The Gulf Co-operation Council (GCC) is increasingly finding that the ESG (environment, social and governance) principles drive new demand in the real estate sector, particularly in the office segment, according to Kamco, Kuwait-based non-banking financial powerhouse.
"We do expect an increasing number of occupiers to prefer sustainable built environments, as more companies start incorporating ESG strategies into their operations," Kamco said in its latest report.
The office space operators would continue to optimise their office space portfolios between traditional and flexible spaces, while occupiers are expected to negotiate hard with operators, and look for higher quality spaces, it said.
Technology, media and telecom (TMT) and healthcare/pharma related sectors are likely to witness growth in their contribution towards new office space demand, due to the significance and support towards these sectors in a post-Covid environment, the report said.
Kamco Invest said the government support and funding are likely to enable SMEs (small and medium enterprises) and startups in technology and fintech to look at office space requirements that include ‘phygital’ experiences.
In its previous 'GCC Real Estate Update: Cyclical or Structural Conundrum – December 2020”, Kamco had said data centres would remain an alternative source of office space demand from repurposed office spaces.
"The ongoing transformation of new space requirements, and tenants seeking upgrades to their existing spaces would keep the market tenant friendly in our view," it said.
Highlighting that office space rents witnessed mixed trends across the GCC, but still remain extremely sensitive to incoming supply; it said markets such as Doha, and Bahrain witnessed high single-digit percentage declines year-on-year in the first half of 2021 due to existing oversupply in the market.
In the industrial segment, growth in demand from themes such as E-commerce and 3PL logistics witnessed in 2020 should normalise, and focus should return towards more conventional sources of demand such as construction and industrial materials as well as white goods.
"Competition amongst spaces could intensify, and will potentially lead to downward pressure on rents, as landlords look to preserve market share. Separately, the transformation of retail mall spaces deriving a higher footprint from entertainment and F&B (food and beverage) tenants is expected continue in 2021," the report said.
Leasing is likely to turn into a two-tiered market, as secondary and lower quality assets that are not refurbished adequately would face significant challenges in keeping occupancy rates and rents stable, Kamco said.
Finding that retail rents in the GCC continued to correct between 4%-12% year-on-year across various markets at the end of H1-2021, as per consultant data; Kamco said the trend sustained despite achieving higher Covid-19 vaccination rates, leading to a recovery in fundamental drivers such as footfalls, POS transactions etc.
The retailers persisted with negotiations over restructuring tenancy deals, bargaining for additional rent-free periods, it said, adding the ongoing theme of changing consumer spending habits, combined with retailers driving expansion plans via omnichannel strategies remained.
"We do expect an increasing number of occupiers to prefer sustainable built environments, as more companies start incorporating ESG strategies into their operations," Kamco said in its latest report.
The office space operators would continue to optimise their office space portfolios between traditional and flexible spaces, while occupiers are expected to negotiate hard with operators, and look for higher quality spaces, it said.
Technology, media and telecom (TMT) and healthcare/pharma related sectors are likely to witness growth in their contribution towards new office space demand, due to the significance and support towards these sectors in a post-Covid environment, the report said.
Kamco Invest said the government support and funding are likely to enable SMEs (small and medium enterprises) and startups in technology and fintech to look at office space requirements that include ‘phygital’ experiences.
In its previous 'GCC Real Estate Update: Cyclical or Structural Conundrum – December 2020”, Kamco had said data centres would remain an alternative source of office space demand from repurposed office spaces.
"The ongoing transformation of new space requirements, and tenants seeking upgrades to their existing spaces would keep the market tenant friendly in our view," it said.
Highlighting that office space rents witnessed mixed trends across the GCC, but still remain extremely sensitive to incoming supply; it said markets such as Doha, and Bahrain witnessed high single-digit percentage declines year-on-year in the first half of 2021 due to existing oversupply in the market.
In the industrial segment, growth in demand from themes such as E-commerce and 3PL logistics witnessed in 2020 should normalise, and focus should return towards more conventional sources of demand such as construction and industrial materials as well as white goods.
"Competition amongst spaces could intensify, and will potentially lead to downward pressure on rents, as landlords look to preserve market share. Separately, the transformation of retail mall spaces deriving a higher footprint from entertainment and F&B (food and beverage) tenants is expected continue in 2021," the report said.
Leasing is likely to turn into a two-tiered market, as secondary and lower quality assets that are not refurbished adequately would face significant challenges in keeping occupancy rates and rents stable, Kamco said.
Finding that retail rents in the GCC continued to correct between 4%-12% year-on-year across various markets at the end of H1-2021, as per consultant data; Kamco said the trend sustained despite achieving higher Covid-19 vaccination rates, leading to a recovery in fundamental drivers such as footfalls, POS transactions etc.
The retailers persisted with negotiations over restructuring tenancy deals, bargaining for additional rent-free periods, it said, adding the ongoing theme of changing consumer spending habits, combined with retailers driving expansion plans via omnichannel strategies remained.