RESEARCH

THE HUB REPORT 2018

DUBAI’S TRANSFORMATION AS A GLOBAL HUB THE HUB REPORT 2018 | RESEARCH

KEY FINDINGS ’s transformation and development outpace those in our selected global hub Dubai and these cities. It does however as a city over the last decade is certainly cities. highlight the number of keys which have unmatched on a regional basis and been delivered over the last two years, arguably even on a global basis. In FINANCIAL AND BUSINESS at which point the figure was recorded the 2015 edition of The Hub Report SERVICES at 27.9 and when Dubai had 200,000 Knight Frank highlighted how Dubai had The domestic financial and business fewer people. The surge in the number established its position as a regional hub; services sector grew 55.6% in the last of keys delivered has primarily been a juncture between East and West, with decade with only (114.3%) driven by increasing demand, from both its economy centred on the growth in outperforming Dubai. Over this time new and existing source markets. Dubai OVERALL, DUBAI’S STATUS logistics, tourism, financial and business period Dubai has seen itself become a International Airport, ’s largest services – all encompassed within a recognised global financial centre; with airport by international traffic, recorded AS A GLOBAL HUB WILL luxurious lifestyle destination. Since then The Dubai International Financial Centre 83.7 million passengers in 2016, up 26% Dubai has long surpassed (figure 1) its recently being ranked among top 10 from 2014. CONTINUE TO STRENGTHEN regional peers and its global hub status, global financial centres in The Banker’s and the UAE’s, is now undisputable. To International Financial Centre rankings. RESIDENTIAL GIVEN ITS EXTENSIVE highlight this, Knight Frank has compared These achievements are underpinned by Finally, in the residential sector, Dubai’s seven key global hub cities, across four a zero tax environment/ low rate of tax for market has experienced a slowdown since CONNECTIVITY, STRONG sectors and a range of indicators to financial and oil companies. Currently it 2015 with prime prices falling by 3.8% in showcase Dubai’s global standing. takes just eight days to start a business the year to Q3 2017, among our selected which is marginally longer than the United cities only London (-4.6%) has seen ECONOMIC PROSPECTS, INDUSTRIAL AND LOGISTICS States (six days) and the UK (five days), greater price falls. We are seeing prices As part of the UAE’s economic although it is four times more than Hong beginning to moderate is some prime LOW TAX SYSTEM AND SAFE diversification plan (UAE Vision 2021) Kong’s figure. Finally the UAE has a well- areas, however, across submarkets where and Dubai’s Industrial Strategy 2030, regarded ease of doing business ranking, significant levels of supply are forecast HAVEN STATUS WHICH ARE the development of the industrial sector which has moved up from 26th to 21st to be delivered we are likely to see an is seen as strategically important goal out of 190 countries over the last year. increasingly fragmented market develop in ALL UNDERPINNED BY WORLD for the sustained long term success of Continuing developments in improving terms of price performance. Despite this economy. Over the 10 years to 2017 the business legislations and a maturing Dubai has remained attractive to investors sector recorded anaemic growth of 10.7% market means that this score is likely to and occupiers alike, in the 18 months to CLASS AMENITIES AND in Dubai compared to the Hong Kong continue to improve. June 2017, 217 nationalities purchased (42.0%), Singapore (59.6%) and Shanghai real estate in Dubai. INFRASTRUCTURE (85.8%). To support the sector’s growth HOSPITALITY Dubai has invested heavily in transport In the hospitality sector, the total Overall, Dubai’s status as a global hub will and infrastructure improvements over number of hotel room keys per person only continue to strengthen given its extensive these years, which as a result is now is significantly higher at 29.9 per 1,000 connectivity, strong economic prospects, ranked the third best in the world. Dubai’s people in Dubai, compared to our selected low tax system and safe haven status all expected industry growth rate of 57.4% hub cities. Although this is not a surprise underpinned by world class amenities and over the 10 years to 2027, is expected to given the disparity in populations between infrastructure..

FIGURE 1 DUBAI AND THE UAE’S REGIONAL COMPARISON – KEY INDICATORS

Rank of next highest Gulf Indicator Dubai Cooperation City or Country Ease of doing business (Rank) 21st Bahrain - 66th Number of days required to start a business 8 days Oman - 6 days Sea Ports, output, in millions of twenty-foot 15.7 ( ) 7.6 (Saudi Arabia) equivalent unit International passenger numbers (Millions) 83.7 (Dubai International Airport) 37 (Hamad International Airport - Qatar)

Source: Knight Frank Research

The

2 3 THE HUB REPORT 2018 | RESEARCH

MANUFACTURING & LOGISTICS

INDUSTRY GROSS VALUE ADDED % CHANGE, CONSTANT PRICE LOCAL CURRENCY QUALITY OF OVERALL TRANSPORT INFRASTRUCTURE, 2017-2018 (7=BEST) AIR TRANSPORT, FREIGHT, (MILLION TON-KM, 2016)

Australia 1,902

100% France 4,155

80% Dubai United Kingdom 5,604 Hong Kong

60% New York Singapore 6,423 Paris London 40% Sydney 6.0 6.6 Hong Kong 5.5 5.7 6.6 11,409 20% 5.2 6.9 4.9 United Arab 16,750 France United States Hong Kong 0% United Kingdom of America United Arab China 21,305 Australia Emirates Singapore Singapore Shanghai China -20% United States 37,890

Sources: Knight Frank Research, Oxford Economics 2007-2017 2017-2027 (Forecast) Sources: Knight Frank Research, World Economic Forum Sources: Knight Frank Research, World Bank

INDUSTRY OUTPUT AS A PROPORTION OF TOTAL GDP, 2017 SEA PORTS, GLOBAL PORT OUTPUT, IN MILLIONS OF TWENTY-FOOT EQUIVALENT UNIT 19.6 30.9 37.1 6.3 2.3 4.1 15.7 N/A Dubai Hong Kong Singapore Shanghai 4.2% 7.3% 8.0% 11.6% 13.0% 15.2% 20.0% 28.0% Paris Sydney London New York Shanghai New York Hong Kong London Paris Sydney Dubai Singapore

Sources: Knight Frank Research, Oxford Economics Sources: Knight Frank Research, JOC, Ports Australia Note: Industry consists of the extraction, manufacturing, utilities and construction sectors

INDUSTRIAL & LOGISTICS PROPERTY SECTOR

ABU DHABI AND DUBAI OVERVIEW 1 2 3 4 5 6 7 8 9 10 11 PRIME INDUSTRIAL RENTS (US$/SQ M/ANNUM) ABU DHABI DUBAI

Khalifa Industrial 6 Location Zone Abu Dhabi Abu Dhabi Airport Industrial City of Mussafah Dubai Airport Dubai Maritime Al Quoz Dubai Industrial JAFZA Jebel Ali (KIZAD) Free Zone Abu Dhabi Free Zone City Park Industrial Area 349 5 Established 2010 2006 2004 1998 1996 2007 1973 1997 1985 1995 2006 7 Status Free zone Free zone Non Free zone Non Free zone Free zone Non Free zone Non Free zone Non Free zone Free zone Free zone Non Free zone / 229 10 9 Free zone 8 11 Total area (km2) 100 12 40 N/A 0.7 2.3 27 52 56 22 146 127 123 115 113 DUBAI Average lease rate - 103 101 1 117 234 122 110 108 - 132 117 136 102 94 - 161 68 - 95 84 warehouse (USD/m2/annum)

30 mins to both Abu Dhabi Located next 15 mins to 17 mins Located next 35 minutes 25 minutes 15 minutes to 25 minutes to 15 minutes to Located next to Abu Dhabi Abu Dhabi Abu Dhabi to Dubai to Dubai to Dubai Al Maktoum Al Maktoum Al Maktoum to Al Maktoum Time to airport International and Al Maktoum International International International International International International International International International International

Airport Airport Airport Airport Airport Airport Airport Airport Airport Airport Paris

International Dubai

4 2 Sydney Airports London Shanghai New York New York Singapore Singapore 3 ABU DHABI Hong Kong Source: Knight Frank Research AUH - Abu Dhabi International Airport, DXB - Dubai International Airport, DWC - Al Maktoum International Airport (Dubai World Central)

Source: Knight Frank Research Data is latest available, currency conversion used is as the average of Q3 2017 period

4 5 THE HUB REPORT 2018 | RESEARCH

FINANCIAL & BUSINESS SERVICES

FINANCIAL AND BUSINESS SERVICES AS A PORTION OF FINANCIAL AND BUSINESS SERVICES, GROSS VALUE ADDED, % CHANGE TOTAL GROSS VALUE ADDED (%) DAYS REQUIRED TO START A BUSINESS, 2017

Dubai Shanghai Sydney New York 14.29% New York 2 3 3 4 25.21% days days days days

Hong Kong Singapore Australia France 23.29% Paris 17.75% 24% 30% 33% 34% 39% 39% 43% 48%

29.35% Dubai days5 days6 days8 23days 55.93% Singapore Hong Kong Paris London United Kingdom United States China 37.31% London Sources: Knight Frank Research, Oxford Economics 31.27% Sources: Knight Frank Research, World Bank

43.18% Sydney TOTAL BUSINESS TAX RATE (% OF COMMERCIAL PROFITS) EASE OF DOING BUSINESS RANKINGS, 2018 45.03%

55.53% Hong Kong 62% 34.88% 2 48% 5 44% 97.50% France Singapore 6 Singapore 31% 35.39% 23% Hong Kong 7 20% Australia 17% United States 14 16% of America United 183.58% United States of United 21 Shanghai America 114.30% Singapore China Kingdom Kingdom United Arab Hong Kong Australia 31 Emirates United Arab 78 Emirates France Note: A percentage of foreign banks and oil companies' Sources: Knight Frank Research, Oxford Economics 2007-2017 2017-2027 (Forecast) Source: The World Bank income in the UAE is taxable, otherwise 0%. Sources: Knight Frank Research, World Bank China

OFFICE PROPERTY SECTOR

PRIME RENTS, Q3 2017 (US$/SQ M/ANNUM) PRIME VACANCY RATES, Q3 2017 INDICATIVE RENTS IN DUBAI, Q3 2017 (USD/SQ M/ANNUM) 4 13 20 1 13 19 Dubai South 191 413 24 Dubai Investments Park 2 205 Marina 14 429 1.7% 3.1% 4.7% 4.9% 5.8% 6.4% 12.3% 14.0% 23 10 12 Hong Kong $2,499 7 5 8 21 Barsha 3 274 15 432

22 3 17 Deira 4 282 TECOM 16 457 15 6 New York $1,501 9 5 282 Silicon Oasis 17 475 16 14 TECOM C 6 283 Downtown Jebel Ali 18 476 London $1,444 Road 7 312 DAFZA 19 501 Paris $920 Sheikh Zayed Road (West) 8 348 Sheikh Zayed Road (East) 20 521 Singapore $843 11 18 The Greens 9 356 Dubai Design District 21 528 Paris Sydney $757 Dubai Sydney 10 22 2 Trade Centre District 393 557 Shanghai Dubai New York

$751 Singapore Shanghai $532 Hong Kong 1 JAFZA 11 410 Downtown 23 579 12 412 DIFC 24 752 London (West End) London (West Source: Knight Frank Research Data is latest available, currency conversion used Note: Central Business District rate is as the average of Q3 2017 period

6 7 THE HUB REPORT 2018 | RESEARCH

TOURISM

HOTEL KEYS PER 1,000 POPULATION, 2016 INTERNATIONAL PASSENGER TRAFFIC (MILLIONS), 2016 MAJOR SOURCE MARKETS AND TOTAL NUMBER OF OVERNIGHT VISITORS (MILLIONS), 2016

Sydney Airport (SYD) 11.4 41.9 Australia Japan 13.1 Singapore New York Singapore Changi Brazil Malaysia 10 Airport (SIN) 58.7 Hong Kong 3 6.4 8.8 11.8 Sydney Shanghai Hong Kong New York John F. Kennedy Canada New Zealand 16.6 International 7.9 Airport (JFK) 59.1 London Sydney China Oman

Charles de Gaulle 1.3 Airport (CDG) 65.9 France Saudi Arabia Shanghai Shanghai Pudong Germany South Korea 17.6 International Airport (PVG) 66 12 15.6 Paris 12.5 18.7 Hong Kong Spain Dubai Singapore Paris London Hong Kong International 29.9 Airport (HKG) 70.5 India Taiwan Dubai Heathrow Airport Indonesia United Kingdom (LHR) 75.7 Italy United States of America Dubai International Airport (DXB) 83.7

Source: Knight Frank Research Data only available for 5-star hotels Source: Knight Frank Research Sources: Knight Frank Research, Mastercard Global Destinations Cities Index Data to year end March 2016 Top five visitor groups

HOSPITALITY SECTOR

AVERAGE LENGTH OF STAY (NIGHTS), 2016 AVERAGE OCCUPANCY (%) AVERAGE DAILY RATE (US$)

Paris Shanghai Hong Kong Singapore Paris 70% $259 Shanghai 70% $194 $192 $174 $174 Dubai 77% $165 $166 2.1 2.7 3.3 3.4 $165 London 81%

Singapore 84% Dubai New York London Sydney Sydney 85% 3.6 5.3 7.4 7.9 New York 86% Hong Kong 87% Shanghai Hong Kong Paris Singapore Sydney London Dubai New York

Source: Knight Frank Research Includes hotels and serviced apartments 2015 data Source: Knight Frank Research Data only available for 5-star hotels

8 9 THE HUB REPORT 2018 | RESEARCH

RESIDENTIAL PROPERTY SECTOR PRIME GLOBAL CITIES INDEX HOW 41 sq m 56 sq m Singapore Shanghai 5.6% MANY 49 sq m -4.6% -3.8% Hong Kong Sydney London Dubai 14.9% SQUARE 4% 15% Shanghai 8% 45% 14% 0% 83% 22.5% METRES 19 sq m 2.3% Hong Kong New York DOES 25 sq m New York 13% 39.6% 11.3% 11% Paris Sydney US$1M

-2% 22.5% 58% 22.5% 47 sq m BUY Paris 28 sq m London 3.2% Singapore YOU? 138 sq m 0% 22.5% Dubai

XX% Prime residential price change, City year on year to Q3 2017

5% year change XX% XX% Personal income tax

Source: Knight Frank Research Top marginal rate Data as at 2016 Source: Knight Frank Research (Data as at Q3 2017)

LIFESTYLE

Hours of sunshine per year 3,481 1,936 1,410 2,535 1,662 1,978 2,022 2,592 Paris Dubai

Number of international schools Sydney 16 150 London 12 9 13 17 11 3 Shanghai New York Singapore Average cost of a litre of petrol (US$) $0.46 Hong Kong $1.90 $1.62 $0.73 $1.17 $1.06 $1.44 $0.80

Mercer quality of life ranking (2017) 74 71 40 44 38 102 25 10

Distance to the airport (km) 10 36 24 28 5 47 28 8

Source: Knight Frank Research

10 11 THE HUB REPORT 2018 | RESEARCH

EDUCATION QUALITY OF PRIMARY EDUCATION, PROGRAMME FOR INTERNATIONAL STUDENT ASSESSMENT (PISA) RESULTS, 2015 (MEAN SCORE) QUALITY OF EDUCATION, 2015/2016 (7=BEST) 2015/2016 (7=BEST)

6.1 6.1 5.0 5.2 5.3 5.3 5.5 5.5 4.3 5.4 5.4 564 556 5.0 548 4.9

535 4.9 4.9 531 527 523 518 503 497 509 510 494 498 496 493 494 499 495 492 470 4.2 437 434 427 OECD Average

Mathematics 490 Science 493 Reading 493 China France Australia Singapore Hong Kong United States Australia China France Hong Kong Singapore United Arab United United States China United States United Kingdom France Hong Kong United Arab Emirates Australia Singapore Emirates Kingdom United Kingdom United Arab Emirates Source: OECD Mathematics Science Reading Source: World Economic Forum Competitiveness Rankings Source: World Economic Forum Competitiveness Rankings

PRIMARY EDUCATION ENROLLMENT RATE, 2015/2016 TERTIARY EDUCATION ENROLLMENT RATE, 2015/2016

91.2% 91.4% 97.4% 98.3% 98.5% 100.0% United Arab Emirates 16.8% United United Australia China France Singapore China 26.7% Arab States Emirates France 58.3%

United Kingdom 61.9%

Hong Kong 66.8%

Singapore 82.7% 93.7% 99.9% Australia 86.3% Hong Kong United Kingdom United States 94.3%

Source: World Economic Forum Competitiveness Rankings Source: World Economic Forum Competitiveness Rankings

DUBAI FOCUS FORECASTED GROWTH IN NURSERY & K-12 STUDENT ENROLLMENT- MARKET SEGMENT PRIVATE VS PUBLIC, DUBAI (2015/2016) HISTORICAL GROWTH OF PUBLIC VS PRIVATE SCHOOLS, DUBAI CURRICULA, DUBAI (2015/2016) 20% 20% 19% 90% 10% CURRICULUM PRIVATE SCHOOLS STUDENTS STUDENTS SHARE 18% 265,299 29,437 169 173 4.3% UK 65 84,612 32% 158 6-YEAR Source: KHDA Private sector Public sector 153 CAGR 15% 146 148 Indian 32 78,716 30%

US 31 48,493 18% 3,418,227 2,994,735 3,232,332 FORECASTED DEMAND Private MOE 11 14,353 5% 2,744,987 1,975,318 OF STUDENT SEATS, DUBAI, 79 79 0.3% IB 11 15,161 6% 78 77 77 78 6-YEAR CAGR French 5 5,902 2% 299,622 504,224 592,017 636,766 646,284

Others 18 18,062 7% 2007 2012 2017 2022 2027 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 TOTAL 173 265,299 100% Population ages 0 to 19 60,000additional seats by 2020 Sources: Knight Frank Research, Total population Sources: Dubai Statistics Center, KHDA 2015/2016 Private sector Public sector Source: KHDA Oxford Economics Ages 0 to 19 as percentage of total Source: Knight Frank Research, KHDA

12 13 THE HUB REPORT 2018 | RESEARCH

HEALTHCARE HOSPITAL BEDS PER 1,000 PEOPLE HEALTHCARE SPENDING AND RESOURCES, US$ (LATEST AVAILABLE) OVERALL HEALTH RANKING, HEALTH & PRIMARY EDUCATION, 2015/2016 (7=BEST)

$9,892 Dubai 1.9 3 Singapore 2.5 Singapore 12 United Kingdom 2.6 Australia 17 $4,708 United $4,193 $4,600 United States 2.8 Kingdom 24 $2,752 France 26 $2,204 Australia 3.8 6.8 Hong Kong 29 $1,611 United States 33 $733 China 3.9 United Arab Emirates 40 Hong Kong 5.3 6.5 6.5 China 6.4 6.4 Arab Kong Hong France 6.3 6.3

China 6.1 States United United United France 6.2 Australia Emirates Kingdom Singapore

Sources: OECD, World Bank All data pertains to year 2016 (or the nearest year) Sources: OECD, World Bank, All data pertains to year 2015 (or the nearest year) Source: World Economic Forum Ranking Score HealthFacts Hk 2017, Singstats 2017

DOCTORS PER 1,000 PEOPLE (LATEST AVAILABLE) MEDICAL TOURISM RANKING

Australia N/A N/A N/A N/A N/A N/A N/A N/A 3.4 3.5

3.3 China rank rank rank rank 2.3 2.6 2.8 23 64.78 21 59.42 23 68.41 21 67.17 score score score 1.8 1.9 score

France Global 7.0 71.22 6 66.88 13 71.92 8 74.86 industry Hong Kong N/A N/A N/A N/A - - N/A N/A

Singapore 4 73.56 Destination 3 73.26 15 70.79 6 76.63 China Dubai environment States and services United United France Australia Kingdom Dubai 16 67.54 18 61.71 22 68.42 10 72.49 Singapore Hong Kong United Kingdom 2 74.87 2 77.3 Medical tourism 17 70.38 5 76.94 Quality of facilities Sources: OECD, World Bank, WHO and Excludes traditional / Chinese United States 2 N/A N/A N/A N/A N/A N/A N/A Singapore Ministry of Health medicine practitioners Source: Medical Tourism Index

DUBAI OPPORTUNITY

DUBAI HISTORICAL HEALTHCARE BED GROWTH FORECASTED GAP IN BEDS BY SPECIALTY

2020 2025

CAGR 13.7% 195 General surgery 281

298 Gastroentorology and GI Surgery 450

1,468 1,707 1,802 2,386 2,434 319 Orthopedics and Trauma 490

321 Rehabilitation / LTC 421

2012 2013 2014 2015 2016 399 Obstetrics and Gynecology 619

Source: Dubai Health Authority Private sector shows double digit growth and increasing market share Source: Dubai Health Authority

14 15 RESEARCH Taimur Khan Senior Analyst +971 56 4202 312 [email protected]

COMMERCIAL LEASING & AGENCY Matthew Dadd, MRICS Partner +971 56 6146 087 [email protected]

MENA PROJECT MARKETING & DUBAI PRIME RESIDENTIAL Maria Morris Partner +971 56 4542 983 [email protected]

HOSPITALITY Ali Manzoor Associate Partner +971 56 4202 314 [email protected] RECENT MARKET-LEADING RESEARCH PUBLICATIONS EDUCATION & HEALTHCARE Shehzad Jamal Partner +971 56 4101 298 [email protected]

MEDIA & MARKETING Nicola Milton Head of Middle East Marketing +971 56 6116 368 [email protected]

Dubai Office Report Inside View Dubai The World’s Smartest Q2 2017 2018 City—Dubai

Abu Dhabi Office Market UAE Hospitality Report Dubai View 2017/2018 Review Q3 2017 2017

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