Abu Dhabi Report H2 2012 “2012 was a pivotal year for the Abu Dhabi real estate market with the delivery of significant new developments which have raised the quality of living and working standards in the capital. The residential sub-sectors are now becoming more clearly defined by qualitative factors with tenants seeking value for money. In 2013 we expect to see a widening segregation in rental rates between the popular new developments, which, with occupancy levels rising, will be able to sustain rental levels and in some cases achieve growth, and the less popular older stock, that will continue to see rents come under downward pressure as landlords compete to maintain occupancy.“ Paul Maisfield, Associate Director & General Manager Abu Dhabi, Asteco Property Management Abu Dhabi Supply Estimates 2012 New Supply 2013 Scheduled New Supply Average Apartment Rental Rates (AED’000/pa) Apartments (in units) 9,000 12,000 Studio 1 BR 2 BR 3 BR Villas (in units) 6,000 5,000 From To From To From To From To Offices (in m2) 312,000 290,000 Marasy -- 87 110 135 170 185 237 Marina Square 55 65 75 85 110 130 140 180 Nation Towers - - 95 100 145 170 165 300 Reef Downtown - - 55 65 70 75 85 95 Residential Market Overview Rihan Heights -- 95 122 130 150 155 190 We estimate that approximately 15,000 new homes have been delivered to the Abu Dhabi market Saadiyat Beach Apartments -- 81 128 130 163 165 206 over the course of 2012, with a further 17,000 scheduled for completion in 2013. Shining Towers - - - - 120 140 175 230 The distribution of the new supply is presented in the table below. St. Regis Residences 75 90 110 145 180 190 240 260 Investment Areas Non Investment Areas Sun & Sky Towers -- 90 100 120 140 155 180 Total Mainland Reem Saadiyat Abu Dhabi Island Mainland In 2013 we expect to see a widening segregation in rental rates between the popular new 2012 3,500 3,300 400 2,300 5,500 15,000 developments, which, with occupancy levels rising, will be able to sustain rental levels and in some cases achieve growth over the next 12 months, and the older less popular stock, that will continue 2013 3,000 5,900 500 3,000 4,600 17,000 to see rents come under downward pressure as landlords compete to maintain occupancy. Total 6,500 9,200 900 5,300 10,100 32,000 The performance of the Abu Dhabi residential leasing market in 2013 will be strongly influenced by The introduction of this new supply has resulted in average rental levels declining across the market the impact the two recent Government announcements will have on demand: on average by 12% over the last 12 months. 1. Government employees required to reside in Abu Dhabi to qualify for housing allowances; As expected, when the new Investment Area developments initially entered the market during 2. All leases to be registered in the Tawtheeq system thus precluding the sharing of accommodation. the first half of the year, rental rates declined given the volume of availability. However, these developments have generated good levels of demand, driven by residents upgrading to better quality accommodation, which consequently resulted in more stable rents, particularly over the last Office Market Overview three months. In some cases, the rental declines seen in the first half of the year have been reversed as take up levels increased. We estimate that approximately 312,000 m2 (NLA) of office space has entered the market in 2012, 2 Current asking rents for selected new developments in the city are presented in the following table. with a further 290,000 m (NLA) scheduled for completion in 2013. The major new additions in 2012 included IPIC Headquarters, Nation Towers, Liwa Tower and Average Apartment Rental Rates (AED’000/pa) Shining Towers. Upcoming projects for 2013 include Al Bustan Complex, the ADIC Headquarters, Studio 1 BR 2 BR 3 BR World Trade Centre and Landmark Tower. From To From To From To From To The delivery of superior quality offices combined with attractive lease terms has resulted in growth Al Bandar 75 80 110 115 130 150 200 230 in transaction activity throughout 2012. Take-up has been dominated by the government sector Al Muneera - - 80 90 110 130 150 190 with entities including Abu Dhabi Tourism Authority, Ministry of Economy, Ministry of Labour, Department of Transport and Etihad Rail taking a substantial amount of office space. Private sector Al Zeina - - 80 90 115 130 140 165 demand has also increased, although requirements are relatively small (less than 500 m2). Capital Plaza - - 100 120 125 155 175 250 Average Grade A office rents are now AED 1,600 per m2 (net effective), representing a decline of Etihad Towers - - 100 149 139 177 195 324 close to 16% over the last 12 months. 02 For additional information call +971 600 54 7773 or email [email protected] www.astecoreports.com Summary H2 2012 and Outlook H1 2013 Residential Leasing – Apartments and Villas H2 2012 H1 2013 Transaction Activity Transaction activity has been strong as a result of new quality supply being delivered to the market combined We anticipate that transaction activity will remain strong in 2013, as more supply enters the market. with more attractive rental rates, driving internal movement. In addition, the recent announcement requiring Government employees to live in Abu Dhabi to qualify for a In addition, the new Tawtheeq lease registration requirements and the government’s efforts to stamp out illegal housing allowance is likely to lead to increased demand at the high end of the market given the value of housing sub-division of villas has led to an increase in demand at the lower affordable end of the market. allowances offered. Popular Prime developments offering a high-end lifestyle as part of a mixed use community (i.e. high quality, good The prime “life-style” developments will continue to prove popular and rising occupancy levels are likely to Developments and finishes/specifications and access to an array of high quality facilities/amenities) satisfied pent up demand at facilitate some rental growth in 2013 as there are currently few competing developments within this high-end Unit Types the top end of the market (i.e. St Regis, Etihad Towers and Eastern Mangroves). segment. There is a waiting list for apartments at the popular St Regis Residences on Saadiyat Island. The major Investment Area developments on Reem Island and Raha Beach have also proven popular with Saadiyat Island is anticipated to become increasingly attractive to residents as a premier living destination with improved quality, parking and access to facilities/amenities available at affordable rents, attracting demand the Cranleigh School due to open in 2014 along with the New York University. from existing residents seeking to upgrade and obtain better value for money accommodation. With its prime position on the Corniche and lifestyle offering, Nation Towers is expected to become one of the Older lower quality buildings have seen their vacancy levels reduce over the last three months where pricing had most sought after addresses in the city after having secured a high level of pre-leasing activity. been adjusted appropriately to tap into this segment of the market. Developments such as Al Muneera and Al Zeina are likely to remain popular as the communities are becoming Villa developments offering good community facilities (i.e. Golf Gardens and Mangrove Village) remained established with supporting retail and F&B outlets due to open during the year. popular and achieved premiums compared to standalone villas. There is currently a lack of good quality villa communities in Abu Dhabi and hence the existing villa developments will continue to prove popular. Leasing Terms and The market standard for rent payment terms was two cheques without additional costs, while some landlords Similar lease terms are expected to be the norm in 2013, with landlords of the most desirable developments / Incentives accepted more instalments but at a premium (usually around AED5,000 per extra cheque). units less willing to negotiate compared to those likely to accept more instalments to secure tenants. Some landlords of prime buildings in the city did not offer any incentives due to sufficient demand. Expatriate landlords with mortgage commitments are also more likely to offer better leasing terms and / or incentives in order to cover their mortgage repayments. Supply and Demand Close to 9,000 units were handed over on the mainland in 2012 most notably in the form of Al Reef Villas and A large percentage of the upcoming new supply for 2013 will be located on Reem Island with the expected Al Reef Downtown, Rayyana by Sorouh next to the Abu Dhabi Golf Course, Al Muneera and the last phases of completion of approximately 5,900 units, comprising the Gate District and a number of standalone towers on Al Zeina at Al Raha Beach. Shams Abu Dhabi. Close to 2,800 units were handed over in Marina Square on Reem Island this year, excluding Tala Tower which Good quality apartments will be delivered on the main Abu Dhabi Island in the Bateen Area in the form of is anticipated for handover in 2013. Marasy by ICT, as well as on Saadiyat Island, by TDIC. On the main island, the major new developments included Rihan Heights next to the Grand Mosque with over In terms of affordable supply, several buildings located within the Reef Downtown development will provide 860 residential units. additional apartments, whereas the Hydra Village development close to Shahama will deliver townhouses. Most of these new developments are part of the “new Abu Dhabi” and as such have benefited from good demand levels as tenants were keen to upgrade to better quality accommodation.