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Investors in Gulf countries remain cautious regarding new real estate projects in the region in spite of improving macro-economic conditions, according to a report.
Investors in Gulf Cooperation Council (GCC) countries are selecting development opportunities carefully, taking into account a developer's experience and capabilities, according to a study by leading strategy consultancy Roland Berger Strategy Consultants.
"Successfully dealing with increasingly demanding clients, reacting to stronger competitive pressure from skilled international players and getting access to land banks will determine the winners and losers," said Tobias Plate, Partner at Roland Berger Strategy Consultants.
Though real estate development opportunities are available throughout the region, a selective development approach based on thorough assessments will be crucial to avoid repeating the negative experiences of the past crisis where purely opportunistic development was paramount, the study said.
"Overall, the competitive landscape is intensifying, forcing GCC real estate developers to rethink their strategic positioning," said Fabian Engels, Principal at Roland Berger Strategy Consultants Middle East.
Increasingly demanding clients are expecting that total completion time, cost and especially quality to be on par with international standards.
Taking the 'if you can't beat 'em, join 'em' approach, local companies are already partnering with international players.
Land bank is controlled by only a few institutions in GCC countries.
As a result, land prices are very high, accounting for up to 60 per cent of total development costs, in turn putting pressure on proper development planning and execution in order not to jeopardise profits, the study found.
"Unfortunately, project experience has taught us that existing strategies often do not cover all relevant aspects," Engels said.
Therefore, the company's overall strategic targets must be broken down into actionable objectives on the project portfolio and individual project level, the study suggested.
Finally, defining the right depth and breadth of the value chain and establishing an effective and transparent organisation staffed with high-caliber employees will yield long-term success, the study says.
Roland Berger Strategy Consultants is a leading strategy consultancy with 2,700 employees working in 51 offices in 36 countries.
