How tech will shake up the future of Dubai’s real estate

The age of digital disruption is in full swing, and as cities race to keep up, the divide between the winners and losers in real estate will become even more stark. So there is a “call for the real estate industry in Dubai” to heed from Mahmoud AlBurai, vice-president of the Arab Countries chapter of the International Real Estate Federation. “We spend very little on research and development, and on technology,” AlBurai said. “It’s time to invest in such infrastructure because we need that for the future. It’s time to be relevant.” For AlBurai, technology has the power to make whole cities irrelevant, let alone individual businesses. “Cities that do not invest in digital infrastructure will go bankrupt or become unable to compete,” he added. “They need government regulation and support, but also need private sector contribution.” The dangers of falling out of step with advancing technology was just one of many topics up for debate at EG’s Middle East Real Estate Forum, held on 30 April at the Armani Hotel in the Burj Khalifa. Innovation, technology and sustainability were identified by panellists as the key drivers of future value and relevance in Dubai’s real estate market. Notably, Dubai was an early mover in this space – its ambitions to become a smart city have been playing out since 2013, when the vice-president of the United Arab Emirates, Sheikh Mohammed bin Rashid Al Maktoum, announced the Smart Dubai strategy. This comprises 100 initiatives and 1,000 government services. The government has also introduced a wide-ranging accelerators programme. Further to this, AlBurai highlighted that, while co-working was becoming a reality in the city state, he also knew of “three or four” developers discussing the co-living concept with the government. Andrew McVeigh, partner at law firm Addleshaw Goddard, said that, as a young city, Dubai could benefit from its ability to build smart cities and community hubs from the ground up, rather than retrofitting them into an existing landscape, unlike most rival cities. However, given the exponential speed at which technology is disrupting the market, the pressure is still on to ensure that it can leverage off the potential opportunities it can bring, and figure out how people will interact with real estate in the decades to come – or risk falling short. Sharing the love Several panel members pointed to the sharing economy as a crucial representation of how consumer behaviour from younger demographics is changing. Praphul Chandra, founder of blockchain-focused start-up KoineArth, said asset tokenisation and smart contracts would widen the sharing economy from solely consumers towards investors, possibly even enabling stakeholder-type agreements. “These are going to fundamentally change how real estate is owned in cities,” Chandra said. “Instead of owning a floor of a building in one place in the city, or owning a flat or a home, you will perhaps own a certain percentage of one and a proportion of another. “That is the way the market is going to evolve. People will own real estate in a shared way, in the same fashion that we own stocks and options today.” New ways of investing in property are already beginning to take shape in other countries, even if they remain consumer-centric. China was highlighted as a market that is pioneering ways in which digital adoption can bolster real estate investment. Sarah Bacon, founder of UAE-based start-up We Share Property, cited Beijing-based online company Uoolu as an example of a firm challenging the widespread belief that consumers must see a property in order to invest in it. It completed more than $700m (£530m) of cross-border transactions for high-net-worth users in 2018. “There are different sectors that are more open in terms of digital adoption from the consumer level, and that can help to promote growth and innovation in the real estate sector,” Bacon added. Do or die In the institutional space, Patrizia is among the global investment managers that are investing heavily to keep up with the digital economy. In October, it bought a stake in German artificial intelligence firm Evana; as part of the deal, it will apply Evana’s software to its €40bn of assets under management. Allen Chilten, director and head of funds at Patrizia, said: “People are talking about technology as a disruptor and an innovator, which I’m sure it will be in some regards, but for the big global managers, you have to do it or die. “First and foremost, you have to digitise everything. Some investors around the world are very experienced at investing in bricks and mortar, but digitally have very little in terms of track record.” At the heart of this is the need for the industry to work together to establish digital as a standard procedure, to allow transparency to flow and build trust among end-investors, which could extend to local family offices wanting to invest in Europe or other continents. “Once achieved in the institutional world, our belief is that trust will come from the person sitting in a living room in Dubai with 100,000 dirhams to invest,” said Chilten. “If they see the likes of ADIA already invested in that product, hopefully all of those tick boxes come in and they say: ‘Yes, that fits my strategy, and I’ve also got some seasoned professionals who have done this.’ It’s a win-win, and that’s where the opportunity lies.” Crucially for Patrizia, trust from these end-users could be strengthened by the potential role that tech could play in cutting out the intermediaries involved in an investment deal, all of which demand respective fees, to determine more accurate risk-return profiles – without denting them. “Technology will hopefully get us there much faster, which we are trying to do through our investments,” Chilten said. Regulatory hurdles The notion of real estate as an industry that is increasingly rooted in data and sharing continues to expand its influence. But it is worth noting that the likes of Uber and Airbnb – the powerhouses of the sharing economy – continue to sustain uneasy relationships with traditional regulations. It is one of the reasons McVeigh reckoned that technology’s role still has a long way to travel before cementing its position in property. While clearly at an “evolution point”, he highlighted that trust is also fundamental to the sharing principle, which has not manifested yet. “What will help around that trust principle is regulation and codes of practice, and people just using it,” said McVeigh. “If you think back to internet retail – using Amazon for the first time, with the package arriving on time, produced a great feeling. That trust started to build; it is the same with sharing services.” Eri Mitsostergiou, director of European research at Savills, said transparency and clarity on how to value such businesses would need to be achieved before the sharing principle – and data – can become integral to the industry. “The growth of all of these companies will change the way things work, as well as the mentality with which landlords cooperate with these companies,” she said. “But there is a big concern in the investment community about how we value these companies and their spaces – how we estimate our returns. This will also bring an evolution from a regulation perspective, and from a valuation perspective. “These are all changes that need to happen to establish these concepts as new segments to include in our investment strategies and decisions.” Keeping up with disruption As data technology continues to shake up the property market, the need for regulators to keep up with its rapid advancement was also addressed. “It is important for us to build a sustainable and smart real estate market that is driven by data,” said AlBurai. “We need technology that disrupts the way we currently buy real estate, the way we rent and sell, and even how we construct real estate. We need new innovations for building faster, affordably and for long-term profit. “We need to look at it as an opportunity, but the government has to be ahead of the game, and to be sure that we have the right regulation and infrastructure to support innovation while protecting people’s rights.” Chandra posited that perhaps the UAE and the rest of the world could take a leaf out of the EU’s book, by considering measures similar to GDPR. “It is critical that we start using data, but you want to be cognisant of data ownership,” he added. “It is unclear who owns real estate data. Is it the consumer who is creating it or the developer? Or can there be a regulatory framework to ensure that you have to share anonymised data for the whole market to evolve?” On the whole, however, AlBurai emphasised that the UAE has made inroads in adapting to new ways of working, living and owning properties within current frameworks while accommodating growth. “In the UAE, and Dubai more specifically, we have seen a lot of regulatory intervention in the past few years, from Smart Dubai to data law and licensing requirements,” said AlBurai. “The partnerships in the UAE between companies, the private sector and government agencies will make it easier for technologies to be adopted at scale.” The Dubai government has also made progress with transparency; it has launched Dubai Pulse, a data service that compiles transactions from the public and private sectors. Racing to meet sustainability goals Technology could also hold the key to meeting the sustainable development goals set by the United Nations, as part of its 2030 global agenda, which the UAE is aiming to achieve domestically and internationally. There are still 11 years to go until the 2030 target date but the clock is ticking, and the ongoing, seismic shift in attitudes to sustainability among the millennial demographic is adding more pressure. “We are worried about the sustainable development goals,” AlBurai admitted. “Four years have passed, and little has been achieved. But the evolution will come from the private sector, and from innovation and technology. “When we talk about real estate, there are a lot of problems that data will help us understand, and can maybe open it up for public-private partnerships and community partnerships, crowdfunding and other innovations to solve the challenges of sustainability. “There are opportunities as well as risks and challenges. Once we use data and information as enablers for change, we will be able to solve a lot of these problems.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette