Communities

Communities are an excellent way for developers to create value. They build infrastructure on large plots of land and subdivide it into individual building or villa plots. A well-developed common infrastructure enhances the value of real estate on these plots, making them more attractive to potential buyers and investors.

There are communities where a master developer has built a few buildings. Then they sold the rest of the plots to other developers. Dubai Marina is such a case. Emaar has built the roads, drainage, power and water connections and the first six buildings. If you have been in Dubai as long as me, you might remember when Dubai Marina was the area with those buildings that looked like they had orange presses on top. Then Emaar sold most of the other plots to developers. Each developed their own buildings. This is why Dubai Marina consists of many different buildings of different style and quality. There aren’t many common facilities in Dubai Marina, except for the Marina itself. The man-made water body in the middle of the development is the main value enhancing feature of the development. It is surrounded by a walkable area with restaurants next to the water.

Jumeirah Beach Residence was different. Dubai Properties built the whole development themselves. This is why all buildings look the same. There are also more common facilities, such as swimming pools, gyms, landscaped green spaces, kids’ play areas and dog parks.

There are significant differences in the attractiveness of different communities in Dubai. The first ones I was impressed with were the Green Community and the Greens. When I first saw them around 2003/04, they were really far out there. Most of my friends were living in Bur Dubai at the time. You had to drive quite far through the desert to reach Green Community. But the place was really nice. Low rise buildings and villas with lots of green spaces and common facilities including large community swimming pools. The Greens were a bit closer to Dubai, but still quite far at the time. The community was also very nice, also with green areas and swimming pools in the inner court area between the buildings. Just a few years later, the Greens were an established part of New Dubai. Even Green Community was not anymore that far out. In around 2008/09 a friend of mine bought a place in Motor City. Again, it felt very far out. Again just a few years later it became a very popular place. At the time I was surprised to see that rents were similar to Dubai Marina when it was far from the sea. However, when I visited the area, the apartments were nice and spacious. The green spaces and jogging tracks with trees made me want to live there. One of the best recent examples of a successful community is Dubai Hills. In spite of not being in a prime location, rental rates per square foot are 15% - 20% higher than in Dubai Marina and JBR. This shows the value people ascribe to the quality of living, brought about by the quality of the parks, common areas and facilities. Dubai Hills Mall is certainly also a contributing factor.

Great communities provide convenience

Green spaces and water bodies are great features enhancing the value of a community. But what is even more important is convenience. Great communities do a great job in meeting all daily needs of their residents.

Great communities have access to:

• Good schools and nurseries

• Entertainment options such as cinema, theater, organized events, etc.

• Grocery stores

• Nice restaurants and coffee shops

• Kids’ play areas

• Dog parks

• Indoor and outdoor sports areas, such as cycling and running tracks, tennis, paddle & basketball courts, golf courses, skateboard park, etc.

While the first three can be a short drive away, the others should be in walking distance.

Some of the recently launched communities also have lagoons, even those far from the sea. Some of them even with swimmable water.

Retail is a big differentiator

The way retail is managed makes a big difference. In most nice villa and townhouse communities, such as Springs/Meadows/Lakes, Dubai Hills or Emaar South, the retail is retained and managed by the developer of the community. If the developer is good at managing retail, they are able to ensure the right shops and restaurants are moving in. It is important to have certain anchor tenants, such as a successful grocery store, a cinema, a few banks and good restaurants. Anchor tenants often pay low rent. But they create footfall. This then allows the developer to rent out the remaining spaces to more specialised high-end stores at higher rates. Overall, this creates an attractive blend of retail tenants, allowing the residents to do most their shopping and essential services within the community.

In areas like Dubai Marina or Business Bay, each building is developed by individual developers. Some keep the retail and some sell it. However, it is not comprehensively managed in the community. Nobody wants to sacrifice rental income to attract anchor tenants and benefit their neighbors. Residents have a less optimal retail experience. They have to drive to do their shopping, eat out and get essential services.

Some developers, including Meraas, Emaar in recent years and a few more, also retain and manage the retail on the ground floor of buildings and sometimes build small malls within the development - like on Bluewaters Island. Where this is supplemented by parks, green open spaces and waterbodies, a similar community feeling can be achieved.

Of course, including parks, waterbodies and modern high-end facilities is costly for the developer. While the construction of high-end facilities and features can cost a lot, it also requires a lot of land. I.e. communities with a lot of green spaces, water features and common facilities have a lot less sellable built-up area. Some of those costs can be recovered from higher profits on retail rent. However, most of it will reflect in higher per square foot sale prices of the units.

Easier to buy and sell

Another benefit of communities developed by a single developer is that the units are all similar. Large pools of similar properties create a market. This makes it easier to buy and sell units. When someone wants to sell a unit in an individual building, it is difficult for buyers to compare it to other properties in the market. Each building has specific advantages and disadvantages. But more importantly, it is difficult the assess the quality of construction of each building they look at or identify any hidden issues. When buying a unit in a large community, there are more transactions of similar units and more people know about the community. This means more information is available to base the purchase decision on.

So what does this now mean?

In the end we want to make money. How does this information help us make money?

Some agents will tell you that you should only invest into communities. Some even go further and claim that the only way you can consistently make money is by investing in communities of a specific developer. This is of course total non-sense. You can make money in many ways with many developers and many products.

But the lesson today is that the value of well managed communities has to be considered. Three weeks ago, I explained why City Walk will always sell at a premium to buildings of similar quality in Jumeirah Garden City, which is just next door. City Walk is a well-managed community with great common facilities.

The quality of the community gives value over and above factors like location, quality of construction & fit-out and view.

So if you find a property investment opportunity in a great community with a developer who has a track record for building successful communities, this is worth more than a unit in a standalone building or in a development by a developer that did not build successful communities in the past.

However, you should also look deeper and assess the amount of green and open spaces, the water features and sports facilities etc. to ensure the community will really deliver the value promised.

Finally, you need to assess how much of this value is already priced in. A price increase is justified if the property, when delivered, is comparable to units that sell at a higher price than what you pay. If you already pay a price similar to what comparable finished units cost, where is the potential for appreciation?

Below is a list of upcoming community projects:

Recent community developments include:

Also, let’s not forget the upcoming projects in other upcoming areas.

Good projects always sell out quickly. In case you are interested in buying a property in a well-managed community or any of the other areas, please let us put you in touch with a specialist who can secure you the unit best fitting your requirements.

As always, you will not get unwanted calls from pushy agents. The agents we work with are independent from us, go through a stringent continuous selection process and will only contact you in the way and at the time you choose.

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Feel free to share your feedback on this article or on topics you would like us to cover by replying to this email.

In case you have missed any of our previous issues:

Dubai Islands - One of the hottest seafront opportunities

Dubai South - Dubai strongest growth engine

Villas and Townhouses - Land is getting scarce

Financing Property in the UAE - Smart financing can optimize your return

Jumeirah Garden City - The latest project in Dubai you haven’t heard of

Nad Al Sheba North - Luxury in harmony with wildlife

If you know someone who would benefit from our content, please share with them.

Until then, keep it up.

Stay tuned,

M&M

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