RESEARCH THE HUB REPORT HOW DOES DUBAI FARE AGAINST OTHER GLOBAL HUBS?

Transcription

1 THE HUB REPORT HOW DOES DUBAI FARE AGAINST OTHER GLOBAL HUBS?

2 THE HUB REPORT 0 KEY FINDINGS In recent years, has further cemented its position as a regional hub. The growth of logistics, tourism, financial & business services, as well as the emirate s image as a luxury lifestyle destination, have all been central to this so much so that others in the region are emulating some of the elements that make it a success. But how does and indeed the UAE as a whole stack up against other global hubs? Between 00 and 0, manufacturing activity in the UAE increased at an annual average rate of.%, according to World Bank data. On the same basis, while (6.%) outperformed, (-%), Australia (-0.%) and the UK (-0.%) did less well. Even more significantly, the UAE saw cumulative growth in exports of almost % between 00 and 0 around twice as fast as Germany (%) and (6%). Undoubtedly, the UAE s strong export performance has been helped by the excellent quality of its transport infrastructure the World Economic Forum ranked it st globally in its 0- report, ahead of (nd), (rd) and Germany (th). All else equal, this suggests that the federation s prospects as a regional logistics hub are secure in the short to medium-term. Partly because of this, as well as s continued success in leveraging its strategic position between East and West, tenant demand for quality industrial & logistics property in the UAE has been outpacing supply in recent years. As a result, rents have been moving in an upward direction. Turning to the financial & business services sector, the rise of International Financial Centre (DIFC) one of free zones in the UAE over the past decade has helped to extend the emirate s lead as a hub. Looking forward, with the IMF s projections showing that the federation will grow at an average rate of.6% annually over 0-00 (faster than Germany, UK, US, and ), it is unsurprising that international businesses continue to set up shop in this market. Moreover, the fact that the UAE is increasingly becoming an easier place to do business (it has steadily been climbing up the World Bank s ranking since 0 and placed nd out of 9 countries in 0) also helps. Moreover, it takes just eight days to start a business not too far off the six days needed in the UK and US, and less than the days required in Germany. Prior to the crisis, of course saw the launch of a significant number of office construction projects a number of which were gradually delivered in the subsequent two to three years. However with tenant demand simultaneously low, the emirate s vacancy rate inevitably rose. But since 0, the financial & business services sector has returned to growth, office takeup has been rising and the availability rate has been heading down leading to increasing investor demand for institutional-grade buildings. In the hospitality sector, the total number of keys per capita in is significantly higher compared to other selected hubs. Moreover, when looking at luxury keys per capita, the gap opens up further. Admittedly this is partly because the emirate has a much smaller population compared to other more established global cities but also due to the significant number of hotel keys delivered since the previous downturn. This surge in new supply, coupled with a strengthening in the UAE dirham more recently (which has hit demand), has begun to apply downward pressure on both average daily rates and occupancy. That said, continues to make strides as a tourist destination and an air travel hub. Visitors to are staying longer to enjoy the city s attractions, with the average length of stay rising from.6 nights in 00 to. nights in 0 further proof that the government s strategy to enhance and expand the emirate s offerings is working. What s more, International (0.m) overtook Heathrow (6.m) last year to become the world s top airport for international passenger traffic impressive given that less than a decade earlier the former was handling around half the volume compared to the latter. Meanwhile in the residential sector, prime home prices in saw an uplift of 9% over the five years to end-0 a better performance than (%), (%), (%), (%), (%) and (%). But as widely reported, s residential sector has faced headwinds over the past year, leading prices to see a downward adjustment. In annual terms, prime home prices fell by.% in Q 0, however this was a smaller magnitude of decline compared to the mainstream segment s.% decrease. Also, the new residential supply pipeline for the prime segment is not significant, suggesting that prices over the next - months should maintain a greater degree of resilience. Finally, remains one of the safest locations in the world, with excellent connectivity, strong economic prospects, a low tax regime and a stable political system combined, these factors will undoubtedly play an important role in paving the way for its success as a global hub. Country Key Australia France Jordan Bahrain Germany Kenya South Korea Brazil KSA Taiwan Canada India Malaysia United Arab Emirates China Indonesia New Zealand United Kingdom Egypt Italy Oman United States of America Please refer to the important notice at the end of this report.

3 THE HUB REPORT 0 MANUFACTURING & LOGISTICS Annual Average Change in Manufacturing Output, 00-0 (in constant prices) Quality of Transport Infrastructure, 0- ( = extremely underdeveloped, = efficient by international standards) Air Transport, freight (million ton-km, 0) -.0% -0.% -0.% 0.% 0.% 6.%.%.% ,909,,9 6,,,6,6, Note: percentage change calculated in local currency At the time of writing, data for the US, UAE and was only available up to 0 (thus CAGR is for 00-0) Sources: World Economic Forum, Global Competitiveness Report Industry Output As a Proportion of Total GDP, 0 Cumulative Growth in Export of Goods, %.% 9.% 9.% 0.%.%.% 0.% 9.0%.9%.9%.%.%.% 6.% 0.% Industry comprises the mining, manufacturing, construction, water, electricity & gas sectors as per The World Bank definition 0 data 0 data are IMF estimates INDUSTRIAL & LOGISTICS PROPERTY SECTOR Indicative Rents in & Abu Dhabi (AED/sq m/annnum) 0 Prime Industrial Rents (US$/sq m/annum) JAFZA Class Industrial Rents (AED/sq m/annum) KIZAD Mussafah Investment Park (DIP) Jebel Ali Free Zone (JAFZA) Al Quoz % developed sq km Jebel Ali Free Zone Sources: South, JAFZA, Knight Frank Research South sq km Figure is for the logistics cluster Los Angeles JAFZA Sources: Various, Knight Frank Research Rates converted from local currency to US$ in August Q 00 Q 00 Q 009 Q 0 Q 0 Q 0 Q 0 Q 0

4 THE HUB REPORT 0 FINANCIAL & BUSINESS SERVICES Number of Free Trade Zones Annual Average Real GDP Growth Forecast, 0-00 (%) Days Required to Start a Business, %.6%.%.%.0%.%.%.6% 6 6 Source: IMF Total Business Tax Rate, 0 (% of Commercial Profits) Ease of Doing Business Ranking, 0.%.%.%.%.%.% Bahrain Oman Jordan Kenya Egypt China UAE India USA 66.6%.% Source: Healey Consultants, Special Economic Zones in India, Arab Chamber of Commerce and Industry, Enforcement & Compliance Special Economic Zones Foreign Trade Zones A percentage of foreign banks and oil companies' income in the UAE is taxable. Municipality taxes are also levied for commercial premises Source: Doing Business 0 OFFICE PROPERTY SECTOR Total Office Stock, Q 0 (sq m, millions) Vacancy Rates, Q 0 (%) Prime Rents, Q 0 (US$/sq m/annum) Indicative Rents in, Q 0 (AED/sq m/annnum) Source: Knight Frank Research Figure is for Central Figure is for Manhattan.0. Figure is for Île de France 9 60 Source: Knight Frank Research 99,6,0,00 Rates converted from local currency to US$ in August 0 Excluding free zones Average asking rent in Upper Fifth Place Figure is for the West End 9 6 TECOM C Bur Deira JLT Business Bay Sheikh Zayed Road Media City Internet City Knowledge Village Emaar Square/Downtown DIFC ,0,0,0,6,6,6,6,99,0

5 THE HUB REPORT 0 TOURISM Hotel Keys per,000 Population -Star Hotel Keys per,000 Population Major Source Markets and Total Number of Overnight Visitors m.m New York Hong Kong m -Star Hotel Keys as a Percentage of Total Stock International Passenger Traffic (Millions) 0.m 6% 0% % 6% % % 0% Heathrow International m.0m.0m Sources: International Airport, Heathrow Airport, Respective National and Regional Statistics Agencies & Tourism Boards, Knight Frank Research Sources: Mastercard, Destinations NSW, Respective Cities, Statistical Agencies and Tourism Boards, Knight Frank Research HOSPITALITY SECTOR Average Length of Stay (Nights) Average Occupancy Average Daily Rate (US$) Average Revenue per Available Room (US$) % 0% % 6% % % 90% Figure is for hotels and serviced apartments 0 data as 0 data unavailable Sources: Various, Knight Frank Research Sources: Various, Knight Frank Research

6 THE HUB REPORT 0 RESIDENTIAL.0% -6.% NEW YORK 6.9% 0.% PARIS.0% 6.6% HONG KONG % Prime Residential Price Growth - US$ million invested in 009 %.%.0% LONDON % % 6.0% -.% DUBAI 9.% -.% SINGAPORE 0% $.0 $.0 $.0 $.0 $.0 $.0 $.0 $. $. $. $. $. $. $. $. $.0 $. $.6 $. $.6 $.6 0%.9% 0 $.0 $.9 $. $.9 $.9 $.6 $. Typical purchase costs for a non-resident buyer purchasing a $m property x% x% CITY x% Prime Residential Price Change, Q 0 Personal Income tax, 0.% SYDNEY % 0 0 $. $.6 $. $. $. $. $. $.9 $. $. $. $. $. $. Sources: KPMG, Knight Frank Research top marginal rate Source: Knight Frank Research LIFESTYLE Days of sunshine per year Number of international schools within a 0km radius of the city How far is the closest airport (km) Average cost of petrol, US$/litre (three-months to July 0) Cost of Living Index, higher ranking means higher cost of living for expatriate employees in that city Sources: Global Petrol Prices, Mercer, Knight Frank Research

7 DEVELOPMENT CONSULTANCY & Harmen De Jong Partner Harmen.DeJong@me.knightfrank.com RECENT MARKET-LEADING PUBLICATIONS Khawar Khan Research Manager Khawar.Khan@me.knightfrank.com Diaa Noufal Associate Partner, MENA Research Diaa.Noufal@me.knightfrank.com COMMERCIAL LEASING & SALES William Neill Partner William.Neill@me.knightfrank.com Offices Market Update H 0 Real Estate Investment Report 0 UAE Industrial & Logistics Research Report Q 0 UAE RESIDENTIAL SALES Maria Morris Associate Partner, Residential Maria.Morris@me.knightfrank.com Real Estate Market Overview: 0 Key Events & 0 Outlook Saudi Arabia Offices Research Report H 0 Prime Residential Report Q 0 Hospitality Report H 0 Abu Dhabi Offices Research Report H 0 View 0 Private View 0 Global Cities The Wealth Report 0 The 0 Report Knight Frank Research Reports are available at KnightFrank.com/Research Important Notice Knight Frank LLP 0 - This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank UAE Limited - Abu Dhabi is a foreign branch, with registration number 99. Our registered office is Unit, West Tower, Abu Dhabi Trade Center, Abu Dhabi, PO Box, Abu Dhabi, UAE. Knight Frank UAE Limited - : Prime Star International Real Estate Brokers PSIREB RERA ORN: 96 trading as Knight Frank with registration number 6. Our registered office is th Floor, Building, Emaar Business Park, PO Box 0,, UAE.