Sheikh Youssef Al Shelash Talks Changing Trends in the Middle East
Oct 20, 2022
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The rental market in Saudi Arabia is attractive to investors because of its high yields. In the wake of the disruption of the COVID-19 pandemic, rising demand for rental units and the lack of adequate supply has led to massive rent increases. However, that hasn’t discouraged people from being interested in apartments right now. “I have seen a shift from stand-alone houses to apartments because real estate is becoming more expensive,” says Sheikh Yousef Al Shelash. He’s the chairman of the Dar Al Arkan real estate development company, headquartered in Saudi Arabia. “People are moving from villas to apartments.”
Fifteen years ago, you wouldn't see a Saudi national living in an apartment because it just wasn’t done, but now Al Shelash says there’s “a big trend of movement into living in apartments, which has become an acceptable way of living.” The cost of living plays an essential role in this shift in living situations. “Utilities are becoming more expensive, and the utility bills of a villa are different from an apartment,” explains Yousef Al Shelash. “And markets have become more open to the external world. It is also more open to the mixing of men and women, and many restrictions have been lifted.” There are fewer fences around homes. “Demolishing these walls and adding more landscaping is adding a different flair to the city, and you can see it is more alive,” says Al Shelash. “The main cities of Saudi are looking more [vivacious], so that is one trend occurring in the middle sector of the economy.”
Using real estate as a preserver of wealth, instead of putting savings in the stock market or a pension plan, is another significant contemporary trend in the Middle East. It’s become a much more popular way to pass wealth on to future generations because it’s a physical, tangible resource for the preservation of wealth. The pandemic gave it a boost in popularity since lower interest rates meant more people could purchase property.
Yousef Al Shelash is also the chairman of Saudi Home Loans, which has helped usher in the home mortgage industry in the Middle East. “After 15 years, there is a fully developed mortgage market in Saudi, similar to the mortgage system in the United States,” he says. “Today, there are mortgage lenders, the banks, and the nonbanks, and also refinancing companies, who are also buying mortgages to continue providing liquidity to the market — but this was not there when SHL started. The company needed to evolve with regulation, and they needed to convince so many banking institutions to provide funding for these mortgages.”
Co-Branding Is a Top Trend in Real Estate
In recent years, co-branding has become another major trend in luxury living. “Co-branding is reaching cars, yachts, planes, and now real estate,” says Al Shelash. “Co-branding with luxury brands is a big trend in real estate and hospitality.” Dar Al Arkan enjoys partnerships with a few of the most iconic design houses in the world including Missoni, Pagani, Elie Saab, and Versace.
What is driving the trend? According to Yousef Al Shelash, “The reason it is a big trend is because there are now more and more people looking to buy a limited number of units. These are also limited for a very long time. So there is a big trend around the globe today of people who would like to buy units with limited numbers, just like they're buying watches, or jewelry, they're buying everything which is a limited edition. So the co-branded real estate is the limited edition of real estate. That is why it is a major trend these days in real estate.”
Ziad ElChaar, the chief executive officer at Quara Holdings, stated, “A high-luxury lifestyle brand should possess a foothold in interiors because the interior design lines of furniture and home accessories is embedded in the DNA of that brand. The clear recipe of failure in a co-branded project is to work with a brand that has no notion and no presence in designing home furnishings.”
According to ElChaar, “All real estate buyers have two main targets, a residence and a return on investment. Sometimes it’s just an investment and sometimes it's both. A real estate project should always present a high return on investment over time in terms of appreciation in value and rental returns. Same goes with co-branded projects; the return on investment is always sustained, as these projects are low in supply and they present the limited editions of real estate. These co-branded real estate projects present a potential high return on investment and uniquely high return on ego, the ROE [return on equity]. This deep desire to being able to own the unique, the one of one, the limited editions, satisfy our egos for ownership.”
What are the benefits? “Real estate developers benefit from co-branding by uplifting their brands to a highly desirable lifestyle brand, synonymous of luxury and elegance. Attracting high-net-worth individuals who are loyal clients of lifestyle brands,” stated ElChaar. “On the financial side, the benefits are not high for a particular project as the investment in co-branding is a franchise fee, the upgrading of the projects usually eats up most of the 15% to 20% price premium that co-branded project demands, but then again, the benefits outweigh the disadvantages.”
Sheikh Yousef Al Shelash on the Role That Tourism Plays in the Region
Unprecedented policy changes in the Middle East are a catalyst for reshaping the real estate market. “Property conversions, design changes, zoning variances, and other creative solutions will be among the steps that real estate investors and tenants take to position themselves for the future, not just to survive, but to thrive,” stated a report from JLL, a commercial real estate consulting firm.
It used to take at least three months to get a visa to the United Arab Emirates, but currently, “70 nationalities can get visas on arrival,” says Al Shelash. “Technically, you don't need a visa. You just show up and get the stamp on your passport.” Creating comfortable living spaces close to iconic tourist attractions is another big trend in the region. “Historically, the only tourism that Saudi Arabia had was religious tourism, people who want to come on pilgrimage to Saudi,” says Yousef Al Shelash. “The artifacts areas in the middle of the desserts [are being built up]. A lot of resorts along the Red Sea are being constructed. This is something also totally new in Saudi, and it shows how much the country has changed.”