QUARTER REVIEW 2018 Real Estate Market Real Estate Performance

Market Intelligence. VPI Simplified. ValuStrat Price Index

ValuStrat Price Index Residential

-8.3% Q3 Y-o-Y

Source: ValuStrat

Key Indicators

Apartment Villa Apartment Villa Asking Sales Price Asking Sales Price Asking Rents Asking Rents

-0.9% 0.2% -1.7% 0.0% Q-o-Q Q-o-Q Q-o-Q Q-o-Q

Hotel Hotel Office Office Average Room Rate Occupancy Asking Sales Price Asking Rents

-5.7% 2.7% -2.5% -3.5% Jan-Aug Y-o-Y Jan-Aug Y-o-Y Q-o-Q Q-o-Q

Sources: ValuStrat, REIDIN, DCTAD

1 | Abu Dhabi Real Estate Market 3rd Quarter 2018 Review VPI ValuStrat Price Index Residential

The ValuStrat Price Index (VPI) is based on a representative sample of key residential locations in Abu Dhabi City. The VPI – Residential third quarter 2018 stands at 81.1 points, this is compared with 100 points for the base two years ago.

Abu Dhabi’s softening residential capital values were 13.8% lower than the same period in 2016, 8.3% lower than last year and 3.2% below the previous quarter. The weighted average residential value this quarter was AED 11,011 per sq m (AED 1,023 per sq ft), apartments stood at AED 12,217 per sq m (AED 1,135 per sq ft), and villas at AED 8,148 per sq m (AED 757 per sq ft).

Abu Dhabi’s gross yields averaged 6.7%, apartments at 6.8% and villas with 6.3%. All ten locations monitored by the VPI witnessed single digit quarterly declines in capital values. Highest price falls of 4%-5% were registered for villas in Al Reef and Hydra Village. Marginal price declines of 1.6% were found in Mohamed Bin Zayed City.

ValuStrat Price Index 5 Villa and 5 Apartment Locations in Abu Dhabi [Base: Q1 2016=100]

110

100.0

100 95.4 96.4 94.1 92.4 90.3 88.5 90 87.1 85.5 83.8 81.1

80

70

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2016 2017 2018

Source: ValuStrat

For more details, please visit www.valustrat.com/vpi MacroEconomicSnapshot

• Abu Dhabi’s Gross Domestic Product (GDP) as of Q1 2018, grew 9% YoY to AED 223.6 billion as per Statistics Centre Abu Dhabi • The emirate’s oil- related activities rose 18% YoY to AED 86.6 billion which is equivalent to 38.8% of the overall GDP • Non-oil activities contributed 61.2% of the emirates GDP which translates to AED 136.9 billion • Oil prices crossed USD 75 per barrel during the quarter, up from USD 60 January this year, prompting the IMF to raise UAE’s growth outlook

1,441,000 1,537,000 1,640,000 1,720,000 1,807,000 1,906,000 2012 2013 2014 2015 2016 2017E

Abu Dhabi City Population Source: Statistics Centre Abu Dhabi

• As of September 2018, the annual inflation rate was 3.5%, softening by -0.9% when compared to the previous month

• Housing and Utilities Expenses retreated 4% annually and 1% monthly

• With the possibility of up to two more interest rate hikes this year, as per the US Federal Reserve, borrowing costs in the UAE are expected to increase

Consumer Price Index vs. Housing Index January 2016 – YTD

125

120

115

110

105

100 General Index (2014=100) 95 Housing, Water, Electricity,

Jul Gas and Other Fuels Jul Jul Oct Oct Apr Apr Apr Jan Jan Jan Jun Feb Sep Jun Dec Nov Aug Feb Feb Sep Mar May May Dec Nov Aug Jun Sep Mar Mar May Aug

2016 2017 2018 Source: Statistics Centre Abu Dhabi

3 | Abu Dhabi Real Estate Market 3rd Quarter 2018 Review ResidentialSupply

• Estimated number of homes expected to be Abu Dhabi Residential Supply completed this year has been adjusted 2015-2019 300 downwards to 4,390 units (‘000 UNITS) 2015

250 • Only 1,969 apartments and 67 villas have been completed during the past nine months as per latest data 222 200 2016 226 • and received 42% and 27% respectively of estimated completions during the first nine months of 230 2018 2017 230 3.5 • By the end of the year, Al Reem Island is 0.9 expected to add 1,014 apartments, Al Samha (Al Reef 2 by Manazel) 860 villas, and Abu 235 200 Dhabi Island to add 480 apartments 2018E 2.6 2.9

250

Existing 2019E New Apartments* 300 New Villas* 467 *May be subject to significant downward adjustment Source: Urban Planning Council, REIDIN, MEED Projects, ValuStrat

ResidentialSales

• The median residential asking price Residential Asking Sales Prices stabilised since Q2. However, compared to last year prices declined 5%

• The median asking price for ready apartments stood at AED 13,003 per sq m (AED 1,208 per sq ft) displaying a marginal dip of 0.9% QoQ, and 3.7% lower than -8.8% -5.0% Last 2 Years Last Year the same period last year

• For ready villas, the median asking price was AED 9,117 per sq m (AED 847 per sq ft). A marginal increase of 0.2% compared to past quarter, 8.7% less than the same period last year -2.2% 0.7% Last 6 Months Last Quarter

*Ready Properties Only Source: REIDIN, ValuStrat ResidentialRents

• Overall median residential asking rents fell Residential Asking Rents 11% when compared to the same period last year

• On a quarterly basis, citywide median asking rents softened by 1.3%

• Median apartment asking rents fell 10.7% -15.7% -11.0% Last 2 Years Last Year YoY and 1.7% QoQ

• Citywide villa asking rents stabilised since last quarter, but were 12.8% lower than the same period last year -5.1% -1.3% Last 6 Months Last Quarter

Source: REIDIN, ValuStrat

Apartment Average Asking Rents (’000 AED Villas Average Asking Rents (’000 AED per Annum) and Quarterly Change (%) per Annum) and Quarterly Change (%)

63 85 Hydra Village -11.6% Al Reef 77 -3.3% 90 98 97 71 MBZ City 144 -5.9% Al Reem 101 -3.1% 155 142

115 87 Al Reef 146 -2.1% Al Muneera 134 -1.8% 157 164

103 231 275 -2.0% Al Bandar 141 3.1% Beach 217 332

120 333 Saadiyat 164 -5.5% Saadiyat 351 -6.0% 194 426

One Bedroom Three Bedroom Three Bedroom Five Bedroom Two Bedroom Quarterly Change (%) Four Bedroom Quarterly Change (%)

Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat

5 | Abu Dhabi Real Estate Market 3rd Quarter 2018 Review OfficeRents

• During the quiet summer period office Office Asking Rents asking rents in primary commercial districts saw a 3.5% drop QoQ, and were 1.7% less compared to a year ago'

• The average citywide asking rent for offices sized between 93 sq m (1,000 sq ft) to 186 sq m (2,000 sq ft) stood at AED 947 per sq m -16.5% -1.7% Last 2 Years Last Year (AED 88 per sq ft)

• Abu Dhabi main island office rents averaged AED 958 per sq m (AED 89 per sq ft) while office rents in Al Reem Island commanded rental rates averaging AED 883 per sq m (AED 82 per sq ft) 1.0% -3.5% Last 6 Months Last Quarter

Source: REIDIN, ValuStrat

OfficeSupply

• There were no major completions Abu Dhabi Office Supply during the last quarter, keeping total 2016-2019 office GLA at 3.51 million sq m (37.8 (Million sq m GLA) million sq ft) 0.13

• Estimated upcoming office GLA for the 0.09 3.61 rest of the year has been adjusted downwards to 92,820 sq m (approx. 1 3.51 million sq ft) 3.51 3.10 • The expected supply up until 2020 composes of 23 commercial projects from various private developers with an estimated GLA total of 303,662 sq m (approx. 3.3 million sq ft)

2016 2017 2018E 2019E

Existing Stock Expected Supply

Source: REIDIN, MEED Projects, ValuStrat RetailSupply

• Lulu Group opened its 148th store in The Mall Retail Malls & Shopping Centres at World Trade Centre Abu Dhabi (the Mall at (‘000 sq m GLA) WTCAD). The 9,290 sq m (100,000 sq ft) store features new layout and design features 1196

• Lulu Group announced 10 new hypermarkets currently under construction in Abu Dhabi 706 which are expected to be operational by 2020, locations include Al Falaha, Al Reem, , Saadiyat and Beda Zayed

• Mall developer Majid Al Futtaim began construction of City Centre Al Jazira. The mall 181 will have 153 retail stores, Carrefour Hypermarket and 15-screen VOX cinema 56 complex, in addition to a fitness centre, a clinic and F&B outlets 7

Convenience Neighbourhood Community < 3k sq m 3k-10k sq m 10k-30k sq m

Regional Super Regional 30k-90k sq m > 90k sq m

Source: REIDIN, ValuStrat

RetailPerformance

• Retail companies began registering for the Number of Malls and Shopping Centres Tax Refund Scheme, as tourists will be able to claim back VAT on UAE purchases before the end of the year 13 11 • Dutch retailer Hema opened its first store 9 outside of Europe. Located in Mushrif Mall, 7 the store specialises in low priced, originally designed, houseware products. 3

Convenience Super Regional Neighbourhood Community Regional < 3k sq m > 90k sq m 3k-10k sq m 10k-30k sq m 30k-90k sq m

Source: REIDIN, ValuStrat

7 | Abu Dhabi Real Estate Market 3rd Quarter 2018 Review HotelSupply

• As of August 2018, Abu Dhabi City had a total Hotel Room Supply of 27,833 rooms within 132 establishments 2016-2019 (‘000 KEYS) • 5-star Saadiyat Rotana Resort & Villas opened its doors with 327 rooms and 13 beach villas

• Three 5-star hotels are expected to open by the end of the year: The Abu Dhabi Edition 1.5 0.0 located in Abu Dhabi Marina's Al Bateen Area (255 keys), Rixos (378 keys) and Jumeirah Saadiyat Island Resort (371 rooms)

27 29

27 27

2018E 2019E 2016 2017

Hotel & Hotel Apt Rooms New Supply

Source: DCTAD, MEED Projects, ValuStrat

HotelPerformance

• Total international guests Jan-Aug ‘18 rose Source of Abu Dhabi Visitors by Region 6% YoY to 2,922,804 Jan-Aug 2018

• The average occupancy rate improved modestly by 2.7% to 72% as compared to the same period in 2017

• However, the Average Room Rate (ARR) and 29% Revenue per Available Room (RevPAR) continued to witness downward pressures 41% and fell 5.7% YoY and 3.1% YoY, respectively

• Local tourists remained the top source 9% market for Abu Dhabi visitors, followed by 8% Chinese, Indian and British guests 4% 4% 5% • The recently opened Warner Bros. World Abu Dhabi was included in Time magazine’s 2018 list of “World’s Greatest Places” together with another tourism driver which UAE US opened last year, The China Philippines India Others UK

Source: DCTAD IndustrialInvestment/Supply

• The first nine months of 2018 saw a total of 664,844 sq m (approx. 7.2 million sq ft) BUA of industrial projects completed in Abu Dhabi • An additional 25,617 sq m (276,739 sq ft) of 3,000 industrial BUA is expected to complete by 2,691 the end of the year 2,476 • Abu Dhabi (KIZAD) 2,000 1,938 launched new free zone warehouses 1,776 spanning 17,000 sq m (182,986 sq ft) and a total of 31,000 sq m (333,681 sq ft) of light Industrial Units (LIUs) featuring flexible 1,000 modular sizes from 380 to 761 sq m (4,090 to 8,191 sq ft) ICAD • Abu Dhabi Statistics Centre reported that Price High Price Low the Industrial Producer Price Index related Source: ValuStrat to manufacturing in Abu Dhabi rose by 80.6% during the second quarter 2018, a 13.4% increase compared to 71% during the same period in 2017

IndustrialPerformance

• Industrial property prices saw marginal increases in certain industrial zones such as ICAD during Q3 of 2018. Prices generally ranged between AED 1,776 per sq m to AED 2,691 per sq m (AED 165 per sq ft to AED 250 per sq ft) in established industrial areas such as Mussafah and ICAD 1

• High specification/quality built, and modern cold storage facilities, commanded rates in the region of AED 4,305 per sq m (AED 400 per sq ft) or higher

• Large and older warehouse properties were being offered from AED 1,722 per sq m (AED 160 per sq ft)

• Mussaffah and ICAD 1 & 2 were the more popular among industrial areas in the emirate whereas less activity was observed in KIZAD

• Rentals also remained relatively stable, although there has been a notable increase in availability of properties which is leading to competitive pricing particularly in older areas such as Al Mina were declines in asking rents are observed at the upper end. Rental prices generally averaged between AED 215 to AED 431 per sq m (AED 20 to AED 40 per sq ft) per annum. ICAD industrial areas have more modern type and higher-grade specification industrial facilities which commanded slightly higher asking rents during Q3

484 Industrial Rental Rates 431 431 (AED/sq m) 377 269 215 183 194

Rent High Rent Low Source: ValuStrat Al Mina Al Mafraq ICAD Mussafah

9 | Abu Dhabi Real Estate Market 3rd Quarter 2018 Review 04.09.18 Architecturally diverse homes find buyer favour in Dubai "An investor, driven by rental returns and capital growth, may elect to purchase in an architecturally diverse freestanding project by a private developer, with not such a high build specification as opposed to a master-planned gated community as it is not so much the lifestyle factor motivating his decision but the return on investment," 03.09.18 adds Cheryl McAdam, Director – Residential Valuations at Holding back the waves: Asia’s land grab Alongside hotels, there will be 4,000 residential units available as second homes — priced between Dh1.5m ($408,000) and Dh100m. Each of the 10 palaces on “Sweden” comes with a beach and a roof shaped like the hull of a Viking ship. The highest price achieved per square foot off-plan in the development is Dh4,000, says Kleindienst20.11.17 — more than four times the Dh979 median sales price per sq ft for villas in Dubai in the 12 months to 31.08.18 Home truths: The long and short of Dubai real estate Average Dubai property prices are 20 percent below their mid-2014 peak values, according to ValuStrat data. And although the IMF estimates that Dubai’s GDP will rise over three percent this year, the business environment is tough in many sectors, with more competition from 28.08.18 Understanding UAE Mortgage Redemption Fees and Loan to Value (LTV) Ratios Declan King – Managing Director and Group Head – Real Estate at ValuStrat discusses mortgage redemption fees and loan to value (LTV) ratios in the UAE on the Business Breakfast Show with Malcolm and Brandy on 103.8 27.07.18 Average Abu Dhabi property prices slip nearly 2% in Q2 The second quarter 2018 Abu Dhabi real estate review issued by consulting firm ValuStrat reported that Abu Dhabi’s residential capital values were 7.1 percent lower than last year and 1.9 percent than the previous quarter. 16.07.18 Demand to soon outstrip supply for Dubai home “We expect a longer term ‘legacy benefit’ of Expo, part of which would market Dubai’s various offerings such as business, trade, hospitality and tourism on a much wider global scale, resulting in a sustained growth in demand for commercial and residential properties,” pointed out by Haider Tuaima, Head of Real Estate Research at ValuStrat is a firm regulated by RICS

ValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuations, Research, Due Diligence and Divestment services across a diverse range of industry sectors since 1977. Offices in the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 800 corporate clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head Strategic quartered in all of MENA and Asia to be Partners of accepted into the prestigious RICS Tech Affiliate program.

Financial Institutions VPI ValuStrat Price Index

VPI Online www.valustrat.com/vpi

The ValuStrat Price Index for Dubai’s freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s freehold residential sector is constructed to represent the monthly price change experienced by typical residential units within Dubai. The VPI uses a comprehensive weighted sample representing more than 90% of all property types across the city and is built by our expert RICS Registered Valuers.

Research Methodology Every effort has been made to ensure the accuracy of this document. New supply data covers 38 defined areas in Dubai including non-freehold areas. Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. Director - Commercial Valuations The new supply database does not take into account most private building projects. Prices are calculated from actual transactions that have been carefully cleansed to exclude duplicates, bulk sales and outdated transactions. Rental data is derived from a carefully cleansed database of listings that don’t include duplicates, potential errors and outliers.

Copyright © ValuStrat Consulting FZCo. 2018 This document is the property of ValuStrat Consulting FZCo and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat Consulting FZCo. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat Consulting FZCo does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document.