nd

QUARTER REVIEW 2017 Real Estate Market

www.valustrat.com 2017Q2 Real Estate Performance

ValuStrat Price Index (VPI)

Residential Office

-1.2% 0.1%

Q2 Y-o-Y Q2 Y-o-Y

Source: ValuStrat Source: ValuStrat

Key Indicators

Transactions Volume* Average Transacted Apartment Villa Asking Rents Ticket Size* Asking Rents

-11% -10% 0.5% -0.2% Q-o-Q Q-o-Q Q-o-Q Q-o-Q

*Residential & commercial trans. *Residential & commercial trans. Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat Source: DLD, ValuStrat Source: DLD, ValuStrat

Office Office Transacted Hotel ADR Hotel Occupancy Asking Rents Prices

4.3% -7.0% -3% 2% Q-o-Q Q-o-Q Jan-May Y-o-Y Jan-May Y-o-Y .Source: REIDIN ValuStrat Source: REIDIN, ValuStrat Source: DTCM, ValuStrat Source: DTCM, ValuStrat

1 | Dubai Real Estate Market 2nd Quarter 2017 Review ValuStratPriceIndex Residential The second quarter 2017 VPI displayed an ValuStrat Price Index overall 1.2% annual decline in values. This 16 Apartment and 10 Villa Locations is equivalent to average capital values in Dubai being 14.3% below the 2014 peak. [Base: Jan 2014=100] Compared to the first quarter, two thirds of the apartment sub-market witnessed 120 growth while villas saw most of the declines. Since we first reported early indications of recovery 15 months ago, locations with prices that appreciated 100.1 more than 10% since then are: 98.5 98.1 98.0 97.9 100 97.9 97.5 97.5 97.0 International City (13.2%), 96.7 excluding Burj Khalifa (9.8%), Motor City (12.3%), and (10.1%). While the highest capital declines for the same period ranged from -5% to - 10%, seen in (-5.7%), 80

Lake Towers (-9.6%), Dubai Sports City Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun (-7%), villas (-5.7%), and 2015 2016 2017 (-5.7%). Source: ValuStrat Office Analysis of the freehold office market, ValuStrat Price Index taking into account various specifications, 5 Office Locations in Dubai qualities, and sizes of the most transacted [Base: Jan 2015=100] locations in Dubai. The Q2 office VPI stood at 91.5 points, suggesting that average 120 capital values for office space are 6.5% lower than the same period during the base year 2015, marginally higher than the same period last year and 0.5% lower than the previous quarter. Downtown Dubai 100 100 97.9 office prices saw the highest annual 97.7 97.0 increase in capital values of 22.3%, while 91.8 92.0 91.5 91.4 90.0 neighbouring office prices 88.7 fell by 14.3% YoY. Both DIFC and saw annual increases of 2.1% and 4.8% respectively. 80 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun

2015 2016 2017

Source: ValuStrat

www.valustrat.com | 2 MacroEconomicSnapshot

• Dubai’s Economic Development Committee estimated a 3.1% growth rate for this year • Dubai’s GDP for 2016 grew by 2.85% at constant prices, as Construction contributed 6.4% and Real Estate Activities contributed 6.6% to overall GDP • Dubai Customs reported that non-oil foreign trade grew 2.7% to reach AED 327 billion in the first quarter of 2017 • Dubai International Airport’s passengers reached 36.9 million up until May, a 6.7% increased YoY • Dubai’s population as of the end of the second quarter stood at 2.8 million

2,105,000 2,210,300 2,320,800 2,450,000 2,695,000 2,801,000 2012 2013 2014 2015 2016 2017-Q2 Dubai Population Source: Dubai Statistics Centre

Consumer Price Index vs. Housing Index • US Federal Reserve increased its January 2015 – YTD Federal Funds rate, the third consecutive quarterly increase of 25 basis points since last March. The UAE 114 Central Bank followed suit 112 • Borrowing costs have increased for 110 those taking mortgages, as the base 108 interest rate now totals 1.50% 106 • As of May, Dubai’s YoY inflation rate 104 went up by 2.26%, however, the monthly 102 rate dipped marginally by 0.22% 100 • Housing, water, electricity, gas and 98 other fuels expenses as of May this year 96 increased by 1.4% YoY 94 Jul Jul Oct Oct Apr Apr Apr Jan Jan Jan Jun Jun Feb Feb Feb Sep Sep Nov Nov Dec Dec Aug Aug Mar Mar Mar May May May 2015 2016 2017

General Index (2014=100) Housing, Water, Electricity, Gas and other fuels

Source: Dubai Statistics Centre

3 | Dubai Real Estate Market 2nd Quarter 2017 Review ResidentialSupply • As of June, around 28% of the projected Dubai Residential Supply 25,000 units for this year have been 2014-2018 completed (‘000 UNITS) • Many projects previously delayed from the past 18 months are either completed or expected to deliver this year, in line with their updated timelines • About 70% of total completions, 12.1 amounting to approx. 5,000 apartments & 600 35 villas, were concentrated in three areas: 550 3.0 497 522 500 485 22 , International City and Dubai 467 497 Silicon Oasis 450 • A total of fifteen off-plan projects were 400 launched in Q2, adding more than 6,000 2014 2015 2016 2017E 2018E units to the residential pipeline post-2020 • Notable announced projects were Vida Residences Dubai Mall (380 units), MAG Existing New Apartments* New Villas* 318 Business Bay (438 units), Bloom 467 Towers (689 units) and Casa Viva *May be subject to significant downward adjustment

Dubailand (401 units) Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat

ResidentialPrices • The median residential transaction price Residential Median Transacted increased 6.3% YoY Prices • On a quarterly comparison, the median transacted price was up slightly by 0.8% • The median transacted price for ready apartments stood at AED 11,733 per sq m (AED 1,090 per sq ft), up 7.3% YoY and 0.8% QoQ 0.0% 6.3% • For ready villas, the median transacted price Last 2 Years Last Year was AED 11,926 per sq m (1,108 per sq ft), declining 1% YoY but up 1% QoQ • During Q2, 64% of all residential transactions were off plan. Locations included Jumeirah Village with 84% of sales being off plan, Business Bay at 81%, Jumeirah Beach Residence and Downtown Dubai at 62% 1.7% 0.8% Last 6 Months Last Quarter • Significant sales of off plan properties in established locations, particularly those with competitive payment plans, resulted in slowing price growth and transaction * Ready Properties Only numbers of ready properties Source: REIDIN, ValuStrat

www.valustrat.com | 4 ResidentialRents • Overall residential asking rents were Residential Asking Rents 7.7% lower YoY • However, on a quarterly basis, asking rents remained flat for both villas and apartments • Compared to the same period last year, rents were down 7% for apartments and -9.4% -7.7% 10% for villas. Additionally, landlords Last 2 Years Last Year are seen offering incentives in the form of rent-free periods and flexibility with number of cheques • Softening of rents was mostly due to substantial supply of new units as projects are completed and handed over • Residential rents expected to stabilise -7.7% -0.4% in the medium term, given increased Last 6 Months Last Quarter demand stemming from population growth as well as households shifting Source: REIDIN, ValuStrat from Sharjah

OfficeSupply • As of June 2017, no major completions Dubai Office Supply have taken place YTD, keeping the 2014-2018 current estimated total office Gross (Million sq m GLA) Leasable Area (GLA) at 8.47 million 0.27 sq m (91 million sq ft) 0.19

• Expected office completions for this 8.66 year has been adjusted upwards to 8.47 8.47 190,000 sq m (2.05 million sq ft) 8.39 • Available data estimates 400,000 sq m (4.3 million sq ft) of office space is 7.88 currently under construction and due for delivery within next three years • Most upcoming office space will be in Jumeirah Lake Towers (60%), Business Bay (28%) and Barsha Heights (10%)

2014 2015 2016 2017E 2018E

Existing Stock Expected Supply

Source: REIDIN, MEED Projects, ValuStrat

5 | Dubai Real Estate Market 2nd Quarter 2017 Review OfficePrices

• Overall transacted office prices declined Office Median Transacted Prices by 2.4% YoY and 7% QoQ • Median transacted price for this quarter stood at AED 10,506 per sq m (AED 976 per sq ft) • Business Bay had 35,369 sq m (380,719 sq ft) of office space sold, taking first place -12.8% -2.4% with a 45% share of overall sales volume Last 2 Years Last Year followed by Jumeirah Lake Towers at 37% • About 55% of all offices sold have floor areas ranging between 92 sq m and 185 sq m (1,000 sq ft – 2,000 sq ft)

-4.8% -7.0% Last 6 Months Last Quarter

Source: REIDIN, ValuStrat

OfficeRents

• Median asking rents were down 0.5% YoY Office Median Asking Rents and up 4.3% QoQ • Asking rents for this quarter were 5.1% lower than the same period two years ago • The median asking rent for office space stands at AED 1,119 per sq m (AED 104 per sq ft) • Offices in Dubai International Financial -5.1% -0.5% Centre continued to post high asking Last 2 Years Last Year rents, with one office listed at AED 3,767 per sq m (AED 350 per sq ft) and for a floor area of 81 sq m (872 sq ft)

4.5% 4.3% Last 6 Months Last Quarter

Source: REIDIN, ValuStrat

www.valustrat.com | 6 RetailSupply • The 60-year-old Deira Fish Market has been Retail Malls & Shopping Centres replaced by a state-of-the-art waterfront (‘000 sq m GLA) market by Ithra Dubai, situated along Al Khaleej Road boasting a Gross Leasable 1,878 Area (GLA) of 104,373 sq m (1.1 million sq ft) • The Pavilion at Jumeirah Islands, a 2,787 sq m (30,000 sq ft) neighbourhood centre, opened with a mix of 14 shops and restaurants

• Nakheel issued a construction tender for 852 its Mall, a 130,000 sq m (1.4 million sq ft) GLA retail centre along Mohammed Bin Zayed Road expected to be ready by 2020 416

• An additional 3 million sq m (32.3 million sq ft) 182 BUA is in the pipeline, raising concerns of mall 44 oversupply and possibly further downward pressure on retail rents in Dubai 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 • Latest data from Dubai Chamber of Commerce Dubai Retail Malls Footfall and Industry (DCCI) indicated that super-regional (million visitors) and regional malls continued to experience healthy foot traffic, despite the interest for online 80 80 shopping which has grown steadily • Additionally, credit card transactions posted a 5% YoY increase during the annual shopping festival. 42 38 A possible sign of improved consumer confidence 24 24 24 • Strategy of sales promotions appears effective in 23 stimulating retail spending • Majid Al Futtaim Holding announced the complete acquisition of all 26 Geant stores from their Dubai Mall Mall of City City original franchise owner- Retail Arabia, all to be Emirates Centre Centre Deira renamed under the Carrefour brand 2015 2016

Source: Dubai Chamber

7 | Dubai Real Estate Market 2nd Quarter 2017 Review HotelSupply • As of May 2017, Dubai had 80,136 hotel Hotel Room Supply rooms and 24,300 hotel apartments, with an 2014-2018 additional 13,660 keys slated for completion (‘000 KEYS) this year 15.6 • Openings this quarter included the five star Rixos Premium with 443 rooms and four star 13.5 118 Rove Trade Centre with 270 rooms 103 98 104 • Four new hotel projects with a total of 3,027 92 keys were announced, including the Marsa Al Arab by Dubai Holding and the re-development of the old Ramada Hotel in • The above supply announcements also 2014 2015 2016 2017E 2018E included Rotana Hotel Central (190 Hotel & Service Apt Rooms New Supply rooms) and Mandarin Hotel Downtown (257 rooms) Source: DTCM, MEED Projects, ValuStrat

HotelPerformance

• Total international guests for the first five Source of Dubai Visitors by Region months of 2017 rose 10% YoY to 7.26 January - May 2017 million • Average occupancy from January to May 4% 2% was 85%, compared to 83% the same time 7% last year 19% • Average Daily Rate (ADR) for YTD May 2017 6% was 3% down, while the Revenue Per Available Room (RevPAR) dipped 0.9%, from same period last year 11% • Due to easing of visa policies, Russian visitor numbers climbed at a significant annual growth rate of 101% to become the 21% 10th largest source market for Dubai visitors. Additionally, Chinese visitor 12% numbers grew by 58% to now rank as the 4th largest source market • Overall, as of May 2017 the three biggest 18% markets for Dubai visitors were Western Europe (21%), GCC (19%) and South Asia GCC Americas (18%) Western Europe Russia, CIS & South Asia Eastern Europe MENA Africa

North Asia & Australia South East Asia

Source: DTCM

www.valustrat.com | 8 IndustrialSupply

• Dubai Municipality announced that as of Industrial Prices June, about 3% of all buildings under (AED/sq m) construction were for industrial use • JAFZA announced an 82% occupancy rate for warehouse and light industrial units within their district 5000 4,306 • A warehousing facility owned by Centre 4,198 4,000 4000 Point Logistics (CPL), measuring a total 2,800 of 22,550 sq m (242,726 sq ft), was 3000 2,315 2,045 opened at Dubai Logistics Corridor in 2000 Dubai South • Swiss global FMCG company – Nestlé, 1000 opened its third manufacturing facility in the UAE at Dubai South last May, Dubai Jebel Ali boasting a total area of 30,000 sq m Investment Free Zone Park (322,917 sq ft)

Price High Price Low

Source: ValuStrat

IndustrialPerformance

• Industrial property prices witnessed Industrial Rental Rates further marginal declines during Q2 2017. (AED/sq m) Prices are generally ranging between AED 2,045 per sq m to AED 4,306 per sq

m (AED 180 per sq ft to AED 400 per sq ft) Al Quoz 538 with high specification and modern cold 322 storage facilities priced at the upper end

• Asking prices for larger and older Al Quasis warehouse properties were slightly under 431 322 AED 2,153 per sq m (AED 200 per sq ft) • Nearby Emirates such as Sharjah, Ajman, Dubai Umm Al Quwain and Ras Al Khaimah 538 Investment 377 continue to exert competitive pressure Park on the Dubai industrial sector • Lower rents seen in locations such as Jebel Ali 538 & Al Quasis, with rates Free Zone 322 ranging between AED 300 to AED 484 per sq m (AED 28 to AED 45 per sq ft). Jebel Ali Marginal declines were also seen in 484 Industrial 322 locations such as DIP, Al Quoz, JAFZA Area and Jebel Ali Dubai 484 South 322

Rent High Rent Low

Source: ValuStrat

9 | Dubai Real Estate Market 2nd Quarter 2017 Review ValuStratInMedia

28.06.17 20.06.17

Real Estate from a Different Pros and Cons of Dubai’s Gated Persepective Communities

"...Specialised asset segments such as car Since 2013, villas in a gated community were 8% parking, self-storage, student accommodation more expensive to rent than in non-gated and retirement villages, although already developments. Also, there were nine times more popular in other countries, are not yet widely transactions for gated villas when compared to available in the UAE. But they will probably overall villa transactions since 2010. “Evidence emerge in time," says Declan King MRICS, indicates that there is a bigger pool of buyers / Managing Director & Group Head of Real investors for freehold gated units,” observes Estate Cheryl McAdam MRICS, Head of Residential Valuations at ValuStrat.

13.06.17 11.06.17

House Prices in Dubai’s Motor City Signs of a Possible Broadening in Rebound to Near 2014 Peak Dubai Price Recovery

ValuStrat, a property consultancy, said that a A quarter of all locations monitored by the VPI quarter of all locations monitored by its price are now within 10% or less of their price index (VPI) are within 10 percent or less of their heights from a few years back. "..It will be 2014 highs, with Motor City now just one interesting to see if these positive trends percent away from reaching its former peak continue in subsequent months and if price. additional areas become included…" said Haider Tuaima, Head of Real Estate Research at ValuStrat.

23.04.17 02.04.17

Five Tips for Mideast Retailers Going Why Dubai Marina is a Compelling Digital Investment Opportunity

“The e-commerce market in the Middle East is Owing to its strategic location and its nascent compared to the West. However, with excellent transport links – namely the Dubai 65 per cent of the Middle Eastern population Metro, Dubai Tram and the Dubai Ferry – and under the age of 30, businesses need to meet representing just over 21 per cent of all millennials where they shop”, reckons Sarah apartment sales, Dubai Marina (Marsa Dubai Umerani, Marketing Manager at ValuStrat. in Arabic) is currently the largest freehold community in Dubai.

www.valustrat.com | 10 About 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, Saudi Arabia and Qatar serve over 750 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 Dubai Riyadh Jeddah real estate, hospitality, healthcare, education, +971 4 326 2233 +966 11 293 5127 +966 12 283 1455 manufacturing, retail, entertainment, transport [email protected] [email protected] [email protected] and FMCG. ValuStrat is a Royal Institution of Doha Karachi + 974 4 496 8121 +92 213 517 4201 Chartered Surveyors (RICS) Regulated Firm and [email protected] [email protected] the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program.

ValuStrat Price Indices 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 Declan King, MRICS ValuStrat Price Index for Dubai’s freehold residential sector is constructed to represent the monthly price change Managing Director & Group Head of Real Estate experienced by typical residential units within Dubai. The [email protected] 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. Haider Tuaima Research Methodology Head of Real Estate Research Every effort has been made to ensure the accuracy of this [email protected] 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. The new supply database does not take into Vismer Mulenga, MRICS account most private building projects. Prices are Associate Director calculated from actual transactions that have been carefully [email protected] 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. Cheryl McAdam, MRICS Head of Residential Valuations Copyright © ValuStrat Consulting FZCo. 2017 [email protected] 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 Darshan Shah, MRICS document. ValuStrat Consulting FZCo does not accept any Associate Director & Head of Industrial Consulting liability in negligence or otherwise for any damage suffered [email protected] by any party resulting from reliance on this document.