business climate, fostering real estate spending, approving 100% ownership of businesses by expats , fastest ever covid-19 vaccination, and introducing business-friendly laws to drive foreign investments which have reflected positively on our balance sheet. There is absolutely no question mark on our great future. Kaizen AMS is all set to thrive and expand its client portfolio several fold in 2021 and in the years to come.

Dubai Rent Freeze Law – How it will Impact the Landlords & the Tenants?

For decades, the world has known Dubai as a city, popular for launching distinctive initiatives to attract residents & expats towards its glittering property sector. These measures always had a profound impact on the UAE economy and acted as a catholicon for the residents and tenants in safeguarding their interest while paying rents and security deposits, signing up for contracts, etc. To support those struggling in paying rent due to unforeseen circumstances such as job losses or salary cuts, Dubai has come up with a new draft of rent freeze law to keep the rents in the city fixed for three-years. The rent freeze law is expected to act in the best interest of both landlords & tenants and will make the Dubai property market ‘a perfect ten’ or ‘tantalizing’ for the world. The law is yet to come into effect.

Objective of Rent Freeze Law:

The primary objective of this rent freeze law is to offer relief to tenants and guide them towards greater stability in relocating within Dubai.  Every year, the residential tenants in Dubai face an inevitable challenge of frequent rent increases. The rent freeze norm is expected to curb the pace at which rent increases and will also boost the occupancy rate, making the Dubai property market more attractive for tenants.

An Effort to Boost UAEs Rankings in the ‘World Happiness Report’:

Without a shadow of a doubt, the year 2020 was indeed a tough year for the UAE. The tenants were forced to move or downsize due to rent increases. However, in 2021 things have stabilized, with the Dubai property market again becoming attractive as earlier for the global investors. 

The rent freeze law is also perceived as Dubai’s push to become the happiest city to live in the world. Both Dubai and Abu Dhabi are the happiest cities in the Arab region according to the 2020 World Happiness Report. This allowed the UAE to maintain its first place in the Arab world for the sixth consecutive year. Dubai & Abu Dhabi stands at 39th & 35th spot globally in the prestigious World Happiness report. The introduction of rent freeze regulation will further improve the UAEs ranking in this report and will attract more tenants & investors towards the property sector in the years to come.

How is Dubai Rent Freeze Law Different from other Emirates?

A similar rent freeze has been implemented in the other emirates of the UAE, however with modifications. In other emirates, the rent freeze law doesn’t require a commitment from a tenant to sign-up for a three-year lease. Instead, they set out the rental terms if tenants did remain in the same property for such a period. For example – The rent freeze regulation in Sharjah has a similar rent freeze with a very limited increase within leases of three years or less. However, there are no penalties applied on tenants who are not interested in signing up for three years. Several tenants are waiting for the same thing to be implemented in Dubai.

Points which Needs More Clarity:

Both landlords & tenants like to learn whether the Dubai rent freeze law will apply to one particular type of property or all types such as -residential, commercial and industrial. Another point which remains unclear so far is whether the cap will finish after three years or will continue. DLD is yet to shed light on whether this freeze will apply to new rental leases and existing contracts and by when this law will be signed. Both landlords & tenants also need clarity on whether there will be any lock-in periods, coverage of free zones, or any specific types of residential property which will be carved out.

Who will be the Biggest Beneficiary of Rent Freeze Law?

Residential landlords will be the biggest beneficiaries of the rent freeze law. They will now be able to attract many new tenants who were earlier hesitant to rent better and luxurious properties due to the frequent rent increase. 

Furthermore, rising work from home culture due to Covid-19 will further boost the demand of the residential property sector as tenants are spending more time at home. These are signs of glad tidings for the residential sector in the coming years.

Impact on Investments:

Real estate industry experts believe that the rent freeze law will drive colossal investments into the Dubai property market and will also have a favourable impact on the occupancy rate. Furthermore, the law will eradicate all elements of uncertainty and boost tenant’s confidence by allowing them to plan their finances more effectively. The law will also channel more investments into the sector.

According to the Director-general of Dubai Land Department (DLD), Sultan Butti bin Mejren, “the law would ensure that tenants need not move frequently due to rent increases. He said the law would also give landlords a clear idea of income that could be expected. Experts have said the planned changes would steady the market.”

Win-Win Situation for Both Tenants & Landlords:

The draft law to freeze rents has been widely appreciated by both tenants and landlords. According to the Dubai Land Department (DLD), the proposed law will stabilize the market for both tenants & property owners and will minimize rental disputes. 

Several Dubai residents are anxiously waiting for more information on the draft law. The law will provide assurance and peace of mind to the tenants that their rent won’t increase, which will ultimately lead to higher tenant satisfaction. Rent freeze regulation will also provide stability to the tenants in managing their finances. 

Dubai rent freeze law will also act as a boon for the landlords in overcoming the challenges involved in securing tenants due to the oversupply of rental properties. This regulation will also boost the occupancy rate of the properties as most of the tenants leave the properties in search of low-rental accommodations, majorly due to frequent increases in rents. Once the tenant leaves due to an increase in rent, it becomes an uphill battle for the landlords to find a replacement. Furthermore, the losses incurred by the landlord due to vacant property until they find a new tenant are much higher than the profits from the increased rent. It makes sense for the landlords to watch the market as well as the competition while negotiating rents with the potential tenants.  The best bet for the landlords is to convince the tenants to pay a fixed rent for three years to ensure the property remains occupied for the whole term.

The experts view the rent freeze law as a step further to Dubai’s rent cap law which exercises restrictions on increasing rents at renewal. The rent freeze law will facilitate tenants in effectively managing their rental liabilities as the rent will remain constant for the specified term. Furthermore, fixed rent will also encourage the tenants to continue at the same property after three years.

What’s the Impact of Non-payment of Service Charges on Strata Management Firms?

In the last year, there has been a significant decline in the collection of service charges for Strata management companies which have dropped by more than half as collections dropped significantly. This is certainly not good news for OA Management firms as the decline in service charge collection means they will be left with fewer funds to be spent on the maintenance and upkeep of the property.

Why are Homeowners Refusing to pay Service Charges?

The primary reason for the non-payment is rising job losses. Several homeowners have lost their jobs due to the current market slowdown, making it difficult for them to pay their service charges. Furthermore, several homeowners are also taking undue advantage of the situation and avoiding the payments deliberately.

RERA’s Guidelines for the Service Charge Waiver:

According to the Real Estate Regulatory Authority (RERA) – “the waiver only extends to 2019 fines and so far, there has been no extension of this to service charges.”

Considering the situation prevailing at that time, in April 2020 RERA announced exemptions of all fines pertaining to the service charges in 2019. RERA also held discussions with strata management companies (acting on their behalf) which were affected by the non-payment by homeowners. 

RERA’s Suggestions to OA firms on reducing the Service Charges:

Here are the key highlights of RERA’s instructions to OA management companies:

  • RERA suggested OA management firms review and monitor the project operating expenses to reduce service charges. This move is directed towards combating the financial impact of Covid-19 as several homeowners lost their jobs or have experienced salary cuts.
  • RERA has advised OA management firms to reduce their annual budgets which will also curtail these charges. This is undoubtedly glad tidings for the homeowners. Homeowners are looking for some sort of discount; however, they have to pay the charges as approved by RERA.
  • RERA has issued guidelines for OA management firms on the number of notices any homeowner can receive, the penalties for non-compliance, payment timelines, etc. 

The Impact of Non-payment of Service Charges:

Service charges are not a burden or additional expense but the payment towards all good reasons. There is a common belief among many homeowners that these charges are misused for personal gains, however, the truth is completely different. Service charges are spent on maintenance activities and to keep the building operations running smoothly. Their funds have a dedicated government regulatory bank account. The terms of these accounts and industry regulations ensure that they don’t go overdrawn. 

Here are some of the adverse impacts of the Non-payment by homeowners:

  1. Interruption in Maintenance Work: Non-payment of service charges by homeowners leads to lack of funds with strata management firms. This will ultimately pause the ongoing maintenance work and result in the discontinuation of several useful services and maintenance work until funds are available including the disconnection of common area utilities by the utility service providers
  2. Decline in the Value of Property: Home is the biggest asset for everyone. Avoiding the payment puts ongoing maintenance or development work at a temporary halt. This ultimately leads to a decline in the value of property or an asset, which is a far costly affair.
  1. Delays in Essential Services: The non-payment of service charges by the homeowners results in the short-term financial stability of the block. This adversely impacts the homeowners as all essential services (such as – cleanliness, security, MEP maintenance services, maintenance of HVAC system, roof repair, maintenance of gyms, swimming pools, repair work, etc.) will be put on hold due to non-payment.

What can OA Management Firms do to Avoid Non-payment?

As per the process, if the owner does not pay the service charges and ignores three warning notices, the OA will notify RERA and the owner can be declared and registered as a defaulting owner.

In every case, non-payment of annual service charges is unlawful and should not be used as a tool against the OA. The OA must make the payment towards maintenance of the building and that obligation should not be hindered by the owners. RERA approves the annual service charges once the financial statements are completed and filed. 

How to Avoid Non-payment of Service Charges?

  1.  Maintain Transparency:

Most of the challenges in the payment of service charges arise due to a lack of transparency and a communication gap between the OA firms and the homeowners. On a quarterly basis, project updates must be sent with the homeowners informing operational as well as financial matters.

  1. The Significance of Paperwork:

To avoid any confusion as well as for legal purposes, it is important that landlords maintain a comprehensive document that clearly outlines the summary of charges to be paid, the reasons for the increase in charges or difference from the previous year, modes of payment, details on the payment due dates & late payment charges, and the contact details of relevant people or departments owners can speak to clarify their doubts or queries related to service charges.

  1.  Seek Assistance from a Property Management Firm:

Timely payment of service charges is critical for the swift operations of the block. In case landlords struggle to collect rent from the tenant if the property is rented. In that case, they can seek help from a professional property management firm that is backed by a team of dedicated experts to get this all ticking over like clockwork.

Key Trends that Will Drive Real estate Investments in the UAE in 2021

The UAE real-estate sector was attracting significant investments from across the globe until disrupted by Covid-19. The pandemic has negatively impacted the exotic residential properties but had a significantly positive impact on the non-residential and industrial real-estate sector.

As the prices of properties are declining, it is of paramount importance to have an understanding of the recent market trends to make a wise investment decision that fetches better returns. It is also important to make a quick decision as prices won’t be down for long, banking on the list of government initiatives such as FDI Laws, restoration of relations with Qatar, Covid vaccination, technological developments, co-habitation laws, and above all the upcoming Expo 2020 which is expected to attract more than 25 million visitors in late 2021.

Here are the Top Five investment opportunities that can work wonders for the real-estate sector in 2021.

1. Non-residential Sector to Emerge as the Biggest Revenue Generator:

According to MarketLine’s September 2020 report titled – ‘Construction in United Arab Emirates’, the UAE’s construction industry generated a revenue of $84.4bn in 2019. The non-residential segment was the biggest revenue generator, accounting for total revenues of $56.6bn which is around 67% of the industry’s overall value. In the coming years, the share of non-residential segments including mixed-use developments can expand up to 75% in the UAE.

2. The Rise in the Demand for Industrial Real estate:

Going by current demand and ROI, industrial real estate is indeed an apple of an eye for the commercial real estate sector. Post coronavirus, there has been an exponential surge in online shopping across UAE, which has increased the demand for logistics. With rising cases of Coronavirus in the UAE, there has been a continuous increase in online shopping as customers are avoiding physical visits.

As per the study conducted by Mastercard in Nov 2020, 73% of UAE consumers are shopping more online since the start of the Covid 19 pandemic. The study also reveals that 54% of consumers are spending more money on the virtual experience. The increase in online sales is fostering the growth & expansion of the industrial real-estate sector as companies across all sectors are now requiring more cold storage facilities, distribution & data centers, and warehouses to store their products to cope up with the rising demand. Top logistics players such as Al-Futtaim Logistics, Emirates SkyCargo, ATS, CEVA Logistics, Amazon, etc. are investing heavily in building their logistics and supply chain infrastructure to meet the current & future demand of the industry. The future of industrial real estate looks promising in the coming years.

Amazon Supply Chain Model: Case Study

Despite being an e-retailer, Amazon has always found it cheaper to handle logistics itself rather than using third parties. The company’s supply chain network in the Middle East is almost as vast as established players such as FedEx or UPS. Since 2015, Amazon has spent billions of dollars in building its own global end-to-end logistics network which is equipped with the latest vans, and trucks, and aircraft.

In the UAE, Amazon fulfills a large majority of customer orders from DXB3 which is the biggest fulfillment center in the UAE. Announced in 2018, DXB3 is spread over a 23,000 square meter facility located in Dubai South. The center ensures that the demand is met during the busy year-end and festive seasons. To increase its penetration in logistics, Amazon has adopted the approach of delivering the packages through its last-mile team or through local courier companies called the Delivery Service Partner program. The program has allowed Amazon to increase the speed and flexibility of the delivery of its packages which ultimately benefited its customers to get faster orders.

3. Second Home Syndrome:

There is a rising culture among global elites to have a holiday home internationally. In the last few years, Dubai has become one of the most preferred cities in the Middle East for the rich to have a holiday home. This will boost the city’s real potential for rental income in 2021 that can offset ownership expenses.

Secondly, there is also a rise in the culture of the “co-primary residence,” or an apartment near the office in the city. As executives who decamped to luxury suburban villa communities on the outskirts of Dubai ease into one year of work from home, their mindset has changed indefinitely. Many of these executives are interested in exploring a second home that is closer to the office. This will be a big boost for central Dubai’s residential market.

4. Tough time Ahead of Commercial Real-estate sector Due to Remote Working:

According to a 2019 survey by International Workplace Group., the UAE had one of the lowest remote work participation rates before coronavirus. Merely 10% of the UAE workers reported working from home 1-2 days per week, compared to a global average of 62%. However, post coronavirus, almost 40% of the UAEs population is working from home. This has adversely affected the commercial real estate sector as most of the office buildings remain underutilized. This has also raised concerns among real-estate investors about the security of the income.

There has also been a rise in teleworking which has also negatively impacted the demand for secondary offices, with the overall share of the office sector shrinking from 40% to 35% in the first three- quarters of FY 21.

5. Discounts on the Properties Located in the Urban Areas:

2021 will witness an exodus of residents fleeing the expensive, populated, and high-density urban areas into the suburbs for more space and budget-friendly accommodation. This will leave thousands of landlords in the dust, who will be unable to evict non-paying tenants but still responsible for the upkeep of the property and paying all expenses associated with it such as – taxes, insurance, and the mortgage. In 2021, investors will be eyeing these properties to ride out the current wave and buying these rental investments at a much discounted rate.

Conclusion:

These five investment trends hold the drive for real estate investments in 2021. This year is expected to be profitable for the investors targeting the Dubai market. Dubai Expo 2020 will further boost the investment prospects in the real estate market.

The real-estate sector could turn this crisis into an opportunity by focussing on designing people-centric solutions which meet sustainability criteria set out by the UAE Government and becoming increasingly enforced. 2021 will be a year for change like never before and there will be marked uplift across construction as a whole, by Q3 FY 22.

Why are developers not consulting Property Managers during design and construction?

As Property Managers, whenever we enter a building it’s automatic that we begin to analyze, compare, sometimes criticize, or perhaps take notes of something new.  It’s in our nature and in many ways, it helps us to improve.  We spend so much time in different buildings, so together with the trained eye to spot things, it is inevitable that these observations are made.

I’m certain that anyone managing property has been in a situation where they find themselves asking the question ‘why have they (the developer) done that’?  This, of course, refers to physical elements of the building such as the positioning of security desks in the lobby or even the size of the lobby in some cases.  These are instinctive thoughts from those of us working in the industry.  However, once we dig deeper into understanding how a building is managed coupled with the complexities of budgeting and service charge calculations, you very quickly ask yourself another question – why are developers not consulting Property Managers during design and construction?

The first thing to point out is that developers face many difficult challenges, including a volatile market, ever-changing regulations, and fluctuations in build costs.  These are all extremely testing for developers competing fiercely to establish or maintain their reputation in the market.  This reputation is defined by the people who use the finished product, be it residents in their homes or companies occupying office space, at a time when the property manager is responsible.  So, if the reputation of the development and developer is made or broken once it is in the hands of the management company, why would they only be given a month (typically) to advise the developer and prepare to welcome residents.

Property Managers have a wealth of knowledge that can preempt ‘Post-Occupation Evaluation’ pitfalls – from the physical elements of the buildings, the complicated logistics of handover and snagging. Also, common contractual issues which arise long after occupiers settle in a building. 

By engaging with a property manager early on, developers will benefit from the input of the professionals that will be the ones taking care of the property.  The areas in which the management company can advise include design, feasibility, governance and financial. 

Design

It may not seem like an obvious task for a property management firm, and the suggestion is not that property management companies take over the design from architects.  Far from it, we are fortunate to live in a city where architectural boundaries are pushed to the limit and we are blessed with some truly iconic designs.  There are occasions in some of the more standard buildings where some minor changes make a lot of difference to the building, these include:

  • Large lobby areas –  These can look fantastic in Burj Khalifa but in a typical residential building, the question of cost is a major issue.  The room needs to be kept cool and furnished correctly, both costly to the end-user.
  • Façade design – Complex designs look great but are often very difficult to clean, which means a much higher cost for cleaning.
  • Void areas – These are areas or rooms in a building which, for all intents and purposes do not have a use.  With very simple changes, these can be transformed into usable spaces such as kids’ play areas or a games room.
  • CCTV monitors – Often placed in a separate room, which requires additional security personnel.  By placing them at the security desk in the lobby, you remove the need to employ additional security.
  • Form over function – What might look attractive in a rendering can sometimes be impractical, for example, bowl style washbasins look great when mocked up but are very difficult to keep clean and free from grime.
  • Building Management System (BMS) – BMS are now common in buildings but are often not utilized properly.  The purpose of a BMS is to help those managing the building once complete, so surely those managing should be consulted with.  These systems can be a huge cost but it is very typical to find that only a fraction of its capability is being used, and at the same time, some basic functions like access control on doors are not included.

Financial

Finances dictate many factors of how well a property is managed, in the worst case we have seen buildings being cut off by DEWA.  Developers try to mitigate this by incorporating a service charge rate in the Sales & Purchase Agreement (SPA), but this is often done simply by looking at neighboring buildings and adopting a similar rate.

Each building is different, each developer has a varying vision so the preparation of a budget should be high on the priority list.  One of the frustrations of owners taking handover is that the service charge rate shown in the SPA is very different from what they are being asked to pay. By working with the management company early on, the developer can instill their vision allowing the management firm to understand the finer points of their requirements and prepare a detailed, properly researched budget. 

Feasibility

A great deal of time and money is spent on the feasibility of a project.  Projected costs, income, and margins are just a few of the items analyzed to understand the project’s viability.  A property manager can play a role here too.  Experienced property managers have a wealth of experience and expertise, which developers can tap into to understand some finer points.  Insight into understanding preferences of residential tenants, or perhaps knowledge of whether commercial tenants in a certain area are looking for small, fitted offices as an example.

Governance and Compliance

Dubai, like any other major city in the world, has a complex framework of governance and compliance.  They are in place to safeguard the interests of all, but it does mean a lot of work for developers.  When it comes to the management of property, two documents that play an integral role are the SPA and the other is the Building Management Regulation (formerly the JOPD).  I referred to the SPA earlier and in particular those which include a service charge rate. 

The Building Management Regulation (BMR), in its most simple explanation, is the rule book for the property.  It is such an important document but in so many cases it is left as an afterthought by developers, which more often than not is simply copied from another building with a few minor changes (if any) made.  By allowing the property manager time with the BMR, they, along with the lawyer and developer can insert important measures that would likely safeguard or enhance the developer’s reputation. 

Things as simple as not allowing pets to implementing leasing measures that restrict sharing accommodation can be part of the BMR.  You may find the developer wants to maintain a certain level of service, after all, it is their vision, an example of this could be to include valet service or concierge services.

To conclude, there may not be a quantifiable way to measure the importance of working with a property manager early on.  It is clear, however, that the developer would place reputation as one of their most important selling tools.  This is enhanced by providing well-planned developments, with properly budgeted service charges, meaning that investors are more likely to return to the same developer for future developments.

Let us remember, it is the developers, whose ambition and vision are creating these buildings.  Architects, consultants, engineers, and contractors are employed to help the developer create their vision.  So, the question again is, why are developers not consulting property managers during design and construction?