Dubai Real Estate Market Overview

Transcription

1 Dubai Real Estate Market Overview Q3 2013

2 Macroeconomic overview Indicator (f) United Arab Emirates Population (millions) Real GDP Growth (Y-o-Y) 3.9% 4.4% 3.7% Consumer Price Index (% change) 0.9% 0.7% 1.5% Real Estate Mortgage Loans (millions AED) 161, ,800 n/a Dubai Population (millions) Real GDP Growth (Y-o-Y) 3.7% 4.4% 4.1% Inflation (% Change) 0.5% -1.7% n/a Sources: IHS Global Insights (August 2013); UAE Central Bank; Dubai Statistics Center 2013 e: estimated f:forecasted 2

3 Market highlights Q All sectors of the Dubai real estate market maintained their positive performance during the seasonally quieter summer months. The retail, hotel and industrial segments continue to experience solid growth. The recovery of the office sector remains more selective and concentrated in the prime segment with the large level of supply and high overall vacancy rates depressing rental pressure elsewhere. The broad based recovery in the residential sector is seeing prices and rents increase across most areas, but there are signs that the rate of increase is slowing in some high end locations. The Dubai economy is expected to maintain its strong growth rate and expand at more than 4% in The strong economic performance remains supported by the growth of sectors such as hospitality, trade, transportation and logistics, in addition to the recovery of the construction and real estate segments. The business outlook remains optimistic with the Department of Economic Development s Business Confidence Index (BCI), reaching points in the second quarter of 2013, an increase of 14.6 points over the same period in According to the survey, more than 83% of firms expect either stability or increased sales volumes while an increasing number of companies are planning to invest in expansion, recruitment and technology upgrades. The only significant commercial transaction in Q3 was an office building in TECOM. There remains however an active residential investment market across Dubai. We have also noted growing interest from Kuwaiti investment firms in all asset classes of the Dubai real estate market. The office leasing market witnessed slower activity in Q3 due to the summer period and the month of Ramadan. While demand continues to improve in the prime locations and some new areas, the high level of supply remains the main obstacle to a healthy broad-based recovery. The residential market continues to experience a broad-based recovery, with prices and rental values picking up in the secondary and more affordable locations, while the primary areas are now seeing slower paces of growth. Activity in the retail market was quiet in Q3 due to the summer period. However, as demand remains strong and retailers are upbeat, the sector is expected to end the year on a strong note in both its primary and secondary segments. The hotel sector has continued its strong performance, on the back of the booming tourism and aviation industries. Year-to-date (YTD) occupancy rates have risen to 79% while YTD Average Daily Rates (ADRs) are also higher at USD 235. A number of hotels are due to open in the short run but the sector is expected to maintain its positive performance The industrial market continues to perform well overall. Demand has started to shift to the newer areas in the south of Dubai, which are witnessing strong growth and are benefiting from well developed infrastructure, good connectivity, proximity to major infrastructure projects, as well as better quality products. 3

4 Talking points Q The UAE Central Bank is expected to confirm the mortgage cap rule by the end of Following negotiations with banks last March, the cap is likely to be set at around 75% of the value of a property for first-time foreign buyers and 80% for local citizens. The Dubai Real Estate Investor Law (also called Tanweer) is now ready and should be released soon. The law aims at minimising legal disputes and protecting investors rights. It will allow investors to get a full refund if the developer fails to complete or handover a property within a certain timeframe. The Dubai government has also issued a new decree (21 of 2013) setting up a special legal committee for the liquidation of cancelled property projects and the settlement of disputes between property developers and investors over these projects Another new law (law no.7) has been issued recently, defining the objectives, tasks and jurisdictions of the Dubai Land Department, including the development of property registration systems, the improvement of the regulatory and control operations and encouraging real estate investment. According to the Dubai Land Department, seven new legislations will be issued by The Dubai Land Department has also announced the increase of real estate transactions tax from 2% to 4% as it seeks to reduce speculative investment activity. This year s edition of Cityscape will be the largest for the last four years covering more than 25,000 sq m of exhibition space with over 200 participating exhibitors. The Dubai International Financial Centre (DIFC) has recorded a 7% year-on-year growth in the number of registered companies during H to 979 companies and 15,000 employees. It also enjoys a 97% occupancy of its leasable area while the retail space is 99% leased. Nakheel will announce two new hotel projects before the end of 2013 and will start building a new community centre in International City in The developer is also progressing with the expansion plans of the Dragon Mart and Ibn Battuta Malls, while construction of the Nakheel Mall and The Pointe are due to start soon. Dubai s second tallest tower has been announced by Emaar Properties and Shefffield Holdings. The future Dream Dubai Marina hotel will be 432 m high and will include 300 guest rooms and 420 hotel apartments, in addition to various entertainment facilities. A dedicated design district, known as D3, has recently been announced. D3 will comprise 10 buildings and will be home to some of the world s leading brands and talent. The project is being developed by TECOM Investments within Business Bay. Its AED 4-billion phase one will be delivered in January Dubai Duty Free (DDF) has arranged a USD 750 million loan to fund its expansion plans at the Dubai International Airport. The loan includes both a conventional term loan facility and Islamic facilities. Dubai International Airport continues to see traffic growth. The airport handled 5,310,000 passengers in July 2013, 6% more than July Year-to-July figures show passenger traffic increasing 15.3% year-on-year to 37,972,500. 4

5 Dubai prime rental clock Q Q Rental Growth Slowing Rents Falling Rental Growth Slowing Rents Falling Residential Rental Growth Accelerating Rents Bottoming Out Hotel* Rental Growth Accelerating Rents Bottoming Out Hotel* Residential Retail Office Retail Office *Hotel clock reflects the movement of RevPAR. Note: The property clock illustrates where Jones Lang LaSalle estimates each prime market is within its individual rental cycle as at end of the relevant quarter. Source: Jones Lang LaSalle 5

6 Dubai office market overview

7 Total Stock (million sq m) Office supply The total office stock within areas monitored by JLL is estimated at 7.2 million sq m at the end of Q Around 45,000 sq m of office space entered the market in the last quarter, with the major completions being 48 Burj Gate on Sheikh Zayed Road and the API Trio Tower in Al Barsha. According to developers, around 245,000 sq m will be delivered in the last quarter of the year. However, much of the announced new supply might be postponed to 2014 and beyond. As of Q3 2013, the CBD (ie DIFC, Burj Downtown and SZR) represents less than 20% of the existing stock while areas such as Business Bay (14%) and JLT (13.5%) are accounting for larger proportions of the current office space. Around 1.2 million sq m of office space is expected to enter the market by 2016, reflecting the strong supply pipeline. However, as the delivery of this extra space may further exacerbate the current supply-demand imbalance, some of the proposed projects might be delayed. Business Bay accounts for the majority of the future supply. The area is expected to see an additional 713,000 sq m of office space by 2016 (equivalent to 58% of the total upcoming supply) including towers such as The Burlington, Bay View, Bay Gate and Tamani Art offices. Other locations that will see new office supply are JLT (10%), Dubai World Central (7%), Dubai Investment Park (6%), the Greens (5%) and DTCD (4%) Dubai Office Stock ( ) Completed Stock Future Supply Breakdown of Expected Completions ( ) by Sub Market Source: Jones Lang LaSalle, Q Source: Jones Lang LaSalle, Q

8 Major office completions /2014 CBD DIFC Burj Daman SZR 48 Burj Gate Barsha API Trio Tower Business Bay Blue Bay, Oberoi Centre JLT Amesco Tower Business Bay The Burlington, Bay Gate Completed Under Construction JLT JBC 4 8

9 Office demand The improvement in the Dubai economy has resulted in an increased demand for office space. However, the recovery in demand remains counter - balanced by the high level of supply entering the market. Demand remains focused on high quality space in prime locations such as SZR, Downtown and TECOM A & B Flight to quality continues to be noticeable with further relocations taking place from the older and secondary areas towards the prime and newer locations. The market continues to suffer from a shortage of large units of high quality office space suitable for global occupiers Built-to-suit options are therefore still being considered, especially by large occupiers in search of 5,000 sq m of office space or more. Large companies are also becoming increasingly sensitive to sustainability issues and there has been an increasing demand for LEED certified buildings with some corporates mandating this for all future office space. Other factors influencing occupiers choice include: - Congestion and traffic - Availability of parking space - Proximity to a metro station Single ownership buildings continue to account for the majority of the existing supply and most of the current demand; while strata projects remain less popular, especially amongst large global companies. Despite being growing commercial locations, many buildings in Business Bay and JLT will not appeal to some occupiers due to their strata status. Landlords are becoming more bullish in the most prime locations, being less flexible on rents and reducing rent-free periods. Landlords in secondary locations remain flexible in order to attract tenants and to fill their buildings. Vacancy rates within the CBD remained high at around 30% as the take up remains counterbalanced by the new supply entering the market. Examples of recent deals Area Acquired Industry Location Comment (sq m) Banking 10,000 Bur Dubai Renewal Oil & Gas 6,000 DIFC Acquisition Hotelier 3,000 Dubai Renewal IT 1,200 Downtown Acquisition Digital Imaging 500 Barsha Acquisition IT 300 Media City Acquisition Finance 200 DIFC Acquisition Source: Jones Lang LaSalle, Q

10 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q = 100 Rental performance The momentum in office leasing activity that was noticeable in the first months of 2013 has slowed in the third quarter of the year. Despite the improved market sentiment and stronger demand, the high level of supply continues to constrain the sector. Average headline quoting rents in quality office buildings in selected areas increased by 3% Q-o-Q in Q The top open-market rent* in the DIFC increased marginally to AED 2,610 per sq m while it improved to AED 1,830 per sq m elsewhere in the CBD. The most prime locations, such as Downtown and TECOM A & B, continue to attract most of the demand, despite the worsening congestion and the limited parking in these areas. DIFC has seen a good level of activity, from both new occupiers taking space and existing firms expanding. A lot of the DIFC activity originated from newly arrived European companies and existing law firms. Index of Average Office Rents The newer areas such as Business Bay, JLT, Jebel Ali, and Silicon Oasis continue to improve and are experiencing rental growth. Prime rents in Business Bay have grown 28% Y-o-Y and 10% Q-o-Q and as the surrounding infrastructure continues to improve and the area is opening up. Rental growth is expected to be maintained despite the strata nature of the area, which makes it unpopular amongst larger occupiers. Despite being also a strata location, JLT offers more affordable office space to companies seeking freezone premises. Prime rents in JLT best quality buildings have seen a rise of 75% Y-o-Y and 14% Q-o-Q, while the other buildings are also recording growth in their rental values. Jebel Ali has also been filling up quickly and rental values in both its freezone and onshore parts have been on the rise. Rental values have picked up in Barsha too as the area saw some activity from smaller occupiers. Rents in prime locations and some emerging new areas were supported by improved confidence and healthy demand. However, the strong supply pipeline continue to apply a breaking impact on rental growth. Trends in Office Rental Values Areas Downtown Burj; TECOM A& B; SZR; Business Bay; JLT; Jebel Ali ; Barsha; Silicon Oasis DIFC; Festival City; The Greens; DIP; TECOM C; Healthcare City Deira; Bur Dubai; Jumeirah Beach Road; Note: The average office rents are based on a basket of quality office buildings across Dubai Marina; DWC * See Definition & Methodology for definition of Prime rents. Source: Jones Lang LaSalle, Q Trends in Prime Rents 10

11 Office market summary Indicator Level Comment / Outlook Current Office Stock Future Supply ( ) CBD Single Ownership Vacancy Prime CBD Rental (excl. DIFC) Prime Capital Value 7.2 million sq m 1.2 million sq m 30% AED 1,830 / sq m AED 18,300 / sq m Includes all grades within 20 sub-markets, monitored by Jones Lang LaSalle. Assuming that all pipeline supply tracked by Jones Lang LaSalle will complete. CBD vacancy levels remain high at around 30%. The take up of office space continues to be counterbalanced by the new supply entering the market. Prime rents improved in the best quality offices in the prime locations such as CBD. Improvements in the office leasing activity is being pulled back by the high levels of supply that continue to counterbalance the demand in the market. Prime Capital Value refers to the market price for the best office space (excluding DIFC). Prime Capital Values increased in Q3 2013, reflecting the improvement in market sentiment. 11

12 Dubai residential market overview

13 Number of Units (in 000's) Residential supply At the end of Q3-2013, the total residential stock in areas monitored by JLL stood at around 364,000 units. The third quarter of 2013 saw the handing over of more than 3,400 residential units. The main projects completed include The Nakheel villas compound in Jumeirah Park, The Villa-stage 3 in Dubailand (306 villas), Burjside Boulevard by DAMAC in Downtown Dubai (351 units), Suburbia by DAMAC in Downtown Jebel Ali (104 units). Other projects have been delivered in International City, Dubailand, Dubai Sports City, Silicon Oasis and TECOM among others. An increasing number of residential projects are currently being delivered as developers are taking advantage of the positive market sentiment to re-start previous stalled developments or hand over new ones. In the first nine months of 2013, more than 9,000 residential units have entered the market, around 50% more than the number of units handed over during the same period in Dubai Residential Stock ( ) According to developers, around 45,000 residential units are under construction and are expected to enter the market by 2015; but in reality some of the projects might be delayed beyond their scheduled dates. The majority of the future completions will be located in the submarkets of Dubailand (16,000 units); Dubai Marina (3,700 units); Dubai Sports City (3,600 units); Business Bay (3,000 units); and Jumeirah Village (2,800 units). Improved confidence, economic growth and rising demand have encouraged developers to announce new large-scale projects. The most notable announced developments include the Mohammad Bin Rashid City; Akoya by DAMAC; Dubai Sustainable City; Jumeirah Island Park by Nakheel; in addition to several announcements by Emaar such as The Hills, Burj Vista in Downtown, The BLVD and The Address Residences. These announced projects are likely to be ready by 2016 at the earliest. Breakdown of Expected Future Completions Completed Stock Future Supply Source: Jones Lang LaSalle, Q Source: Jones Lang LaSalle, Q

14 Major residential completions /2014 Downtown Dubai Burjside Boulevard Jumeirah Park Villas Jumeirah Village Knightsbridge Courts Silicon Oasis Silicon Gate 1, City Oasis Dubai Sports City Elite 6, Mediterranean Building Dubailand Platinum 1 & 2 Completed Under Construction 14

15 Feb 2008 Apr 2008 Jun 2008 Aug 2008 Oct 2008 Dec 2008 Feb 2009 Apr 2009 Jun 2009 Aug 2009 Oct 2009 Dec 2009 Feb 2010 Apr 2010 Jun 2010 Aug 2010 Oct 2010 Dec 2010 Feb 2011 Apr 2011 Jun 2011 Aug 2011 Oct 2011 Dec 2011 Feb 2012 Apr 2012 Jun 2012 Aug 2012 Oct 2012 Dec 2012 Feb 2013 Apr 2013 Jun 2013 Aug 2013 Feb 2009 Apr 2009 Jun 2009 Aug 2009 Oct 2009 Dec 2009 Feb 2010 Apr 2010 Jun 2010 Aug 2010 Oct 2010 Dec 2010 Feb 2011 Apr 2011 Jun 2011 Aug 2011 Oct 2011 Dec 2011 Feb 2012 Apr 2012 Jun 2012 Aug 2012 Oct 2012 Dec 2012 Feb 2013 Apr 2013 Jun 2013 Aug 2013 January 2003 = 100 January 2009 = 100 Residential performance The residential sector in Dubai continues to see a robust broad-based growth, supported by increasing positive sentiment and renewed confidence in the market. In Q3-2013, the REIDIN Residential Sale Index grew by almost 18% Y-o- Y and 6% Q-o-Q, but remains 15% lower than its peak value. Villa prices rose 14% Y-o-Y while the apartment sale price index increased by 15% Y-o-Y. Despite the strong growth, apartment prices remain 19% below their peak values. International City recorded the strongest price growth with a 27% Y-o-Y increase, highlighting the strong recovery in secondary locations. International City was again the top performer in terms of rental values growth, followed by JLT, The Greens area and Sports City; while JBR recorded slowest growth. This supported the conclusion that secondary locations have been improving as tenants continue to relocate from the expensive areas to more affordable neighbourhoods. The residential market has carried on with its broad-based recovery, on the back of growing positive sentiment, the status of Dubai as a safe haven, a rising population and solid economic fundamentals. Despite the government s initiatives to prevent a bubble, the dominance of cash buyers could lead to a period of unsustainable growth in prices. On the leasing front, the REIDIN Rent Index climbed by 15% Y-o-Y and 6% Q-o-Q. The villa rent index went up by 14% Y-o-Y and appeared to have reached its peak value, while the apartment rental index scored a 15% Y-o-Y growth but remains 19% lower than its record level. 600 Dubai Residential Property Sale Indices 120 Dubai Residential Property Rent Indices Residential General Residential Apartment Residential Villa Residential General Residential Apartment Residential Villa Note: REIDIN.com RPPIs use monthly sample of offered/asked listing price data and land registry price data (transaction data). Dubai sales/ rent index series are calculated monthly and cover 7 city-wide, 8 main districts and 4 major communities/ projects. REIDIN tracks asking prices and rents Source: REIDIN, Q

16 Residential market summary Indicator Level Comment/Outlook Current Residential Stock 364,000 Future Supply ( ) 45,000 Apartment Rent Apartment Sale Price Villa Rent Villa Sale Price Around 3,400 units were added to Dubai s residential stock inventory in Q Assuming that all supply tracked by Jones Lang LaSalle will complete. In reality, some of the proposed projects may be delayed beyond their scheduled date. Asking rents went up by 15% Y-o-Y. The recovery is being more broad-based with the secondary and more affordable areas growing at faster pace than the prime locations Asking apartment sale prices went up by 20% Y-o-Y. Sale prices in the well established areas are growing at a slower pace but accelerating in the secondary areas. Villa rents have increased by 14% Y-o-Y. Asking rents for villas in the secondary and more affordable locations have been increasing, sometimes at a faster rate than in the well established areas. Asking prices for villas have increased by 11% Y-o-Y but overall prices are growing at a decelerating rate. Note: Direction arrows are based on the performance of the REIDIN monthly index. 16

17 Dubai retail market overview

18 GLA in '000s sq m Retail mall supply The total stock of mall based retail space in Dubai remains steady at 2.8 million sq m recorded during Q3 with no major retail completions. The last quarter of the year is expected to see a pick up in activity, with two of the most awaited retail centers, the Phase II of Al Ghurair City and The Phase I of The Avenue by Meraas, due to open before the end of the year. Meraas will also be delivering The Beach project at JBR in Other notable upcoming retail centres include the Jumeirah Park Community Center and the Discovery Gardens Retail Center, both due in 2014 while the 100,000 sq m expansion of the Dragon Mart and the 67,000 sq m Agora Mall are scheduled for Overall, by 2016, it is estimated that around 840,000 sq m of new retail space will enter the Dubai market. With the retail sector in Dubai performing strongly, an increasing number of new shopping centres have been announced. Those include the 400,000 sq m Phoenix Mall in International City, Phase II of Dubai Outlet Mall, the expansion of the Dubai Mall, the Art Centre in Barsha as well as Mall of the World as part of MBR City. Nakheel has also announced two retail main projects on Palm Jumeirah: The Pointe and The Palm Mall. Several existing shopping malls have embarked on expansion plans. These include The Dubai Mall (93,000 sq m of expansion announced), Al Ghurair Centre (extra 35,000 sq m to be delivered soon), Dubai Outlet Mall (65,000 sq m of additional space), Mall of the Emirates and Ibn Battuta Mall. Large super-regional and regional centres are expected to continue to dominate the market, especially as the majority of announced and under construction malls have GLAs of more than 30,000 sq m. Dubai Retail Stock ( ) Breakdown of Under-Construction Retail Space by Type of Mall 3,200 3,000 2, ,600 2,400 2,649 2,775 2,817 2,817 2,865 2,889 3,057 2, Completed Under Construction Source: Jones Lang LaSalle, Q Source: Jones Lang LaSalle, Q

19 Expected major retail projects Deira Al Ghurair Centre - Phase 2 Al Wasl The Avenue Downtown Dubai Dubai Mall - Phase 2 International City Dragon Mart - Phase 2 Al Barsha Outlet Village JBR The Beach Under Construction 19

20 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q AED / sq m Rental performance Estimated Rental Value (ERV) The retail market in Dubai has witnessed a slow third quarter due to the Eid break and summer holidays. However, activity is expected to pick up in the last months of 2013 as demand continues to be buoyant and retailers remain quite upbeat. Due to the quiet summer months, the top open market net rent for a notional standard shop in prime super regional centres has remained unchanged in Q at around AED 5,700 per sq m. The Primary Super Regional Malls continue to be very popular amongst both residents and tourists; while the smaller community and neighbourhood centres have been performing better, supported by stronger demand from a growing resident population. The rising confidence and purchasing power in Dubai have also resulted in more demand for premium brands, a segment that was severely hit during the previous crisis. With retailers struggling to find quality locations and the large primary malls largely full, there has been a growing demand for street shops. A clear example is the increasing number of F&B units opening on the Sheikh Mohammed Bin Rashid Boulevard in Downtown. The overall retail market in Dubai continues to perform well, supported by positive sentiment, solid economic fundamentals, a growing tourism industry and a rising number of residents. We expect leasing activity to accelerate over the next 6 months. AED / sq m Q Primary Secondary Super Regional 4,300-5,700 1,000-2,400 6,000 5,000 4,000 Dubai Retail Rents (Q Q3 2013) Regional 1,350-2, ,900 Community 1,300-2,400 1,100-1,350 Neighbourhood 2,450-2,700 1,100 Convenience 1,500-1,900 1,300-1,400 3,000 2,000 1,000 0 Note: Based on a basket of malls of different size. (See definitions for further details) Primary Secondary Note: Chart shows mid-point ERV for an in-line store in a basket of Primary and Secondary Super Regional shopping malls. The rent quoted reflects a notional standard line store unit of 100 sq m. Source: Jones Lang LaSalle, Q

21 Retail sector summary Indicator Level Comment / Outlook Current Retail Space (GLA) 2,817,000 sq m No major additions to the mall based retail space in Q Future Supply ( ) 839, 500 sq m The main upcoming retail completions for the last quarter of 2013 will be Phase I of the Avenue by Meraas and Phase II of Al Ghurair Center. Other large-scale retail projects to be delivered thereafter include The Beach Mall, The Dragon Mart expansion and the Agora Mall. Average Retail Rents in Primary Malls Average Retail Rents in Secondary Malls AED 5,000 / sq m AED 1,725 / sq m Rents of prime units in better performing centers have remained unchanged in Q Primary as well as the newest secondary malls are expected to see rental growth in Average Regional Mall Vacancy 13% Citywide retail vacancy has remained unchanged at 13% in Q Vacancy rates are expected to drop in the coming months as leasing activity increases. 21

22 Dubai hotel market overview

23 No. of Rooms Hotel supply The third quarter of 2013 saw some notable openings on Palm Jumeirah, such as the Sofitel and the Anantara. The Conrad Dubai, located on Sheikh Zayed Road, was also another new entrant to the market. The main openings scheduled for the end of 2013 include the Novotel Al Barsha and the expansion of the Millennium Airport. During the third quarter of 2013, several new hotel developments were announced such as an hotel on JBR, two hotels by MAF attached to their malls Deira City Centre and Mall of Emirates, the Dream Hotel in Marina and TRYP by Wyndham in TECOM. Some of these new projects represent the entry of new brands and operators into the Dubai hospitality market. A number of existing hotels are undergoing renovation and refurbishment plans. The Sheraton on the Creek, has closed for a complete renovation while the Ritz Carlton on JBR has shut down its old wing. Habtoor Grand has recently reopened 320 refurbished rooms in its two towers. Many hotels are also revamping specific areas, particularly the food and beverage facilities. Dubai Department of Tourism and Commerce Marketing (DTCM) have announced the Vision 2020 for the tourism sector with an ambitious objective of achieving 20 million tourists by The hospitality supply and tourism projects planned for the next 7 8 years are expected to be aligned to this goal. Dubai Hotel Stock ( ) 70,000 3,600 4,700 65,000 1,520 60,000 55,000 50,000 65,600 59,380 60,900 57,345 45,000 40,000 35, F 2014F 2015F Current Supply Future Additions Source: Jones Lang LaSalle, Q

24 Expected major hotels completions 2013/2014 Conrad 559 Rooms Sofitel 543 Rooms Anantara 293 Rooms JW Marriott Marquis (Second Phase) 800 Rooms Novotel 466 Rooms InterContinental Marina 132 Rooms Completed Under Construction 24

25 ADR (USD) Occupancy(%) Hotel performance Dubai received over 5.5 million tourists in the first half of 2013, registering a double digit growth of 11% over the same period in The city has sustained its healthy growth levels in terms of tourism demand and this is reflected in improved hotel performance across the city. 250 Dubai Hotel Performance (YT August ) 80% Airport arrivals have registered a 15% increase in the January-August 2013 to nearly 38 million supporting the demand curve. Earlier this year, Dubai Airport became the second busiest airport in the world, maintaining its growth story. July was a slow month for the hotel industry in Dubai due to the combination of summer months and Ramadan. Nevertheless, the average performance YT August 2013, remained positive, supported by the growth experienced in the first six months of the year % 70% 65% Occupancy rates as at YT August 2013 have increased by 2 percentage points over the same period in 2012, reaching 79% on a city-wide basis. Average Daily Rates have witnessed an 5% improvement reaching USD 235 in YT August 2013 as compared to same period in YTD 2011 YTD 2012 YTD 2013 YTD ADR Occupancy Source: STR Global 60% As a result RevPAR levels showed an impressive 7.5% growth reaching USD 185 in YT August 2013 over the same period in

26 Hotel market summary Indicator Level Comment / Outlook Current Hotel Supply 59,380 rooms The third quarter of 2013 witnessed the addition of two resorts on Palm Jumeirah Sofitel and Anantara as well as the Conrad Dubai on Sheikh Zayed Road. Future Supply ( ) 9,800 rooms Major openings scheduled for 2014 include the Four Seasons, InterContinental Marina, second tower of J W Marriott Marquis and Marriott Al Jadaf amongst others YTD Occupancy 79% Increase in YTD levels of occupancy with resurgence witnessed across all sub-markets YTD ADR USD 235 As a result of resurgence in occupancy and ADRs; RevPAR levels have a notable increase by 7.5% on a city-wide average basis

27 Dubai industrial market overview

28 Industrial supply & demand The industrial sector in Dubai has maintained its healthy growth and strong performance in Q The growth of the industrial sector is mainly supported by the economic growth of Dubai, the safe haven status of the Emirate and the positive atmosphere surrounding the Expo 2020 bid. The industrial sector in Dubai is also benefiting from the well-developed infrastructure in the Emirate and the rising aviation industry. The strength of the aviation sector can be highlighted by the following facts: Dubai International Airport is now the world s second busiest airport by passenger traffic. Year to July passenger traffic reached 37,972,500, 15.3% more than the same period in Dubai International is also working to increase its capacity The new Al Maktoum International Airport is anticipated to be the largest in the world. It will have capacity for 160 million passengers and 12 million tons of cargo per year. The airport will start passenger flights by the end of October. Emirates Airlines continues to prove itself as a world leading airline. In 2012, the airline carried around 39 million passengers and 1.8 million tonnes of cargo. The Dubai ports have also been contributing strongly to the growth of the industrial sector: Jebel Ali sea port opened its third terminal that will increase its capacity to 19 million TEU* a year. By 2014 Jebel Ali is expected to be the biggest port in the Middle East DP World handled 26.6 million TEU across its global portfolio in the first half of On the back of the growth in the aviation sector and the position of Dubai as a trading hub, DAFZA announced a 44% increase in demand for space in H DAFZA noted an 11% y-o-y growth in expansion applications from existing tenants. European and American companies constitute 40% of DAFZA s tenants. DAFZA has been named the Middle East Free Zone of the Future 2013/14 by FDI magazine *TEU - Twenty-foot equivalent units 28

29 Industrial supply & demand Overview of some of the main industrial areas in Dubai Area Age Land Area (sq m) Regulatory Status Selected tenants Al Quoz ,500,000 Onshore Fedex, Mercedes-Benz Traditional Areas Al Qusais 5,450,000 Onshore Maxell, Sabco Umm Ramool Ras Al Khor ,900,000 12,000,000 Onshore Onshore Al Futtaim, Al Ghurair Group, Al Habtoor Leighton Aramex, Total, Unilever, Easa Saleh Al Gurg Group JAFZA 1985 JAFZA North - 45,000,000 JAFZA South- 35,000,000 Offshore DHL, Danube, LG, Kenwood, Heinz, Kraft, Mars, P&G Free Zone Areas New Onshore Areas DAFZA ,000,000 Offshore Dubai World Central ,000,000 Jebel Ali Industrial Area Dubai Investment Park ,240,000 16,500,000 Free Zone Areas Logistics and Aviation City only Onshore Onshore Clarins, Rolls-Royce, National Foods Products Company Dnata, RSA, Caliper Landmark Group, Jumbo, Bridgestone, Paris Group, Drake & Scull Dubai Industrial City ,000,000 Onshore Nestle, Baker Hugues 29

30 Industrial supply & demand Activity in the industrial market appeared to be on the rise in Q with a number of transactions recorded mostly in the new and modern industrial zones. The market has observed an increase in demand in the last few months, with enquiries from both new entrants to the market as well as existing occupiers looking to expand their operations With the traditional onshore areas such as Al Quoz or Ras Al Khor being saturated and ageing, the trend is increasingly shifting towards the newer areas such as Dubai Industrial City (DIC) and Dubai Investment Park (DIP) and the freezone locations such as the Jebel Ali Free Zone Authority (JAFZA) and Dubai Airport Free Zone Authority (DAFZA). The newly developed areas such as DIC, DIP or Dubai World Central (DWC) offer large plots of land, suitable for the global occupiers who prefer to build their own units. The old areas such Ras Al Khor or Al Qusais do not have large plots as land availability is scarce. The new areas also offer the following advantages: Easy access and connectivity Proximity to major infrastructure projects. Modern facilities and better quality products A large number of enquiries for industrial space continues to emanate from food & beverage (F&B) companies. Recent Industrial Transactions Company Industry Location Size (sq m) Date Hotpack Packaging DIP 32,500 sq m September 2013 Hellman Calipar Total Freight Barloworld Logistics RSA Logistics Rolman Group Arcelor- Mittal Byrne Equipment Healthcare DWC 12,500 sq m expansion Freight/ Transport September 2013 DWC 5,600 sq m July 2013 Logistics JAFZA 2,000 sq m July 2013 Logistics DWC 9,500 sqm temperature controlled facility Distribution JAFZA 33,000 sq m expansion July 2013 June 2013 Steel JAFZA 86,000 sq m April 2013 Equipment rental DIC 37,300 sq m n/a Source: Jones Lang LaSalle, Q

31 Main industrial areas DIC DWC DIP Jebel Ali Industrial JAFZA Extension Umm Ramool JAFZA North Al Qouz DAFZA Technopark Ras Al Khor Al Qusais 30

32 Industrial performance The industrial sector is considered one of Dubai s most resilient real estate markets, with rates remaining stable due to the lack of speculation in the market. Rental rates in completed industrial units in Dubai currently vary significantly from one area to another, with no real standardization of logistics facilities. The older areas have maintained their average rents of AED per sq m, due to their proximity to local markets, despite the poor quality of their stock and the relatively underdeveloped infrastructure systems. Completed units in newer but more peripheral locations (such as DIC and DIP) have started to offer higher average rents as they are seeing increasing demand. The free zone areas of Jebel Ali and Dubai Airport command a higher average of between AED per sq m for completed warehousing units Demand is starting to shift towards those areas offering better quality products, well developed infrastructure and access to ports and/or airports (e.g. DIC, DIP, JAFZA). Al Maktoum International Airport will start transforming into an integrated logistics platform over time, increasing the attraction of industrial areas to the south of Dubai. The industrial market has been much less cyclical than other sectors over recent years and continues to be dominated by long term commitments to single tenants. Warehouse rents Area Older Onshore Areas Newer Onshore areas (excl. Freezone areas) Freezone areas Land lease sales Area Unit Lease AED / sq m / p.a. Lease term Annual years (DIC) 1 year (DIP) (DAFZA rates ) 1-2 years Land Lease AED / sq m / p.a Older Onshore Areas Newer Onshore areas (excl. Free Zone areas) Free Zone areas Source: Jones Lang LaSalle, Q (JAFZA) (DAFZA) 32

33 Definitions and methodology Office: The supply data is based on our quarterly survey of 20 sub-markets, starting from Completed building refers to a building that is handed over for immediate occupation. Central Business District includes DIFC, DTCD, Sheikh Zayed Road, Burj Khalifa Downtown. Free Zone areas include Jumeirah Lake Towers, DIFC, TECOM, Dubai Silicon Oasis, DWC, Dubai Outsource Zone and IMPZ. Prime Office Rent represents the top open-market rent (open market refers to a new leasing not to a sitting tenant) 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. Data relates to headline rents, exclusive of incentives. Prime Capital Value represents the top open-market capital value that could be expected for a notional office building of the highest quality and specification in the best location on the survey date. Prime capital values are a calculation, derived from prime rents and yields: Capital Value = (Prime Annual Rent / Prime Yield From) * 100 Residential: The supply and stock data is based on our quarterly survey of 37 sub markets, starting from This data excludes labour accommodation and local Emirati housing supply. Completed building refers to a building that is handed over for immediate occupation. Residential performance data is based on the REIDIN monthly index. REIDIN.com Dubai Residential Property Price Indices (RPPIs) use monthly sample of offered/asked listing price data and land registry price data (transaction data). Index series are set at 100 starting at the beginning of each data set. 33

34 Definitions and methodology Retail: Classification of Retail Centres is based upon the ULI definition and based on their GLA: Super Regional Malls have a GLA of above 90,000 sq m Regional Malls have a GLA of 30,000-90,000 sq m Community Malls have a GLA of 10,000-30,000 sq m Neighbourhood Malls have a GLA of 3,000-10,000 sq m Convenience Malls have a GLA of less than 3,000 sq m Primary Malls are the good performing malls with high levels of turnover. Secondary Malls are the average performing malls with lower levels of turnover. Prime Rent Shopping Centre represents the top open market net rent that could be expected for a notional standard in line unit shop of 100 sq m situated in a specified shopping centre as at the survey date. Hotels: Hotel room supply is based on existing supply figures provided by DTCM 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 on a sample of more than 32,000 rooms across Dubai. Industrial: Industrial Stock is calculated on the basis of applying a site coverage to the total developed industrial land. Industrial rental values are based on average asking rents across 14 major industrial areas in Dubai. 34

35 Contacts: Dana Williamson Head of Agency MENA Chiheb Ben-Mahmoud Head of Hotels & Hospitality MENA Andrew Williamson Head of Retail MENA Michael Heitmann National Director, Industrial MENA Craig Plumb Head of Research MENA Cynthia Nasseh Senior Research Analyst MENA twitter.com/ JLLNews 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.