Could there be any project more ambitious than re-creating the Moon on Earth? But that is exactly what Canadian entrepreneur Michael Henderson intends to do in Dubai for a not-insignificant sum of US$5 billion, a sign of the bullishness of the Middle East real estate market.

The proposed destination resort, to be funded by Henderson’s Moon World Resorts, would contain a 4,000-room hotel, a 10,000-capacity arena and a ‘lunar colony’ where visitors can experience a moon-walking simulation.

US$5 billion; a sign of the bullishness of the Middle East real estate market.

Construction is also resuming on another feat of engineering, the Palm Jebel Ali – the dredged artificial island that famously stalled in 2008 at the hands of the global financial crisis. The revived project, from developer Nakheel, promises to be twice the size of Palm Jumeirah with 110 kilometers of shoreline and more than 80 hotels, malls and attractions.

Then there is the otherworldly Bugatti hotel, a glittering collaboration with local developer Binghatti. It represents the luxury car maker’s first venture into the world of residential real estate and will sit, naturally, at the ultra-luxe end of the scale. The 42-story skyscraper in Dubai will be equipped with two garage-to-penthouse car lifts.

Regional Momentum Boost

It’s not just Dubai that is getting a real estate glow-up. The entire region is seeing immense growth, with the total value of real estate projects currently planned or under construction standing at an eye-watering US$1.36 trillion.

The figure demonstrates that a recovery from the declines of the COVID-19 pandemic is well underway, according to Deloitte Middle East Director of Real Estate Development Manika Dhama.

“This was primarily due to pent-up demand from residents, visitors and international investors,” Dhama tells The CEO Magazine. “Market activity is expected to remain resilient for the remainder of 2023, albeit at a lower growth rate than in 2022.”

“Market activity is expected to remain resilient for the remainder of 2023, albeit at a lower growth rate than in 2022.”

– Manika Dhama

The United Arab Emirates is indeed at the forefront of the region’s real estate sector, buoyed by robust visitor numbers that are bouncing back well post-pandemic.

However, there is also considerable movement in Saudi Arabia. Dhama highlights the pace of government spending on infrastructure and giga projects, the ease of travel through recent visa initiatives and the focus on increasing homeownership of Saudi Nationals as the factors that will underpin growth in the sector over the medium term.

“Accordingly, MEED Projects estimates that the construction sector, at 26 percent, will be the largest segment in terms of 2023 value of contracts out to bid,” she explains.

Hospitality at the Forefront

Hotel chains are heeding the signs, also flocking to Saudi Arabia, with its Red Sea Resort a particular drawcard. Hospitality brands that have already signed up include Fairmont, St. Regis, Ritz Carlton and Six Senses.

In fact, Six Senses has announced three new properties in the destination, with CEO Neil Jacobs excited about the possibilities.

“Obviously Saudi is sensitive, but we’ve taken a view that we, along with many of the other international companies that are going in, can really be part of the transformation in Saudi,” he enthuses.

“The amount of investment that is going into the country from the country is unprecedented. In our own view, there are few countries that can actually afford to create that kind of infrastructure. There’s a lot of business in that part of the world. But then the international business will come, although it may take a while.”

“The amount of investment that is going into the country from the country is unprecedented.”

– Neil Jacobs

Meanwhile, in Qatar, the establishment of the Real Estate Regulatory Authority highlights enhancements in managing the sector’s development and improving transparency to attract investments, according to Dhama. It builds on the recent construction frenzy for the 2022 FIFA World Cup, with the country’s real estate market now its second-fastest growing industry after hydrocarbons and investments in excess of US$22.5 billion.

Further development of the sector in the country now has to be carried out by private developers, believes Nasser Hassan Al-Ansari, Chair of the Board of Directors at Just Real State Company, who spoke at the recent Qatar Real Estate Forum 2023, as reported by Gulf Business.

“The government has executed and implemented all the infrastructure, and it has enacted laws that are necessary to revitalize the real estate sector,” he said. “The private sector should not depend on the government for further support but rather come up with innovative products that attract foreign investors.”

A Complex Outlook

While the prospects look good, it’s not an entirely rosy picture. Challenges lurk on the horizon with the potential to hinder the pace of growth of the regional real estate sector. Dhama highlights these as widespread geopolitical uncertainty, inflationary concerns and the corresponding rise in interest rates.

“Pockets of growth during the first five months of 2023, such as demand for prime residential and Grade A office stock in Dubai and Riyadh, reflect the varied factors at play in different cities in the Middle East and a flight to quality, which looks set to continue in the short- to medium-term,” she says.

As part of a shift toward self-sufficiency, growth in the vertical farming industry across the region is expected to drive demand for warehouses – more good news for the sector.

But other developments promise to enhance the efficiency and sustainability of the sector, helping to future-proof it from such threats. For example, the adoption of modern methods of construction and smart and sustainable building technologies are helping to shape its future.

As part of a shift toward self-sufficiency, growth in the vertical farming industry across the region is expected to drive demand for warehouses – more good news for the sector.

The strengthening of economic relations between China and the Middle East is also forecast to boost the region’s real estate sector.

A Digital Reimagining

Add to that mix the rise of Proptech players in the Middle East, such as Realiste, a company that aims to revolutionize the real estate market in the region by “increasing its transparency and accessibility for investors worldwide”.

“The company is confident that its AI-driven products can benefit not only the property investors, but all parties involved, including government, property investors, construction companies and banks, by streamlining and accelerating property deals,” a Realiste spokesperson said.

“The key emerging trends in the Middle East real estate sector are digitalization opportunities across the value chain, from project concept to funding and delivery, as well as a growing focus on sustainable construction models and ESG reporting.”

– Manika Dhama

Deloitte itself launched a new Middle East AI Institute in Riyadh in May to support its digital transformation strategy in the kingdom and the wider region. It aims to enhance productivity, accelerate the pace of business innovation, support talent and create opportunities for youth who are interested in pursuing careers in AI.

“The key emerging trends in the Middle East real estate sector are digitalization opportunities across the value chain, from project concept to funding and delivery, as well as a growing focus on sustainable construction models and ESG reporting,” Dhama reveals.

Whether the Moon will become a reality remains to be seen, but with vast funding injections being made into the region, it is fast becoming clear that when it comes to real estate, the stars really are the limit.