Dubai Riyadh Real Estate Market Overview

Transcription

1 Dubai Riyadh Real Estate Market Overview Q1 2013

2 Macroeconomic overview Indicator (f) 2014 (f) Saudi Arabia Population (millions) Real GDP Growth (Y-o-Y) 6.8% 4.2% 3.6% Inflation (% Change) 4.5% 4.3% 3.8% Budget Surplus (USD billions) Riyadh Population (millions) Cost of Living Index (% change) 4.0% 3.8% 3.5% Sources: Sama, Jadwa, IHS Global Insights April 2013, CDS, 2012 f:forecasted 2

3 Economic highlights Q Real GDP in KSA grew by 6.8% in High oil production and expansionary fiscal policy have kept the Kingdom s growth at a high level. Retail sales continued to increase, growing by 25% in Q compared to the same quarter last year. Bank lending to building and construction has increased by 27% in Q from the same period last year. This reflects greater participation in infrastructure and housing projects. To facilitate housing construction program, King Abdullah has approved the creation of a new USD 67 billion housing fund. At 3.9% Y-o-Y, inflation increased for the third consecutive month in March. This was almost entirely due to higher rental inflation and increasing food prices. Saudi banks increased their lending to real estate end users (mostly mortgages) by 30% in 2012, the largest increase during the last five years. 3

4 Property & project news Q The Ministry of Housing has appointed a contractor to build 7,000 new residential units on Othman bin Affan Road, north west of King Khalid International Airport. The project will also include 24 mosques, schools and other supporting facilities. The Shoura Council is considering taxing unused, large land plots, in a move designed to bring forward development and ease the current housing shortage in the Kingdom. Al Oula has taken full control of Thabat Real Estate Development Company through the purchase of all shares of former partners, including Egypt s Tala at Mustafa Holding Group. The Riyadh Development Authority (ADA), has approved a massive SAR 278 billion development plan including major new housing projects and additional metro and railway lines. Designs were revealed for the new stations from leading architects including Zaha Hadid, Gerber, and Snohetta. Starwood debuts it Four Points by Sheraton brand in Riyadh, located in the Khaldia Towers complex., it contains 376 rooms including 138 suites. Jabal Ali Industrial Company has announced a new industrial city south of Riyadh on Al Kharj Road. The new city will offer serviced plots, zoned for light or heavy industrial, commercial and hotel uses. Mizat Development Company has lunched two residential projects (Hada 1 and 2) west of Riyadh, with a total of 86 units. 4

5 Riyadh prime rental clock *Hotel clock reflects the movement of RevPAR. Note: The property clock illustrates where Jones Lang LaSalle estimate each prime market is within its individual rental cycle as at end of relevant quarter. Source: Jones Lang LaSalle 5

6 Riyadh office market overview

7 Total Stock (sq m GLA in 000's) Office supply and demand Total stock of Grade A and B office space in locations monitored by Jones Lang LaSalle has increased by around 61,000 sq m in Q to stand just short of 2 million sq m. Five new buildings were completed during Q1 2013, adding more than 61,000 of office GLA. The largest completion was Blue Tower (20,000 sq m) on King Fahd road. Several new Grade B buildings have been completed on King Fahd Road and Olaya Street over the last three years. The combination of vacant space in these buildings and space being marketed in buildings currently under construction provides tenants with a wide range of choice and is resulting in more competition between owners to attract new tenants. Take up in Q was led by the government sector, with the largest deal being for around 10,700 sq m of space in Sultan Tower. New supply will increase substantially in 2013, with the completion of the initial phases of the King Abdullah Financial District (KAFD), the IT and Communications Complex (ITCC) and GOSI s Olaya Towers at the intersection of Tahlia and Olaya. These projects could add over 500,000 sq m of efficient high quality space within the CBD. More than 1 million sq m of new space is currently scheduled to be delivered over , but some of this space is likely to be delayed as the market becomes oversupplied. Riyadh Office Stock ( ) 4, , , ,500 2,000 1,500 3,066 3,361 2,526 1,000 1,897 1, Completed Stock Future Supply Source: Jones Lang LaSalle, Q

8 Major Existing & Future Office Projects Major existing & future offices projects 4 1 Faisaliyah Center Kingdom Center 3 Tatweer Tower 4 Tamkeen Tower 5 Granada Business Park 6 The Business Gate 1 KAFD 2 ITCC Existing 3 Olaya Towers 4 MIG Tower Future 8

9 SAR per sq m p.a. Office rental performance The average quoted rents for completed Grade A & B buildings in Riyadh has declined marginally (less than 1%) in Q1 to SAR 1,054 per sq m pa due to higher vacancies, particularly in B grade buildings in the CBD and to the South of Riyadh. Quoted prime rents (for the best quality buildings) have reduced for the first time in two years, falling by 2.6% over Q1 to SAR 1,850 per sq m p.a. The average for Grade A and Grade B buildings currently stands at SAR 1,291 and SAR 880 respectively. Vacancy rates have increased in Q1, with city-wide and CBD vacancies both increasing to 18% and 19% respectively. There will be further upward pressure on vacancy rates over the next 12 months given the expected new supply entering the market. We expect that increased vacancy rates and the greater choice available to tenants will maintain downward pressure on rental levels during 2013, especially for Grade B properties. 1,600 1,400 1,200 1, Rental Performance (Q Q1 2013) Average Grade A Average Grade B Average (completed Grade A and Grade B buildings) Q Q Q Q Q Source: Jones Lang LaSalle, Q

10 Office market summary Indicator Level Comment / Outlook Current Office Stock 2.0 million sq m Includes Grade A, B & C space within major precincts (see definitions for further details). Total city-wide stock is estimated to be above 3 million sq m GLA. Future Supply ( ) 1.7 million sq m The Riyadh market will face a major supply shock over the next two years with the release of space in projects such as ITCC, KAFD and Olaya Towers. City-wide Vacancy CBD Vacancy 18% 19% Average Grade A Rental SAR 1,291 per sq m p.a. Average Grade B Rental SAR 880 per sq m p.a. 10

11 Riyadh residential market overview

12 Total Stock (Number of units in 000's) Residential supply and demand Approximately 8,000 residential units were completed in Riyadh in Q1. This brings the total residential stock in Riyadh to just over 917,000 units. The majority of the recent supply has been delivered in small projects comprising less than 20 units. The major new announcement in Q1 was Al-Tahaluf s residential project Bayt Al- Hurr located in the west of Riyadh and expected to deliver more than 200 units over the coming three years. An additional 129,000 units are due to enter the market from 2013 to 2016, with an annual supply of around 32,000 units. One of the more active developers is Al-Habib group, which is currently building two residential projects. The first of these, Reem Residences, is expected to deliver 500 units by the end of We are seeing an increase in the registration of off-plan sales programmes with the Ministry of Commerce. The Ministry of Housing is planning to build 7,000 units in Riyadh that will be delivered over the coming four years. Approximately 6,000 residential units are expected to be delivered in expatriate residential compounds over the next five years. This new supply is likely to reduce the current upward pressure on compound rents. Data released by SAMA shows the Real Estate Development Fund disbursed more than SAR 11 billion in loans during the first half of the These loans were to Saudi citizens to facilitate the building or purchase of new homes. 1,100 1,050 1, Riyadh Residential Stock ( ) Source: Jones Lang LaSalle, Q , Completed Stock Future Supply 12

13 6 5 Major existing & future residential projects Al Qasr Project 2 Balencya Project 1 3 Al Argan Project 4 Maskan Arabiah Al Rabiah Project 2 Al Shams Arriyadh Project Existing Future 3 3 Al Ghroub Project 4 Rafal Tower Project 5 Akaria Village 6 Durrat Al Riyadh 13

14 SAR per sq m SAR per sq m Residential prices Average villa prices have increased across most districts of Riyadh by an average of 2% in Q1 to SAR 4,250 per sq m due to significant increases in the West of the city. Average prices in the Center of Riyadh have remained unchanged in Q1 as most sales have been of older / refurbished projects due to the lack of new product available for sale. Malaqa, Yasmeen, and Sahfa in the North, Al-Hada and Khuzama in the West and Qurtaba and Ishbiliyah in the East are perceived as the most attractive locations for villas. The new concept of mixing apartments with villas through a separate access is becoming more popular in low end districts to the South and West of Riyadh. Villa - Average Sales Price The average price of apartments has also increased in districts to the East, South, and West of Riyadh during Q The average asking price for new apartments increased 4% during Q1 to SAR 2,915 per sq m (excluding branded apartments). Average prices in the east increased by 7% as Al-Argan started selling apartments. Al-Reem Residences and Phase 2 of Manazel Al-Qurtaba, currently under construction are expected to deliver around 1,300 apartment units. Once complete these projects will provide quality apartments for end users. Currently, most apartments available for sale are located in the low income areas of Qurtaba, Yarmouk, in the East and Shifa,, Badr, and Suwaidi in the South. Apartment Average Sales Price 4,300 4,200 4,100 4,000 3,900 3,800 3,700 3,600 Q Q Q Q Q Source: Jones Lang LaSalle, Q ,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 Q Q Q Q Q Source: Jones Lang LaSalle, Q

15 SAR per annum Residential rentals - villas Villa rents have increased by 8% compared to the same quarter last year. High income villas in the West and Centre have experienced greater increases than other districts. Rents in residential areas such as Olaya, Sulemania in the center and Hiteen and Nakheel in the west and Shumaisi in the south are higher than those in surrounding neighborhoods.. Due to more demand for apartments in the South, villa rents in this area have not increased much during the last year Villas in expatriate compounds have shown a larger increase in rents, reflecting the long waiting lists for access to this kind of accommodation. The availability of new villas for lease is greatest in areas such as Qurtaba and Monisia in the East, Malaqa, Sahfa and Yasmin in the North. Villa occupancy in districts between the North Ring Road and Prince Salman street is increasing rapidly and this area is expected to attract more attention from Saudi families when government offices move towards the north of Riyadh. 180, , , , ,000 80,000 60,000 40,000 20,000 0 Villa - Average Annual Rent North South East West Center Source: Jones Lang LaSalle, Q Q Q Q Q Q

16 SAR per annum Residential rentals - apartments Apartment rents have increased at a lower rate than villas, growing by 6% in the year to Q and now stand at approximately SAR 31,000 p.a. for an average 2 bed unit. Apartment rents in areas such as Wazarat and Malaz in the South Olaya in the Center, Diplomatic Quarter in the West and Yarmuk and Qurtaba in the East are higher than those in other districts. Due to high occupancy rates, and the concentration of private schools and hospitals, rents in areas such as Warooud, Malaz, Olaya and Sulaimania continue to grow at higher levels. Given the lack of labour accommodation within the industrial cities, districts like Batha, Manfoua, Khalediyah and Amal have a high concentration of apartment buildings used as labor accommodation. The government is planning to move many government of its offices towards the north of Riyadh and large expat schools are also moving in this direction. This is likely to result in stronger future rental growth in the North and Centre than in other areas. 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Apartment - Average Annual Rent North South East West Center Source: Jones Lang LaSalle, Q Q Q Q Q Q

17 Residential market summary Indicator Level Comment / Outlook Current Residential Stock 917,000 units Based on the National Housing Census (2010) and units completed since in areas monitored by JLL. Future Supply ( ) 129,000 additional units in all projects Includes all of types of housing. Average 2 Bed Apartment Rent SAR 30,900 p.a. Apartment rents expected to increase further during 2013, especially in North and Central areas. Average 2 Bed Apartment Sale Price SAR 2,915 per sq m Apartment prices has witnessed major increase during the last four quarters. Average 4 Bed Villa Rent SAR 118,700 p.a. Villa rents are expected to increase further in Average 3 Bed Villa Sale Price SAR 4,250 per sq m Villa prices are expected to increase further, especially in the East and North districts. 17

18 Riyadh retail market overview

19 Total Stock ('000 sq m) Retail supply and demand There was one medium size addition to mall based retail space in Q1 2013, with Ethra Mall (36,000 sq m) opening in the Southern Riyadh suburb of Sweiidi. This completion has increased the stock in major retail malls (those over 10,000 sq m in size) across Riyadh, to approximately 1.25 million sq m. Outside of the mall sector, Sheta and Saif (electronic retailer) was the major completion in Q1 (approximately 2,000 sq m of GLA). Fawaz Al-Hokair is planning an aggressive expansion in Riyadh. In addition to Nakheel Mall, two other centers have been announced, which will add approximately 174,000 sq m of GLA to their retail portfolio. Total mall based retail supply is expected to reach around 1.8 million sq m by the end of This includes around 188,000 sq m of retail space in mixed use projects such as KAFD and ITCC. The repositioning of non performing retail centers also continues. Bustan Centre has been taken over by the Maqrin Group and will be positioned as male only retail space. Al-Harm Plaza has been closed after a recent fire. 2,000 1,500 1, Riyadh Retail Stock ( ) Future Supply Completed Stock ,700 1,550 1,200 1,250 1, Source: Jones Lang LaSalle, Q

20 Major existing & future retail malls 1 Riyadh Gallery 2 Sahara Mall Hayat Mall 4 Khurais Plaza 5 Al Otheim MAll 6 Granada Mall 9 7 Rimal Center 8 Panorama Mall Existing Future 9 Al-Qasr Mall 1 KAFD Retail 2 Nakheel Mall 20

21 SAR / sq m Rental performance Average retail rents have remained stable across all categories (super regional, regional and community malls) during Q This has kept the average rent across all types of centers unchanged at SAR 2,562 per sq m p.a. Most of the super regional malls have high occupancy rates and rents are expected to increase during However, we anticipate limited increases in rents in regional and community shopping malls given the availability of space and continued downward pressure on rentals in poorer performing malls. There remains demand for retail space outside of organized malls. Standalone centers remain a popular option, with the opening of Sheta and Saif new electronics store on Anas Bin Malik street in the north of Riyadh (their 7 th store in Riyadh) during Q1. 3,000 2,500 2,000 1,500 1, Average Retail Rentals (Q Q1 2013) Super Regional Regional Community Q Q Q Q Q Source: Jones Lang LaSalle, Q

22 Retail sector summary Indicator Level Comment / Outlook Current Retail Space* (GLA) 1.25 million sq m Existing stock within organised retail malls over 10,000 sq m GLA. Ethra Mall was the major completion in Q Future Supply ( ) 525,000 sq m KAFD and Nakheel Mall are the next major quality retail projects expected to be delivered in 2013 and 2014 respectively. Average Estimated Rental Value SAR 2,562 per sq m p.a. Average rentals for speciality stores in major malls have remained stable in Q Average Regional Mall Vacancy 10% Vacancies remained largely unchanged, ranging from 0-30% in major malls. 22

23 Riyadh hotel market overview

24 No. of Rooms Hotel supply The total room supply in Riyadh as at end of Q was around 8,500 hotel rooms. While there have been no new projects completed in Q1, the existing Mena Grand Hotel in Khaldia Tower has been converted into the first Four Points by Sheraton in Riyadh. This has introduced another major player in the branded midscale segment. Other hotels scheduled to open towards the end of 2012 such as the Hilton Garden Inn and the Holiday Inn Meydan Olaya have now been shifted towards the end of Among the other projects scheduled for completion in 2013 are the Hyatt Regency, Crowne Plaza and the iconic Kempinski Burj Rafal. Upon completion this will be one of the highest towers in Riyadh and a landmark in the city. In reality, it is likely that a number of the projects currently scheduled for completion this year may not open until 2014, adding to the already significant level of proposed completions in Recently announced projects include the Grand Melia (which will be the first Melia hotel in KSA. There are also Indigo and InterContinental hotels proposed within the King Abdullah Financial District (KAFD). Riyadh Hotel Supply ( ) 18,000 16,000 14,000 2,700 12,000 3,300 10,000 1,500 8,000 6,000 13,250 4,000 8,400 8,400 9,950 2, F 2014F 2015F Current Supply Future Additions Source: Jones Lang LaSalle, Q

25 ADR (in USD) Occupancy( %) Hotel performance The Riyadh hotel market is showing signs of stability, following a period of declining performance as arrivals failed to keep pace with the significant increase in supply recorded in 2011 and Occupancy levels have declined significantly from their peak of 72% in 2008 to 57% in The market is now showing signs of stability, with average occupancies remaining largely unchanged over the first quarter, down from 64% in Q to 63% in Q1 this year. Average room rates (ADR s) have decreased by 2.2% since Rates have also now stabilised, with a marginal (0.7%) increase being recorded on a YTD basis with Average Daily Rates of USD 273 in Q The same trend is true of RevPAR, which declined by 11.8% in 2012 but has now stabilised, remaining largely unchanged at USD 173 in the year to March Riyadh Hotel Performance (2008 YT March 2013) % % 64% 60% 62% 63% 57% YTD YTD Average Daily Rate Occupancy Rate 90% 80% 70% 60% 50% 40% 30% Source: Jones Lang LaSalle, Q

26 Hotel market summary Indicator Level Comment / Outlook Current Hotel Supply 8,450 rooms After the addition of about 1,200 rooms in 2011, the only internationally branded hotel to enter the market in 2012 was Ibis Olaya. Future Supply ( ) 7,500 rooms Some of the new supply scheduled to enter the market in 2012 have now been shifted into (YT Mar) Occupancy 63% Slightly decline in YTD levels of occupancy as compared to same period (YT Mar) ADR USD 273 Slight ADR increase of 0.7% in comparison to YT March 2012, however a reducing occupancy has declined the RevPAR (by -0.5%) in YT March 2013 compared to YT March

27 Definitions and methodology Residential: The supply data is based on the National Housing Census (2010) and our quarterly survey of major projects and stand alone developments in selected areas of Riyadh. Completed building refers to a building that is handed over for immediate occupation. Residential performance data is based on two separate baskets one for rentals in villas and apartments and another basket for sales performance for both villas and apartments in selected locations across Riyadh. Retail: Retail supply data covers the GLA (Gross Leasable Are) within organized malls over 10,000 sq m. Classification of Retail Centres is based upon the ULI definition as published in Retail Development, 4th Edition published by ULI. Rent represents the average quoted average rent for line stores in the major shopping malls in Riyadh. Office: The supply data is based on our quarterly survey of the Grade A and B office space located in CBD, North and East Ring roads, Khurais, Mazer, and Sitteen Streets. Completed building refers to a building that is handed over for immediate occupation. Prime Office Rent represents the top open-market rent that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The Prime Rent reflects an occupational lease that is standard for the local market. It is a face rent that does not reflect the financial impact of tenant incentives, and excludes service charges and local taxes. Hotels: Hotel room supply is based on existing supply figures provided by Saudi Commission for Tourism and Antiques as well as future hotel development data tracked by Jones Lang LaSalle Hotels. Room supply includes all graded supply and excludes serviced apartments. STR performance data is based on monthly survey conducted by STR Global. 27

28 Contacts: John Harris Co-Head Riyadh Peter Bibby Co-Head Jeddah Andrew Williamson Head of Retail MENA Gabriel Matar Director, MEA Hotels & Hospitality Group Craig Plumb Head of Research MENA Fayyaz Ahmad Associate Director, Advisory Saudi Arabia Diyaa Ayoub Senior Analyst Saudi youtube.com/joneslanglasalle linkedin.com/company/jones-lang-lasalle joneslanglasalleblog.com/emearesearch mena.com COPYRIGHT JONES LANG LASALLE IP, INC This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.