The Truth About Dubai Commercial Real Estate Nobody Tells You!

Is it too late to enter Dubai's real estate market game? Is there going to be a bubble? Is there a crash brewing? Absolutely not. However, there are certain micro sectors in Dubai's real estate market that are certainly more promising than the others. Today we're going to talk about one of the hottest opportunities in Dubai real estate, which is in commercial real estate. Welcome back to The Dubai Connect podcast. I'm your host, GG Benitez, a certified international property specialist and a licensed realtor in California as well as here in Dubai, connecting global real estate investors with prime opportunities. Welcome back to this exciting episode that so many of you have been asking me about. How can we get into the commercial real estate opportunities? Today on The Dubai Connect podcast, I am honored to have, and it's his first time on a podcast, so be nice, from Earth Group, which is a growing real estate developer known for its people first approach and lifestyle commercial and residential developments. Earth Group is continuing to expand its portfolio here with projects that are rooted in intention, craftsmanship, and forward-thinking urban living. Please help me welcome Josh, the sales consultant who I've had the pleasure to work with at Earth. Hi Josh. Hi G, how are you? I'm doing good. Been a busy day so far and it's getting busier because Dubai real estate never stops. It's 24/7, 365 days. So yes, pleasure to be here with you today. I'm so glad. Can you give a little bit of background about who you are and your experience in the market here? Sure. My name is Joshua Rodriguez, and I'm a property consultant and sales consultant. I work with Earth Group. I've worked with a couple of other developers in the past. Been in Dubai for three years. Prior to that, I've been in Canada for the longest time and worked in retail banking. So I have a little bit of investment experience from there. I moved to Dubai and been loving it here. Actually, what you just shared is why I believe we've done such a good job working together with my North American clients because I try to explain this to other Dubai brokers. We're a different bunch in America. We are very skeptical. We ask a lot of questions. With your banking finance background and being from Canada, I believe that you've done a really great job of helping share the data, the numbers, the trends. People from this region, Josh, they already know to just buy in Dubai, right? Correct. Especially if it's commercial, right? But people in America still need to be educated. When they come to us, it's already on their radar. But we need to share with them the data and the stats, and you do a very good job of that. I will say that commercial is a little bit newer in the game here because, correct me if I'm wrong, up until recently in order to even be able to participate in commercial opportunities as a foreign investor, didn't you have to have a sponsor? Yes. In the past, commercial was mostly owned by Emiratis, and it was always secondary. There was no commercial off plan. It's something that in the recent few months we're hearing about, and developers are jumping on to cash in on that success. But previously it was just Emirati owned. At the same time you had a few other investors, usually British or Indian, because they've been here for the longest time, more than four decades. Now, if you're thinking about ownership, yes, in certain situations you did need sponsorship. Any international investor never thought about investing in commercial. It was only residential. I will say especially to my Arab Americans that I'm from, they love participating in commercial in the United States and just were under the assumption that wasn't an opportunity. But now it is. Yes. I would actually like to ask you, how have you seen the commercial real estate market in Dubai evolve even since you've been here? Perfect. Very good question. With commercial off plan specifically, it's just been maybe over just under ten months since developers started launching this kind of opportunity for investors. Previously, a developer would build it and then eventually sell it to one single investor, usually an institutional investor, who would then segregate those into smaller fractions of units and sell them for a higher price. Now in the residential market, a lot of investors are a bit skeptical. As you mentioned earlier, it's only certain pockets and certain areas, not all kinds. That's why the commercial off plan sector is growing exponentially. If you look at some of the major developments that have launched in the last six to ten months in prime locations, I'm being very specific here. You cannot really launch a commercial off plan in a non-prime sector that has nothing to do with offices and then claim it's not sold. That doesn't work that way. So here at Earth Group, I'm talking Business Bay, the corporate heart of Dubai. It's been going very well, exponentially growing. You've been part of that success as well in HQ by Rove. We've done deals together. So HQ by Rove specifically was fully furnished and fully fitted. You had Cushman and Wakefield providing concierge and corporate services. The international investor immediately understood what we are offering, and on a 50/50 payment plan with a three to three and a half year construction time frame, that was the perfect opportunity for them to jump on to investing in commercial off plan. Actually, let me just say for someone watching this for the first time, what are the advantages of being in an off plan versus a ready-made or a resale? Excellent question. I love this because this is probably something I hear almost twice or three times a day in my meetings. Off plan, in my opinion, is the best thing. Why? You get to see those prices that the developer has for the very first time. Secondly, you're not making somebody else rich, someone else's investment rich. Now it also depends on appetite. If an investor wants immediate returns on investment and is not concerned about capital gains or needs to park his funds, then secondary is good, but it's cash intensive. You may have to even take out a mortgage immediately sometimes. But commercial off plan with zero percent interest, as long as you make the payments on time, you make sure that you get the first prices, which is the developer's launch prices. You get a payment plan, and this is when you have to pick the right developer and the right payment plan. To me, a 50/50 payment plan that we offer is the best thing. It's like you've paid half the money for your specific office project until almost two months before handover, and then you pay the other half. This is a very good thing to invest into because you're leveraging half the money there. You have the option to then sell it before the second fifty percent is due, and you're going to be making your capital appreciation. Not that I encourage anybody to get into Dubai right now for flipping. Correct. But may you share how that works? For sure. At Earth Group we make it even more easier. You mentioned fifty percent. The exit strategy, as we call it, is only at thirty percent. So by law in the SPA, thirty percent, they can offload it? They can offload it. Whether they sell it at the same price or a higher price, it depends on market conditions or the choice of the investor. So they can legally offload it. But do you recommend that being the time to do it? I do not. When do you recommend, if they're planning for maximum capital appreciation, in your expertise, when is the sweet spot to sell the project? I love this question and I will elaborate on it very well. Because we have a 50/50 payment plan, you've paid only half the money. But remember, the other half is only due on handover. Which means if you think about it, let's say three to six months before handover, almost seventy to eighty percent of the building has been constructed. Any business that wants to move in needs to take an upfront decision at least three to six months before they move from their current premises. So this is that sweet spot. When you've paid half the money and you are three to six months close to handover, this is when you list it on the market for very good capital gains. At that point, a business that wants to move in will want to make a decision, and that's when you sit at the table and negotiate for a good price. Thank you. I think that is such valuable information because I'll see brokers saying just buy it. Don't worry you can sell it at thirty percent. Sure, legally you can. But if you're wanting to make the most strategic decisions and maximize your wealth, it is important to share with investors when that sweet spot is and why that sweet spot is there. Are you comfortable or even allowed to share projections on capital appreciation before handover? If you're not, it's okay. No, I can tell you based on what the ROI expected from your second buyer. Okay, so this is how we talk capital gains. It's one of the ways how we talk. So today, if somebody is expecting twelve percent ROI, they take part in the pre-launch prices. This is when they onboard into the off plan journey. Come close to handover when you're selling the property, let's say you have a new investor who's comfortable with nine to ten percent ROI. This is the difference that you calculate when you sell. So if you took a property at four thousand per square foot or forty-five hundred, you can easily sell this at fifty-five hundred per square foot because your next investor will be getting around ten percent or let's say nine percent ROI, but they're comfortable with it. By the way, these numbers are already quite high. I was just going to ask you, what are some of the trends you're seeing with Grade A offices in Dubai, and how does that compare to some of the other commercial markets in top markets around the world? Sure. If you look at commercial Grade A in Dubai, for the most part, as long as the investor entered at the early price point, no one gets less than ten percent. Ten percent a year? Correct. ROI, correct? No property taxes. So no one's going to get less than ten percent ROI. Now, if you joined at a later stage or if you bought it at a ridiculous price and you're getting eight percent, even at that point it's still very good. I do real estate in California, so these numbers are incredible. Yes. And it's the opportunity to have a piece of what's happening. In fact, may I ask you, what is going on with businesses setting up their headquarters here in Dubai? What is drawing them, and do you have any stats on that? We do. We've taken some feasibility studies from certain sources from around the world and from local institutions as well. What's been shown is that the vacancy rate, first of all for offices in Grade A specifically, I'm being very specific, is ninety-seven percent, and it's inching closer towards ninety-eight percent. Point number two, it's because there are a lot of current problems, geopolitical tensions related to countries having trade wars with each other, wars, and also a lot of tax problems in certain European countries. These businesses want to move their headquarters or at least a satellite office, and they want to do it here in Dubai. The first place they go to is DIFC if it's a financial firm because it has its own separate set of common laws. But after that it's mainland, and it comes to business for the most part. And that's where Earth comes in. Exactly. That's why we have our office as well. We're building in Business Bay residences and commercial. We ourselves are invested there. We own our own office in Business Bay. It's always the corporate heart of Dubai. Business Bay, by the way, for those who don't know, is right next to Downtown Dubai. It's like a ten minute walk or something, right? Ten minute walk. You have direct views of the whole of Downtown Boulevard and the bridge. My office has a fantastic view. Beautiful views. I've been there. It's gorgeous. So, top location, which this is proven because Dubai is a very transparent real estate market. You can easily go on the portals to see where the most demand for Grade A offices is. It's in Business Bay, which is where you're bringing supply. But it is a limited supply. Very limited. Very limited. Yes. It's not easy to get this opportunity, and only a few developers would I even have faith in. I know you're not going to talk about the competition, but only a few would I have faith to say let's get into a commercial opportunity with this developer. Because in Dubai, unlike all these other commercial spaces around the world, the name of the developer matters just as much as the location. Because with the name of the developer comes the financial backing. Yes. The quality. Yes. The experience. Yes. And all these are going to matter when we go to sell or rent it out. How do we differentiate from other opportunities? With the developer, it's very important. We at Earth Group are backed by the Alshamsi family. For those who are within the UAE, you know how reputed the family is. We have our plots owned completely by us. We have escrow from day one, which means fifty percent of the construction money is already in that account from day one. So we do not rely on the client's money to build the building. Rather, clients partner with us on a pre-launch price to go ahead with us. When they get handover, they realize the capital gains. As a developer, we have the Rove brand with us, as you know. We are the only developer in Dubai where we have secured the rights from Rove Hotels to do their residences and their commercial. Downtown, Business Bay, Marina, the residences are sold out. HQ by Rove, the majority, was sold out on launch itself. You participated on this sale. So with us, we have a very good track record. With our upcoming projects as well, you're going to see some great things happen. Earth itself, what are some of the unique positioning that Earth is doing to differentiate itself from other developers that are doing commercial? Perfect. First, we're a boutique developer. We don't mass produce. You don't get messages from me every month about a new launch, which I'm sure you do get from so many other developers. Our design team actually puts their heart and soul into projects. They take over three to four months just to make sure that the designs we come up with are unique and cater to all the audiences that we sell to. We are not a one-dimensional company. We sell, I think, approximately if the data is right, more than one hundred thirty nationalities. So you cannot have a single design that caters to everyone. You have to make sure that the design that you're having helps find common ground amongst all of these nationalities so that the objections are less. So, actually, to that point then Josh, I'm curious, how have you seen a shift in the demographic of professionals that are looking for offices, and how are you meeting that need? Good question. In terms of offices, we've observed both investors and end users. Mostly it's investors who come in because it's off plan. A ready business will want to have something close to handover. That's a fact. Unless they're paying exorbitant rent somewhere where they think this is going to continue going upward, and then they decide to allocate a part of their company's budget towards the off plan. They just see it through and wait for it, like three years, three and a half years with some of the projects. They're okay with it, and it's fifty-fifty payment plan. On handover, as long as the company or the client's profile is right, they can even get the mortgage on it. I was just going to ask you, can they secure financing for that remaining amount before handover? Yes, commercial mortgages are possible. It has different conditions compared to the residential one. The interest rates are a bit different, the tenors might be a bit different. But the overall answer is yes. Actually, I have a source for that. If anyone wants it, I'll link it. I work with MortgageFinder. Yes, which is the top mortgage broker here. They can help with that. Okay. So thank you for explaining that. Are you seeing a different type of employee working here? I know you said there were one hundred twenty nationalities that you purchase from, but are you seeing young professionals, older, are you seeing people that are here to stay? Because I know a few years ago it was people that were coming to work for a year and then they were leaving. Are you seeing a shift? Yes. Tell me about it. People are coming for longer, ten years now. I think no one's coming to Dubai for less than ten years now. People are financially educated. You need to have long-term goals. Short-term is not the easy way. Because of this, there's also a lot of young Gen Z, millennial population that's moving in. It happened with COVID. With HQ by Rove, one of our design elements is that it mimics a Google office, LinkedIn campus. You love that? That's actually what was one of the selling features. Yeah. HQ by Rove was a great example for this. In the design you would have seen we have podcast rooms, a rubberized jogging track, lots of open spaces, the atrium with the coffee shop moving up and down. It was to attract the Gen Z and millennial crowd so that they are not bored at work. Because during COVID, the whole concept of hybrid work came after the work from home started. You never heard of these things before COVID, at least I did not. So people got the luxury feeling of being at home and they got accustomed to it. Now employees had to become competitive as to why they should come back to work. Then employees started asking, what kind of amenities do you have, and what are you offering? Money was not the sole discussion. It was more about, let's say, do you offer a gym membership, do you offer any extra wellness programs? I'm talking about the top sectors, not the average businesses. This is when talent started moving between different companies. Based on the feasibility studies which we got, as long as you can create a lifestyle and sort of a living environment within the office premises, you are going to have employer retention. At the same time, you're going to see a lot of bigger companies wanting to move there because the C-suite executives will also want to be there. Josh, this is such an important point because I'm seeing this in the residential as well after COVID. Even the ultra high net worth individuals, especially the ones that had more money, they weren't looking just about how do I make the most money on my investment, but what is that lifestyle. Because COVID really shook the entire world up. Now when I'm talking about residential, it is really about the amenities, the lifestyle, and the experience. You were the first one, I think you're the first branded commercial hospitality brand commercial, and I was so proud of that. Because I know that is a need in the segment. As to your point about employee retention and wanting these C-suite executives to come, what differentiates your project? Yes, you're already in Business Bay, the most in-demand area, but then how do we differentiate your project from someone else? These amenities, this lifestyle, these experiences, and the hospitality experience really were such a huge hook for my investors that are thinking long term and understanding what happened after COVID. Since that is already almost sold out, to my sadness, I mean, congratulations. Can I add something? You have to sell out. Thank you. Thank you. There we go. I will ask you then, what's next for Earth? Very good question. This is where it gets very interesting. Two thousand twenty-six marks a new era for Earth Group. We're going to continue the momentum. We're going to be launching a new commercial off plan again. But this time it's going to be something very different from the Rove identity. We're going to have our own portfolio of branded projects. It's coming under the series called House of Tenet. It means house of principle. Correct. And it goes back to the word. It means legacy or heritage. I think it sticks more to legacy. It means that, and it's the legacy of the Alshamsi family. The one thing about them is that they're very consistent, very disciplined. This principle is something that they want to uphold. They want to start this with the commercial, House of Tenet, house of principle. Wow. May you tell me where this is going to be, or are you allowed to share? Business Bay. Business Bay? It's Business Bay, and we're launching it very soon. You know myself, as you've known from the company, we do two to three projects. We don't really give out all the information. Even myself, I wouldn't have access to all of it. We like to keep it very confidential for our investors. What we do is we get the right information at the right time. But I can discuss in general because we definitely know where the location is. As I said, it's Business Bay. What about pricing, any pricing info? Not now. Not now. You're going to have to reach out to me. You're going to wait for the launch, and believe me, you're going to love it when you get it. Perfect. So, in terms of the project itself, we're doing something which is shell and core this time. Okay. So the opposite of HQ by Rove. Okay. Why we're doing this is because this project is targeted at the one percent. The few who move the many. And that's the caption as well. For the few that move the money, so their decisions matter. Correct. So this means it's for the chairman, the CEO, the top C-suite executives. It's designed with bigger sizes. It's designed as a low to mid-rise, around twenty floors. And the kind of clientele who will be wanting to either invest or eventually, the end users as well, people like these have their own branding and design ideas. So we leave it shell and core for them. When you looked at HQ by Rove, because it was smaller sizes, I think the majority of the sales were in the seven hundred to four hundred square feet range. People like a total solution offered to them. Listen, I'm just moving in. I need the best fit-outs. I want you to do it. I don't want the headache. So it was peace of mind that we sold them. But here, because it's bigger sizes, because it's companies looking to probably move their headquarters or their bigger offices there where their one percent work out of there, we leave it to them to decide how they want to do it. Talk about companies bringing their headquarters here. I want to say there was a stat about seventy-five percent of Fortune five hundred companies are setting up their MENA headquarters in Dubai. Correct. And there is not enough commercial opportunities. And then you're now targeting an even more tighter segment. When there's scarcity in that tighter segment, it means greater value for an investor. Exactly. These companies who are moving in here, I've discussed with so many commercial agencies. The one thing that we got to know is that the current stock of Grade A, what I call the old spec Grade A, doesn't actually meet the requirements. Why? Because all of the Grade A buildings in Business Bay are more than ten plus years old. So you have button operated elevators, lesser parking, entry and exit are a nightmare at certain points of time. You know it. You've come to our area there. Now what's happening is the companies that are moving here are coming from London, moving from Switzerland, Germany, could be from Toronto, from New York, from most of the western places. They need buildings which are very specific that already exist in their cities. Now the developers are all going to offer this. That's why the new launches, and by twenty twenty-eight, which will be our handover of House of Tenet, will be one of the fastest handovers in Business Bay of the new spec Grade A building. Yes. And it'll create a two-tier office system. The old spec and the new spec. The new spec will be far ahead than the old spec. I'm talking access controlled elevators, privacy and security more than required, car parking more than required, elevators, easy entry exit. Because the newer developments in Business Bay, at least ours, are towards Al Khaleej. The entry and exit is less than ten minutes. In the worst traffic scenario, the best case it is two minutes. So this is why you're going to see a lot of the existing businesses, and the ones you said who are moving in, they will want these buildings. Believe me, the rent disparity between the old spec and the new spec will not be too much. So think about it. Today you have an office, let's say in Business Bay. I don't want to name any specific tower. Let's say you're going to pay four hundred fifty dirhams right now per square foot, which is a low rent to be honest with you. Now let's say the new spec Grade A building. I'm comparing today's prices itself. Let's say they also charge four hundred fifty dirhams per square foot, but are offering one hundred times more amenities, far better luxury, convenience, and a more prestigious and premium address. Where would you move your business? Obviously. Exactly. Exactly. Let's say it was ten percent more rent as well. Your business is doing well. You have the high net worth individual clients coming in. You have some of the best employees. You want to retain them. You don't mind paying the extra ten percent to move to the new spec Grade A buildings. That's why, wait for end of twenty twenty-eight. Some of the best handovers of Grade A like actual Grade A spec offices will happen. Then you will see the market move towards them. That's amazing. Yes. And you're still going to be focused on people-centric, experience-centric, just at a more luxurious level. I mean, the last one had spa and pool. What did I mean? It was just a fun activities place. I don't like calling it amenities. It was more of activities because it's targeting the much younger crowd there. That's important to note because you're seeing the younger people that are coming post-college with their families. They're setting up here and they want to stay here. Dubai's GDP growth, they just had to actually revise it so it's going to even be higher than what they had originally projected. You have the favorable tax profile for corporations. There is a corporate tax, but it's still quite competitive globally. Once you meet a certain threshold, you have this talent pool to pull from in this region that you have access to when you set up a headquarter here. And it's Dubai. Yes, it's the best place to be right now. It's the best place to be right now. Yes. I have to leave in a couple of days and I'm just so sad to even leave. I brought one of my girlfriends here. She's a broker in La Jolla, which is the most expensive, wealthy neighborhood in all of the United States of America. She said, "I thought that was the most amazing place. Dubai has blown her mind away." We're talking about four million people right now, growing at two hundred thousand residents a year. For your sector, there is such a need for commercial space for investors, for these businesses. Earth is really carving a quite great positive brand name here in this market. Yes. Absolutely. To add on to everything that you've said, you're the real estate expert here as well. You know, not all plots have the designation for commercial. It's only select few. So that's why you will observe, be it Business Bay or Downtown, there are no more plots. Business Bay, you have very few plots that have a designation for commercial. It takes an extra special expertise from the developer and a risk appetite as well to move forward. Only a developer that has great financial backing or is very financially stable can launch commercial. With residential, you have the conventional buyers. People think always, if not anything, I can live there. Correct. So that's why commercial, good point. Correct. Commercial specifically targets a niche audience where they either look to diversify. They understand numbers, which is your audience. That's why you'll observe North American buyers are not emotional buyers. They don't make impulse decisions. They like facts, figures, and data. All of that points towards commercial off plan. Absolutely. And that's what I'm saying. For those who are smart about diversification, get in now because there are limited plots and limited opportunity. We don't know for how long this is even going to be an offering. Correct. There's only so much space in Business Bay. It's very finite for commercial, especially. It's very finite. Very finite. Yes. So I thank you. I thank you not only for coming on the podcast and sharing with our audience the opportunity in commercial real estate, but also that you've been a wonderful partner for me. You've helped me share the real data, the real hard numbers, so that my clients can understand the value that Earth has been providing. We will continue to grow that together. Yes. And if you've seen, we always provide the conservative numbers, and on those conservative numbers, your investors were convinced. I would love to give all these skyrocketing numbers, but they may not happen. But if it happens, even better, icing on the cake. We think the same way. I like to underpromise and over deliver. What I'm trying to develop, which is you're very relationship based as I am, is that this is a whole building and managing your portfolio in the UAE. It's not just let me get you a project and I'm out. It's I want to help you manage and grow it. Exactly. You've seen me introduced this way as well. I never, whenever I have a client meeting, I never say you're a broker. I never say you're a property advisor. I say you're a portfolio manager. Portfolio manager. Really, and I don't know if that's for all nationalities, but for me dealing with Americans that are on the other side of the world, it's what I have to be. Correct. Right. Correct. You have helped me always be successful. Always here to. So I'm excited to hear more about the next launch. Yes. I thank you for coming on. I'm sure we'll be doing more podcasts as this market segment continues to evolve. So thank you, Josh. The pleasure is always mine. Thank you so much for having me. Definitely. If you have any questions about this next launch, make sure to send me a message via WhatsApp, which I will link in my description. I hope that you were able to gather a little bit more information about why commercial is one of those micro segments right here in Dubai in the UAE where you can grow your wealth confidently. I hope with that, happy investing. Make sure to like, subscribe, and follow, and stay tuned for the next episode of The Dubai Connect podcast.