Middle East real estate debate: Middle East real estate holds its own in unsteady global markets

Delegate biographies: Learn more about the panelists

Euromoney The over-arching question of this debate is: what is driving the huge flows of investment in Middle East real estate?

RB, Aldar Clearly a core driver is demographics. Abu Dhabi has grown to being a city of 1 million people in short order from the late 1960s to now. It will grow to 3 million by 2030. In addition, people realize that we are building a sustainable economy, not simply one based on oil and natural gas, and that we have an extremely robust economic model.

NM, CBRE I completely agree. The quantity of stock that is being developed at the moment will only work if we continue to attract people to come and live here. And to put it into context, the quantity of offices in Dubai at the moment is around 30 million to 33 million square feet or so. We think that there’s probably approximately another 80 million square feet under construction, and that requires a population of 4 million or 4.5 million people here by 2015 to make it work. If this doesn’t happen, there’s going to be a very high amount of vacancy in Dubai, and that’s going to impact on Abu Dhabi as well. So the key for the success of the country, and all the Emirates, is the continued attraction of people to come and live here.

KTQ, Nakheel Another key reason is the fulfilment of the need for a hub between the Asian time zone and London. So a major driver for the development of Dubai is as a hub for global commerce, much as Singapore and Hong Kong developed. So Dubai has a very fast-growing port, a very fast-growing free zone now with a critical mass of companies and a growing airport. The only difference here is that development seems to be running at 10 times the speed! And we should give credit for that to the government and its commitment to sustainable, well-planned development.

IO, JLL Jones Lang LaSalle’s World Winning Cities Programme reviews the competitiveness of cities around the world based on a host of metrics and drivers of real estate and city success. The programme is also used to predict the rising urban stars among emerging markets. In 2008, we’ve identified Abu Dhabi as a standout, having the most favourable prospect of any of the emerging World Winning Cities. By way of comparison, when we first launched the survey in 2002, Dubai was assessed with a similar status and is now firmly established as one of the 21 Emerging World Winning Cities. So these two cities over a range of measures are places that investors recognize that they have to be.

NM, CBRE Another change that will encourage investment here is that some of the local organizations, particularly families, are finding that they’re over-invested in the GCC or the Mena region and are looking for opportunities to export their capital. The easiest way to do that is through co-investment. So we’re seeing, particularly in Abu Dhabi, some of the trading families eager to attract European investors, not to exchange capital but for asset swaps. This means that we export capital and have inbound capital in the same transaction, and it allows each entity to understand the other’s market. It’s a way to quickly open up the market, and by the year-end I expect one or two major deals of this kind.

Stability and proximity

KTQ, Nakheel Another point: Dubai and the UAE as a whole have always been regarded as a safe haven. The area is politically stable in an unstable part of the world. That attracts investment. And clearly the position of the UAE is perfect: take a four-hour flying radius from Dubai and there are 1.6 billion people inside that circle, from Pakistanis to Russians.

IO, JLL That’s an important point. People looking in from the west often perceive the Middle East generally as a higher-risk market. Those 1.6 billion people see the Gulf very differently: as a safe haven for investment. If you’re from the Asian subcontinent or some other neighbouring countries of wealth, this is a commercially compelling safe haven for inbound investment. A lot of western investors miss that point, but it is a key underpinning for the market.

Macro versus speculation

Euromoney Is the buy side taking this long-term, macro view, or is the region seen more as a flip?

TH, Pramerica A little bit of both. There is a strategic element, because we don’t think that the oil money and the liquidity and the demographics are going away. At the same time, there is such a dearth of good modern office space that we can find projects in which we build and sell in the short term and generate very high returns.

NM, CBRE I think one of the important things is that the transfer of money is now two-way. For the first time over the past 12 months or so we’ve seen the arrival of foreign institutional capital here as part of the global trend of increasing appetite for cross-border investment. We reached a milestone at the end of last year with more than 50% of every penny spent in real estate investment being spent out of the country of origin. In addition, we have great returns to be achieved in this marketplace, we’ve got an immature investment market, and the arrival of foreign capital into the Middle East region at the moment is only around 11% of the total money spent. This comes at the same time when the allocation of cash to real estate as a proportion of overall portfolios has gone up, and it’s increasing from around 6%, probably to around 10% by 2012. So there’s more money invested and the allocation’s going up. People need new locations.

RB, Aldar And it’s not just portfolio investors, it’s companies that want a very cost-effective, tax-efficient environment, that has the right feel to their middle and upper management in all respects. And people are also realizing that to do business in UAE you need to be here. The days of fly-in, fly-out are gone.

WH, Kenmore We exemplify many of these trends. We’re a European property fund management company that has gone into cross-border investment only in the last five years; going into France before a lot of our competitors, then going to Scandinavia and trying to keep exploiting early-mover advantage. We believe that this market will mature over the next five years and appreciate that there will be compression of yields as a result of that, with the more institutional sort of equity coming in behind us. And it’s starting to happen.

IO, JLL The big change for me is that there are now two really good reasons for multinational real estate investors to be in the region, whereas historically there was one, which was to export capital. Today companies like Kenmore or Pramerica can operate locally and earn a competitive profit on inward investment as well.

RB, Aldar Exactly. Now there is great potential for straightforward pension funds, superannuation funds and investors looking to manage assets, not simply to build or own them.

Euromoney Is the Abu Dhabi picture the same as Dubai’s?

RB, Aldar There are some similarities. Both have been sea hubs for cargo and people and act as a bridge between east and west. But there are differences: Abu Dhabi is the capital city of the UAE and has a different model. Abu Dhabi has sat quietly for the last 10 or 15 years and learnt from other cities around the world. Now the government wishes to develop it in a very controlled, professional way, to a very high quality, in a way that is economically and ecologically sustainable and in a way that helps diversify away from oil and gas.

IO, JLL I agree with KT and Ron. The region lacked a hub and Dubai led the charge on that. But there are other drivers of investment flows into real estate in this region and one is clearly that previously attractive investment environments elsewhere have lost some of their lustre, just as Dubai and Abu Dhabi have demonstrated that they are building high-quality, world-beating cities that are likely to exhibit higher rates of growth for some time.

TH, Pramerica For me the story here is the demographics. The migration into these countries is enormous and money always attracts intelligence and ambition, so the quality of the people migrating to Dubai and to Abu Dhabi and by now Qatar and so on, is very high.

The investment environment

Euromoney How easy is it for investors used to real estate in developed markets to operate here?

TH, Pramerica It’s different here. We found in our Dubai deal that the leases were one-pagers, and the length of the typical lease is one year. That just won’t work for, for example, a lot of German open-ended funds. We had to fight to educate the developers to accept a 44-page lease we created but in the end we prevailed and they leased the entire building based on these 44-page lease agreements, plus we got mostly three- to five-year leases.

RB, Aldar Thomas, I would agree with you – it’s not the easiest place for a fund to come in and do business. As far as how leases are structured and the like, you’ll find at Aldar we’ve already got what you’d recognize as the British institutional lease here, adapted to fit the local market, and it’s been readily accepted. That’s a net lease, so it includes full service-charge recovery, all the issues that you’d expect to be covered as an investor.

IO, JLL Clearly, in some instances, foreign investors will be at a disadvantage because the local investors have faith in the government and the economy beyond any written documentation: it’s easier for them to take things on trust. The local players also are prepared to move very quickly with large sums of money. In the deal we did with AIG [its first investment in the UAE was the purchase of two class-A office buildings financed by Nour Islamic Bank], the transaction timeframe was very short indeed, putting immense pressure on the institutional processes of the investor and debt provider.

NM, CBRE And lest we focus too much on this issue, let me point out that we have a building under offer at the moment to a consortia of high-net-worth Japanese individuals with a reputation for being conservative, and we have a pension fund from the UK that also has a building under offer at the moment that is the first asset they will own outside of the UK and France.

IO, JLL And of course, when AIG and Pramerica do deals in the region, they’re endorsing the investment environment.

KTQ, Nakheel Everything that we do at Nakheel is structured with the international community in mind – the first sukuk that we did, which is listed on DIFX, and our planned residential Reit and infrastructure trusts. The great thing about the Dubai International Financial Centre is that it is very, very open to adopting the best practices from London, from Singapore, from Australia, from the US.

NM, CBRE It is worth pointing out the role of Aldar and Nakheel here. First, they have created stock that is of investment grade for the first time. Second, they have been instrumental in creating transparency and an investment environment that conforms to international standards in terms of documentation, laws and so on.

KTQ, Nakheel That second point is important. The region’s different cities have different risk profiles. Dubai is gravitating towards the kind of regime you find in Singapore, in Australia and in the UK. We have clear real estate law, so, for example, there is freehold title, easily transferable between foreigners if you buy anything that’s in a designated area – and Nakheel has a land bank of 3.5 billion square feet in that category.

IO, JLL Just to put a slightly contrary point: in real estate, as in other markets, transparency is a double-sided coin. It makes doing business easier but it often provides more modest returns. Primarily regional but also international investors with higher risk thresholds have been capitalizing on these situations to generate higher returns for their stakeholders. Increased transparency and a stronger regulatory regime is however good for the region and will contribute to the depth and long-term stability of the market.

Pros and cons

Euromoney What other pros and cons are there in the regulatory environment?

NM, CBRE One thing that is lacking is landlord and tenant legislation in a format that protects both landlord and tenant. This is a key issue for investors and the mechanism we have for dispute resolution at the moment is wholly inadequate. And when you put in an overriding system where geographical ownership is dependent on nationality, that creates locations that are out of bounds to particular nationalities. I’m not sure that is sustainable. That said, one big advantage that the UAE has is the speed with which the government acts, and so if there’s a problem in the marketplace then it’s able to enact new legislation quickly.

IO, JLL Jones Lang LaSalle’s Global Transparency Survey shows that the Mena region has seen the biggest improvements in real estate transparency on a global basis during the past two years. Leading the charge, but certainly not alone, Dubai is the most transparent Mena country and the biggest improver of all 56 markets covered. Abu Dhabi, Bahrain, the Kingdom of Saudi Arabia and Egypt have also made great strides.

FM, JLL I would add that there is a lot of confusion arising from all the different zones, each with its own particular rules and laws. This has to be harmonized. Then there are the leaseholds that are not completely clean leaseholds, whereby you own the estate but you don’t own the land that your estate is on. I think that the authorities are very much aware of that problem and they are addressing it.

WH, Kenmore I agree that the two challenges are transparency and complexity – the fact that what works in one instance doesn’t work in another, similar, instance. The different regulatory regimes of the different Emirates makes working in the region more complicated, as does the zoning. I think we need greater harmonization at both the micro and the macro levels.

RB, Aldar But we shouldn’t forget how fast things are changing. Abu Dhabi has already put in place a raft of legislation to help the property market, and more is to come. Yes, it would be great to see it come out as federal regulations, but realistically what will happen is that the best practice will become clear and will slowly be adopted across the board. But by necessity, because of the pace of development, the regulators are focusing on the priorities. Everyone talks about tenure but in Abu Dhabi tenure is very clear. For foreign nationals, it’s 99-year peppercorn lease. Most of central London is on that. We have a solution to the freehold issue that people accept.

IO, JLL I think we’d all agree that the work put in by Aldar and Nakheel has greatly benefited the market in these areas. The one criticism would be that the developers seem to be doing the regulators’ jobs for them. Your sales and purchase agreements are quite prescriptive – they act in a way that elsewhere would be covered by regulation.

RB, Aldar And it will be eventually. The government is busy and so we are taking on some responsibilities but doing it in such a way that it can be passed on to the right authority at the appropriate time.

KTQ, Nakheel Effectively we self-regulate. To give you an example of how that can help investors, over the last six months Nakheel has sold a lot of land in response to market demand. But we have made it a condition that people who buy land from Nakheel now are not allowed to on-sell it and they have to build on it within a timeframe specified by Nakheel. So we are limiting people’s ability to speculate and cause market disruption.

RB, Aldar We sell land based on developable acreage, but it’s sold under a very strict development agreement. The buyer gets a full master plan, development guidelines, that specify, among other things, timeframe. If they fail, we can take back the land. We allow them to trade the land, because we believe that’s only right and sensible, but the contract is live from the minute they purchase the land from us, so that property has to be developed within that timeframe, to our master plan, to our massing, to our building lines, to a design that we sign off.

And just to step back and look at the bigger regulatory environment of corporate governance, we now operate with the same transparency, corporate governance and compliance procedures that a FTSE 100 company would operate under. We are an international public company in all respects. If anything, we’re probably harder on ourselves because we carry an internal audit team as well.

Beyond Abu Dhabi and Dubai

Euromoney What about outside the UAE and the rest of the Mena region – where are the opportunities?

NM, CBRE Clearly there are numerous opportunities within the broader Mena region, many of which are being driven by key institutional investors from Abu Dhabi, Doha, Kuwait and Riyadh. There is a huge regional opportunity, spanning from the much reported developments in Morocco to the less obvious examples in such countries as Sudan and even Djibouti. But it’s fair to say that most of these are driven by the Gulf’s economies and not inward investment. Closer to home, Saudi Arabia will inevitably flex its huge economic muscle to support and fast track the completion of new city developments such as the Prince AbdulAziz Bin Mousaed Economic City.

TH, Pramerica We are looking at Cairo, although it’s a chaotic town, because there are areas being built up outside the centre where we would selectively invest. We are looking at a large transaction in Morocco, too. We have a Shariah fund with four very large Gulf-based investors as co-investors. With their help we are better able than the typical American or German investor to explore these kinds of opportunities. We are looking at Saudi Arabia as well, if we have the right partner and the right project. I just got an email this morning that one of our projects we were looking at has disappeared because the local partner is not giving up a share to us as we had hoped, so it is hard to make headway there. But I am confident we will, as besides money – which they don’t need that much – we bring know-how to the table.

Euromoney How important are those relationships with the key investors? Which transactions could you do without them and which could you not do?

TH, Pramerica The deal in Dubai we just closed, we did without their involvement. For Qatar, for Abu Dhabi and for Dubai we really wouldn’t need any of the synergy with our shareholders, but for Morocco and Egypt and Saudi, it’s important.

Euromoney And what assets or what sectors are you looking at, at the moment?

TH, Pramerica In Dubai we looked at office space in the business bay and financial area, and we thought there was a bit too much being built and too much in the pipeline. But then we looked at the Jebel Ali area and we saw that, yes, there is a dearth of modern office space there; there is a totally different tenant profile, more trading companies and more representatives of foreign companies and we went into office space there. In other countries, for example in Morocco, we do just pure land development, which is a bit more risky but obviously the returns are very high, and we just sell off land to other developers and maybe keep a residential part that we would do ourselves. In Sharjah, we’re looking at a residential play that has some nice features and so we look at different sectors depending on the market. In Qatar or in Abu Dhabi we would go from land development, as we were recently negotiating in Al Reem, to probably developing residential in certain areas for expats. And then in Turkey, which is not in the geographical area of today’s discussion, we really go into residential and retail in quite a big way.

Euromoney Thomas mentioned Saudi Arabia. What is the opportunity there?

WH, Kenmore It’s the largest market in the region, and it’s a huge opportunity for any major investor. It’s obviously not an easy one to unlock from a resourcing point of view and from a legal title perspective. We’ve taken a lot of advice from lawyers in Saudi who are saying: ‘Yes, the law is there and you can as a foreigner own 100%.’ But no one’s done it yet.

TH, Pramerica Strangely enough, despite the oil wealth, it’s a very under-served market and it has, I think, almost 30 million people. So we believe, yes, it’s almost a strategic market for the next couple of years, because it’s so under-served.

IO, JLL It’s a longer-term play, it’s more challenging, and you have to invest time before you can invest money. One way to succeed is to do joint ventures where you bring expertise in addition to capital.

KTQ, Nakheel When we recently did a roadshow to Saudi we found a significant number who wanted to work with Nakheel but on a swap basis – we buy there and they buy here – but also as partners to develop residential properties as well as hotels and whatever in Saudi Arabia. Because foreign investors still can’t directly invest in Saudi property, but can through a fund, one possibility is for Nakheel fund management to work on a joint venture basis with a GCC buyout fund, where we invest in both Saudi as well as Dubai and Bahrain, so they have a diversified portfolio.

Oversupply an issue?

Euromoney The issue of overbuilding always comes up in relation to Dubai and Abu Dhabi. What is the developers’ response?

RB, Aldar I’m glad you brought that up because I think the way Aldar and Nakheel are developing is music to investors’ ears. For example, in Abu Dhabi, the planning authority is focusing on keeping demand just ahead of the supply. That can only be done by controlling the amount of development in the various asset classes that get built in any period and those controls are in place now and for the next five years. That is good news for investors. And we are also ensuring that development occurs in the right order: for example, it was clear that when we started Yas Island, we needed 26 kilometres of 10-lane highway and that is being built within two years. So infrastructure is followed by development. Again this is good news for investors as well as the actual end users.

IO, JLL I think there is a big misconception about oversupply in the region. People talk about the delivery of 80 million square feet of commercial space in Dubai in particular, but the plain fact is that there is a real shortage of space that is attractive to big international companies and that addresses all the sustainability issues that are required now by multinationals. We have several instructions to acquire regional headquarters buildings for large multinationals and it’s not easy to find buildings that fully satisfy clients’ needs. And the sustainability issue cannot be underestimated. It’s no longer lip service, it’s an absolute requirement for the integrity of long-term real estate values.

RB, Aldar You’re probably aware that Abu Dhabi has just brought out a new building code that is bespoke to the climate here. We are a high user of energy and we’re a high user of water, so the regulations address those points first. But yes, we are having to build to these new standards and it is costing us to do so.

NM, CBRE Exactly the people to drive this market are Aldar and Nakheel, because they have the critical mass to be able to introduce new standards and lead the rest of the market.

KTQ, Nakheel At Nakheel we have got a formal commitment to sustainability and it affects performance measurement, pay, strategy. So, absolutely, we understand the issue and I agree that in this regard there is no oversupply issue in the region.

Financing availability

Euromoney What about the availability of financing for real estate in the region? Are the banks still lending despite the credit crunch?

IO, JLL Well, there have certainly been changes on the debt side. I think for the first time there is a financing constraint on the pace of development. In Abu Dhabi, the central bank has rightly reined in the banks and asked them to focus first on Abu Dhabi projects, because there are enormous requirements. And all the banks, Islamic and traditional, have been asked to become more stringent in their lending criteria. The international and regional banks definitely have a more selective approach to financing in the region. I think this is a positive sign for the market, because it reduces the risk of over-leverage.

WH, Kenmore There is definitely less foreign appetite. The way we get our debt is through partnership with local players who already have access to the local banking partners, and it’s the only way really at the moment to do it.

NM, CBRE The banks are forming these kinds of partnerships too. European banks in particular are forming alliances with Middle Eastern banks so that they can bring their own investor base to the region. So in a way we have benefited from the credit crunch affecting the rest of the world.

WH, Kenmore There is also still plenty of liquidity in the Islamic side of the market and that’s something that we’re definitely looking to tap into.

RB, Aldar We haven’t experienced any problems in the debt markets – both we and Nakheel have issued using various structures. We did a five-year $1 billion equivalent bond at very competitive rates and we see a very high level of confidence in the story here in Abu Dhabi.

TH, Pramerica It’s true that there is liquidity but it is not always easy to deal with the local institutions. We have been dealing with an Islamic bank but it’s been difficult for both sides: difficult for us because of their lack of sophistication, difficult for them dealing with international institutional requirements.

IO, JLL Absolutely. The deal we did with AIG that I mentioned before used Noor Islamic Bank [which has also recently signed a financing agreement with Aldar], and they’re a new bank. And, yes, I think there was a learning curve on both sides. But the deal was done, it was large and pioneering, and now everyone involved is looking for the next transaction.

FM, JLL On the international banks I would say that with the exception of Standard Chartered and HSBC, which are mainly doing residential really, the foreign banks are not in the business of lending to investors or to institutions to buy into commercial property. Yes they are here, trying to understand the market, but when they go back to their investment committees the answer is no. The legal framework is still not mature enough for banks to be happy to start lending based on the asset, not based on the borrower’s creditworthiness.

TH, Pramerica That’s what it looks like, yes.

FM, JLL And to be fair to them there is another problem. Deal sizes are getting bigger and bigger all the time. A Dh500 million [$136 million] deal was still digestible, but today we are coming across deals that are 1 billion-plus and that starts to cause problems with banks’ large exposure ratios. So they go to syndication but again the market is not yet mature enough for a bank to go and syndicate on such large scales on the open market. Things will change but it will take time.

NM, CBRE We’re talking about the banks but of course they are not the only source of funds. Some of the trading families that are very keen to be investors, particularly in some of the overseas markets, are now hungry to finance other people buying stock. So, for example, we are working with a buyer of a property in London who is using cash provided by a Bahraini family. They want to fund rather than buy themselves because they gain expertise and access to market information without taking the direct property risk. In this particular instance there was also some scepticism about where the London market was going. We, CBRE, happen to think it’s a great time to buy in London. That view is not universally shared!

Other investment vehicles

Euromoney What about indirect investment channels? Do first-time investors have to come in with $150 million and buy a building, or can they gain exposure in other ways?

RB, Aldar Yes they can. Obviously they can buy our stock! But also, we are creating vehicles that investors can come into and spread their risk across several asset classes – retail, hospitality or whatever. And therein there is a shareholder with the opportunity to go to the securities market in due course for a further benefit. That’s the way we’re dealing with the larger elements of our retail portfolio, our office portfolio, our hospitality portfolio and a degree of our residential portfolio that we release directly. And it’s very similar to what you’re using, Kar, in your infrastructure funds, creating investment trusts. The banks can come in by that route if they want to come in, because they will leverage those vehicles.

KTQ, Nakheel Yes. We are about to launch a development fund into which we will put some of our land in Port Rashid and then invite international investors to participate. Many investors do find the size of investment in the underlying market they have to make offputting; these vehicles will give them access to the high returns we can offer but in a more manageable size and form.

TH, Pramerica Yes, one of the deterrents to foreign funds investing, for example, in Dubai, is because the unit size is at a minimum $150 million to $250 million, which is just too large a deal for a toe-dipping exercise.

IO, JLL I think this increased sophistication of the capital markets and the structuring of real estate as investment vehicles are going to come increasingly to the forefront. It makes good sense to finance developments in this way, to finance infrastructure off balance sheet and to structure leases in a way that allows them to be sold on to the public markets. That is where we need to be and I think it’s going to be increasingly the case.

RB, Aldar Well the great thing about this model is that you can then hold on to a proportion of it for your existing shareholders, plus we’re generating fees managing the portfolio.

IO, JLL Exactly. You start with development funds, but you also establish income funds and you start creating your own pipeline and your own exits, which is quite exciting. The market hasn’t had the public market and fund exits previously, so we are moving from a development-led market to a private equity and institutional type of environment. Without the next step, we would be limited in terms of the investment environment. But now with the public markets coming into play, we will see a whole new wave of investment, a much broader platform for investment and a much more institutional platform for investment.

WH, Kenmore Yes, we are just in the process of launching a Bahrain-based regulated GCC property fund to give a transparent vehicle to institutional investors. We see ourselves very much as a conduit for western investors, especially those who are already investing with us in the UK, Europe, Scandinavia. We have seen a lot of Scandinavian money coming into this part of the world as well, albeit on much more of a sort of private equity basis, but there’s a definite appetite from international investors for more regulated vehicles, and obviously Reits will be a major part of that.

We’ve based ourselves very much in Dubai as a GCC platform but already have deals in Qatar, Abu Dhabi and are looking towards Saudi Arabia and Bahrain as well as Oman. This is a pan-GCC fund, using local and international money to allow cross-border investment between regional players and to create a conduit for international cash. We are aiming to create a balanced portfolio across all main property asset classes. In the office sector we’re looking now towards buying off-plan, enabling us to buy entire buildings, because we see a real two-tier market emerging between the stratified office buildings, particularly, and the larger-scale single assets, which have been too large for the foreign investors who’ve been here to buy historically. But now that the Pramericas and other large institutional players are coming into the market, there is the ability to buy an entire building and hold it within a much more institutional framework. And that is clearly the case for logistics parks as well, to provide a very large, very well-managed environment for the larger logistics players that are coming into the market. It’s primarily been a development-led market for us, we’ve been very opportunistic using our own balance sheet cash, but we are now looking to bring in much larger amounts of money. We did a roadshow recently round the region and suggested we were looking to raise $200 million. Given the feedback we received we are now looking to raise $500 million.

FM, JLL The market is waiting for real estate exposure to be accessible on the stock exchange. That will definitely create a lot of breadth and depth to the market. It will also allow people to go short and if we can develop a real estate index, then we move further towards the level of transparency investors want. And absolutely, Nakheel is pioneering there.

Bubble or no bubble?

Euromoney We’ve talked about the oversupply issue. Does that mean that you do not believe there is a property bubble?

NM, CBRE The world has proven that economic cycles are a fact. The causes of what we are seeing in the more mature markets may be different to previous downturns but the fact is that real estate is often affected as a consequence. On the upside, our region remains a net beneficiary but its ability to maintain investor confidence and manage increasing stocks will be a function of prudent control on supply, especially with the provision of good-quality and affordable residential units to ensure that the flow of commercial real estate can be populated.

IO, JLL I don’t think there is any evidence of a classic bubble and we’ve heard the compelling demographic arguments underpinning development here. What we are seeing, though, is a move to normal market cycles and a maturing of the market. So are we going to have ups and downs? Of course. Are we going to have corrections? Absolutely. But that doesn’t change the macroeconomics of the region. And if you put everything else aside, the pure wall of capital and the vision of the government together, those two things alone would point very favourably over the next three to five years.

FM, JLL I agree. We will see cycles and we will have corrections. One worry is that the market is not used to those cycles and might react negatively to excessive volatility.

RB, Aldar It happens in all markets. But the big picture is clear: power and wealth around the world is changing. And in this region, economies are being built and the growth potential is huge. I see no rationale for describing the situation we have now as a bubble.

KTQ, Nakheel When I talk to investors in London and elsewhere, and they express concern about the possibility of a bubble in Dubai, I can understand why they feel that way, because in most countries the population doesn’t grow much and so property prices move with the economic cycle. What’s different in Dubai is that there is a concerted effort to build infrastructure for 4 million people, and migration in Dubai has been consistently at 7% for the past 15 years. This consistent immigration of people into Dubai is driving economic growth, as well as the FDI and portfolio flows. And in many ways we are only at the beginning of sophistication of the market and the capital markets. The outlook over the longer term is very strong and beginning to take shape.