The majority of upcoming apartment supply in Dubai (79 per cent) is architecturally diverse while ready units are equally split between diverse and homogenous. In the villa space, the bulk of the supply in both ready and upcoming units are in the homogenous category, according to a new report by GCP-Reidin.
With more upcoming apartment supply set to be unique in design, this indicates that the build out period will be longer, allaying some of the supply pipeline concerns. Given that investors value architectural diversity, developers are responding in the apartment space by creating more individualised developments.
"Architectural homogeneity or diversity is not a function of price levels but is an outcome of rapid urbanisation. What real estate markets globally show is that over time where there is iconoclasm in buildings, price appreciation is higher. This is a trend that we have witnessed in Dubai as well across the board from high-income property communities such as Emirates Hills and the Palm Jumeirah all the way towards International City," says Sameer Lakhani, managing director, Global Capital Partners.
For instance, an intra-community analysis of homogenous and diverse communities shows that Emirates Hills (diverse) outperformed Al Barari (homogenous) by 25 per cent since 2012. Similarly, a comparison between Dubai Marina (diverse) and JBR (homogenous) reveals a similar dynamic where the diverse community outperforms.
Similarly, an inter-community price performance analysis of an architecturally diverse building (Azure Residences) within a homogenous community (Palm Jumeirah) reveals that the former had greater capital appreciation than the rest of the apartments, which mostly consist of large homogenous apartments blocks (i.e Golden Mile and Shoreline), the GCP-Reidin report adds.
"Our research indicates that heterogeneous studio and one-bedroom apartments located in Dubai Marina are achieving a slightly higher AED rate per sq ft than homogenous units in JBR. The sales price per sq ft for apartments in a homogenous building in JBR are as follows; a studio at Dh1,495/sq ft, a 1-bed at Dh1,236/sq ft and a 2-bedroom apartment at Dh1,440/sq ft as opposed to an apartment located in a heterogenous building located within Dubai Marina which is around Dh1,522/sq ft for a studio, Dh1,409 for a 1-bedroom and Dh1,248/sq ft for a 2-bedroom," observes Cheryl McAdam, director, residential valuations at ValuStrat.
When it comes to net yields for mid-quality apartments in JBR (homogenous), ValuStrat finds the return to be around 4.4 per cent as opposed to Dubai Marina (heterogenous) at 4.7 per cent.
Both investors and end-users are starting to prefer architecturally diverse communities. "We know this to be intuitively true as well because communities such as Dubai Marina at the higher end and Jumeirah Village Circle at the mid end have dominated transactions," explains Lakhani.
"Most developers see gated villa homogenous communities as an important niche market in a competitive environment: enclaves can attract end users/investors searching for a sense of status, security, lifestyle and community living. An investor, driven by rental returns and capital growth, may elect to purchase in an architecturally diverse freestanding project by a private developer, with not such a high build specification as opposed to a master-planned gated community as it is not so much the lifestyle factor motivating his decision but the return on investment," adds McAdam.
Meanwhile, homogeneity in the villa space is a function of achieving the maximum cost efficiency within the concept of gated communities.
"There are two benefits to developers in homogenous communities: lower construction and management costs and a more attractive and unified environment. It also helps to create efficiencies in construction/management, therefore allowing lower service charges," reckons Craig Plumb, head of Mena research at JLL.
In the horizontal space, the majority of development has been done by the major developers, which is why there has been greater levels of homogeneous developments. "This becomes a function of providing gated communities at quick handover dates so as to perpetuate rapid urbanisation. This phase of growth has been seen in every real estate market and Dubai is no different," continues Lakhani.
Developers tend to opt for a more uniform villa design which supports a more compact/economical use of the plot, saving on cost/professional design fees. Different styles may require larger plot areas and not be as economical.
"What is happening is that Dubai is entering a phase where architectural diversity is becoming more common [which therefore implies a longer gestation to completion and reduced supply pipeline]. There will, however, be communities that will continue to be more homogenous and these will proliferate depending on demand-supply levels," adds Lakhani.
Upcoming apartment supply which is architecturally homogenous can be seen in Dubai Silicon Oasis and Al Furjan.