Real Estate Market 1st Quarter | 2019 Review Real VPI Residential VPI Residential VPI Office Estate Capital Values Rental Values Capital Values Performance -12.4% -9.0% -14.4% Q1 Y-o-Y Q1 Y-o-Y Q1 Y-o-Y
Market Intelligence. VPI Simplified. ValuStrat Price Index
Source: ValuStrat Source: ValuStrat Source: ValuStrat
Key Indicators
Source: REIDIN, DTCM, ValuStrat
Residential Off-Plan Residential Off-Plan Residential Ready Residential Ready Residential Sales Ticket Size Sales Volume Sales Ticket Size Sales Volume Rents
1.59m 4,418 1.64m 2,677 94,929 AED Transactions AED Transactions AED p.a. 24.6% 4.8% 7.0% -0.9% -1.9% Q-o-Q Q-o-Q Q-o-Q Q-o-Q Q-o-Q
Hotel Average Hotel Office Sales Office Sales Office Daily Rate Occupancy Ticket Size Volume Rents
465 78% 1.05m 387 968 AED Jan-Dec 2018 Jan-Dec 2018 AED Transactions AED/sq m p.a. -5.5% 2.0% -17.5% 64.0% -1.0% Y-o-Y Q-o-Q Q-o-Q Q-o-Q Q-o-Q
Increase Stable Decline
1 | Dubai Real Estate Market 1st Quarter 2019 Review VPI ValuStrat Price Index
Residential The valuation-based ValuStrat Price Index (VPI) for Dubai’s residential capital values, VPI - Dubai Residential Capital Values displayed an overall 12.4% annual fall in 16 Apartment and 10 Villa Locations [Base: Jan 2014=100] capital values, with quarterly declines of 3.2%. This downward trend resulted in 27.1% 110
citywide capital value loss since the peaks of 98.0 97.9 97.5 97.5 97.0 100 96.7 96.2 95.4 mid-2014. All established freehold locations 92.7 89.5 monitored by the VPI witnessed price drops 90 87.0 84.0 since the last quarter, ranging from 1.8% to 81.5 5.2%. On an annual basis, 5 out of 26 locations 80 measured saw single-digit declines, villas in 70
Palm Jumeirah, Emirates Hills and Al Furjan, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 as well as apartments in Dubai Sports City 2016 2017 2018 2019 and Jumeirah Village Circle. Capital values dropped more than 16% annually for villas Source: ValuStrat located in Jumeirah Islands, apartments in Palm Jumeirah, International City, Discovery VPI - Dubai Residential Rental Values Gardens, Business Bay, and The Greens. 16 Apartment and 10 Villa Locations [Base: Q1 2014=100] The Dubai VPI now also analyses residential 110 rentals. The rental VPI is a 100 index with a 98.8 97.6 98.7 97.4 base set for Q1 2014, it monitors 16 apartment 100 90.1 90.4 87.7 85.6 and 10 villa locations within Dubai’s freehold 84.0 90 82.7 market and compares similar units within 78.8 78.0 76.5 those locations on a quarterly basis. The Q1 80 2019 residential rental VPI in Dubai stood at 76.5 points, declining 23.5% since 2014, 70
softening 1.9% quarterly and 9% annually. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Dubai’s net yields averaged 5.5%, with 2016 2017 2018 2019 apartments at 5.7% and villas at 4.5%. The Source: ValuStrat average residential occupancy rate stood at 88%. VPI - Dubai Office Capital Values 5 Office Locations Office [Base: Q1 2015=100]
The first quarter ValuStrat Price Index for 110 Dubai’s office capital values stood at 74 points, suggesting that average capital values are 26% 100 91.8 92.0 91.5 91.3 lower than the same period during the base 91.4 88.7 90.0 89.3 90 86.5 82.7 year 2015, 14.4% lower than the same period 80.7 80 77.7 last year and 4.7% below the previous quarter. 74.0 Office space in Jumeirah Lake Towers witnessed the highest annual drop of 16.7% 70 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 and 6.5% QoQ, Barsha Heights was second in line with losses of 15% year on year and 7.7% 2016 2017 2018 2019
QoQ. Downtown Dubai and Dubai International Source: ValuStrat Financial Centre (DIFC) saw the least quarterly declines of 1.4% and 2.1%, respectively. For more details, please visit www.valustrat.com/vpi
www.valustrat.com | 2 Macro-Economic Snapshot
• Amidst a challenging economy, optimism was Dubai Population observed among companies in the emirate, with a recent survey from the Department of Economic Development reporting 59% 3,235,000 expected economic growth in Q1 2019, up 18% 2019-Q1 3,186,000 YoY 2018
• Dubai’s economy grew 1.94% for full year 2018 2,976,000 with its real GDP valued at AED 398 billion, as 2017 per latest report from Dubai Statistics Centre 2,699,000 2016 • Real estate activities rose 7% and contributed 25% of overall economic growth last year 2,447,000 2015 • The United States of America was the top foreign investor in Dubai, making more than 2,327,000 AED 14.3 billion (USD 3.9 billion) foreign direct 2014 investment in 2018 according to Dubai Investment Agency (Dubai FDI) 2,214,000 2013 • Dubai Customs announced free zone trade jumped 23% YoY to AED 532 billion. However, 2,106,000 overall non-oil foreign trade displayed no 2012 change and was valued at AED 1.3 trillion
• In conjunction with directives to ease doing business in the emirate, Dubai’s Department of Finance issued five economic and financial Source: Dubai Statistics Centre initiatives to support Small and Medium Enterprises (SMEs) and Public-Private Partnership (PPP)
Consumer Price Index vs. Housing Index January 2016 – YTD • Population reached more than 125 3.2 million as of March 2019 120 • Dubai International Airport 115 (DXB) handled more than 89 110 million travellers in 2018, up 1.% and remained world’s 105 busiest airport in terms of 100 international passengers
95 • As of February, citywide Jul Jul Jul Oct Oct Oct Apr Apr Apr Jan Jan Jan Jan Jun Jun Jun Feb Feb Feb Feb Sep Sep Sep Dec Dec Dec Nov Nov Nov Aug Aug Aug Mar Mar Mar May May May inflation rate sank 3.9% YoY and dipped 0.5% MoM 2016 2017 2018 2019
General Index (2014=100) • Housing and Utilities Expenses Housing, Water, Electricity, Gas and Other Fuels plummeted 6.1% YoY and 0.5
Source: Dubai Statistics Centre MoM
3 | Dubai Real Estate Market 1st Quarter 2019 Review Residential Supply
• Last year, recorded actual completions Residential Supply reached 20,364 units. Equivalent to nearly 2016-2020 45% of the initial total projections (’000 UNITS) • For 2019, expected supply was adjusted downwards to 42,176 apartments and villas. This number is 54% less than the preliminary supply forecast, more delays are expected during the year, mitigating excessive residential supply concerns 2020E • More than half of the remaining new build 14.2 56.7 591 apartments this year will be located in 2019E 7.7 34.5 549 Business Bay, Jumeirah Village Circle, 549 2018 Dubailand, Dubai Silicon Oasis and Dubai Sports City 529 2017 • A little over 70% of villas to be handed over 497 2016 this year are concentrated in two locations, Dubailand and MBR City • Eight off plan projects were announced during Existing the quarter, promising 774 apartments and New Apartments* 1,201 villas by 2023. Including Dubai Holding's New Villas* Burj Jumeirah Tower, Emaar’s Golf Grove and *May be subject to significant downward adjustment Arabian Ranches 3, Cherrywoods and Central Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat Park at City Walk by Meraas
Residential Sales
• As prices kept on falling, sales volumes Ready Sales Volumes continued to rally for last 6 months perhaps with an anticipation of a bottoming-out market, as the first quarter saw off-plan sales 8.5% -0.9% increase 21.1% YoY and ready properties sales Last Year Last Quarter improve 8.5% YoY • Q1 saw the highest share (26%) of ready villa purchases priced between AED 1M - AED 2M since 2016 • Ticket sizes for both ready and off-plan saw considerable quarterly growth rates, off-plan up 24.6% and ready grew 4.8% Off-plan Sales Volumes • The average transacted ticket size for off-plan was AED 1.59 million and for ready properties 21.1% 4.8% AED 1.64 million Last Year Last Quarter • The median transacted price for ready apartments stood at AED 9,365 per sq m (AED 870 per sq ft), down 13.6% YoY and 1.4% QoQ • For ready villas, the median transacted price was AED 9,623 per sq m (894 per sq ft), down 8.7% YoY and 0.7% QoQ Source: REIDIN, ValuStrat
www.valustrat.com | 4 Residential Rents
• Overall residential asking rents fell 9.0% YoY Residential Asking Rents • However, on a quarterly basis asking rents -15.1% -9.0% dipped 1.9% Last 2 Years Last Year
• Compared to the same period last year, listed rents were down 9.5% for apartments and 8.1% for villas
• Average annual rents for 2-bed villas stood at AED 118,000, 3-beds at AED 164,000, and 4-bedroom villas remained at AED 217,000 -3.0% -1.9% Last 6 Months Last Quarter • Average rents per annum for studio apartments were AED 51,000, 1-bed at AED 71,000, 2-bed was AED 101,000, and 3-bedroom apartments were AED 132,000
• Residential occupancy in Dubai is estimated Source: REIDIN, ValuStrat at 88%
Office Supply
• An estimated total of 112,437 sq m (1.2 Office Supply million sq ft) gross leasable area (GLA) 2016-2020 was completed last year, bringing total (Million sq m GLA) office GLA at start of 2019 to 8.8 million sq m (95 million sq ft) • Two notable office buildings were completed during Q1, Huawei HQ with an estimated 8,175 sq m (88,000 sq ft) 0.15 GLA and Innovation Hub having 148,645 0.48 sq m (1.6 million sq ft) GLA. The Offices 9.30 8.81 4 and 5 at One Central DWTC were also 8.81 8.70 opened in late 2018 with total estimated office space for both at 64,590 sq m 8.47 (695,235 sq ft) • Available data for remaining office space under construction is estimated at 440,774 sq m (4.7 million sq ft) GLA • Most upcoming supply will be in DIFC (35%), Trade Centre (22%) and JLT (17%) • DIFC 2.0 was launched to add 594,580 sq m (6.4 million sq ft) GLA by 2024 2016 2017 2018 2019E 2020E
Existing Stock Expected Supply Source: REIDIN, MEED Projects, ValuStrat
5 | Dubai Real Estate Market 1st Quarter 2019 Review Office Sales
• Office transaction volumes during the first Office Median Transacted Prices quarter jumped 64% when compared to the previous quarter, including a substantial -33.3% -20.9% number of bulk sales of space priced at less Last 2 Years Last Year than AED 6,458 per sq m (AED 600 per sq ft)
• Overall transacted office prices were 20.9% lower than last year, and down 20.3% QoQ
• The median transacted price stood at AED 7,535 per sq m (AED 700 per sq ft) -11.9% -20.3% • Business Bay was the most popular choice for Last 6 Months Last Quarter office sales with a share of 58.9%, followed by Jumeirah Lake Towers (JLT) with 28.4% of overall transactions this quarter
• The median size of offices sold in Business Bay was 95 sq m (1,025 sq ft) and 113 sq m Source: REIDIN, ValuStrat (1,212 sq ft) in JLT
• 44,360 sq m (477,488 sq ft) of total GLA was sold during Q1, amounting to a total investment value of more than AED 408 million
Office Rents
• Median office asking rents declined by 4.4% Office Median Asking Rents YoY and dipped 1% QoQ • Asking rents for this quarter were 10.1% -10.1% -4.4% lower than two years ago Last 2 Years Last Year • The citywide median asking rent for a typical office size stood at AED 968 per sq m (AED 90 per sq ft) • Median asking rents commanded by Dubai International Financial Centre (DIFC) were at AED 2,045 per sq m (AED 190 per sq ft) for typically sized units between 93 – 186 sq m (1,000 – 2,000 sq ft) 2.0% -1.0% • In Business Bay, median asking rents stood at Last 6 Months Last Quarter AED 1,076 per sq m (AED 100 per sq ft) for a typical office area of less than 93 sq m (1,000 sq ft) • Office occupancy in Dubai is estimated at 84%
Source: REIDIN, ValuStrat
www.valustrat.com | 6 Retail Supply
• No less than 10 new retail projects or Malls and Shopping Centres expansions are in various construction stages, (‘000 sq m GLA) to add an estimated 932,089 sq m (10 million 762 sq ft) GLA to total retail mall stock in Dubai
• Above include Deira Mall on Deira Islands, Dubai Hills Mall, Nakheel Mall Palm Jumeirah, Cityland Mall in Dubailand, and 135 Avenues Mall in Dubai Silicon Oasis
• Deira Island Night Souk and Board Walk, with an estimated 122,758 sq m (1.3 million sq ft) GLA, has completed construction and will feature 5,300 shops and 96 F&B outlets 22
• City Centre Deira to undergo renovation worth 13 AED 377 million with no notable addition to its gross leasable area
• Sapphire Mall at Dubai Industrial Park was 30 259 498 1,026 1,696 officially opened adding 19,974 sq m (215,000 sq ft) GLA to Dubai’s retail stock Convenience Neighbourhood Community Regional Super Regional (< 3k sq m) (3k-10k sq m) (10k-30k sq m) (30k-90k sq m) (> 90k sq m)
Retail Completed Retail Under Construction Source: REIDIN, ValuStrat
Retail Performance
• During 2018, Emaar’s retail assets saw Number of Malls and Shopping Centres footfall collectively increase 5% YoY to 136 million visitors, Dubai Mall’s footfall was 84 2 million
• Occupancy across Emaar’s portfolio stood at 92%, commanding average rates of AED 6,458 1 per sq m (AED 600 per sq ft) as of December 3 4 2018
• Majid Al Futtaim Properties collection of malls in Dubai occupancy was 94.5%
• Visa announced e-commerce in the region 15 45 28 19 11 witnessed double digit growth during 2018, driven by 27% YoY increase in payment Convenience Neighbourhood Community Regional Super Regional (< 3k sq m) (3k-10k sq m) (10k-30k sq m) (30k-90k sq m) (> 90k sq m) volume and 44% YoY upsurge in online transactions Retail Completed Retail Under Construction Source: REIDIN, MEED Projects, ValuStrat
7 | Dubai Real Estate Market 1st Quarter 2019 Review Hotel Supply
• The year began with a total of 91,085 hotel Hotel Room Supply rooms and 24,882 hotel apartments within 716 2016-2020 hospitality establishments (’000 KEYS) • An estimated 2,259 units were added during 9.1 Q1 from the opening of eight hotels • Notable openings during the quarter were 24.2 Mandarin Oriental Jumeirah (256 rooms), S Hotel Al Barsha (258 keys), Grand Plaza Movenpick Dubai Media City (235 rooms) and Hilton Garden Inn Al Jaddaf (326 keys) • Dubai is set to witness one of the highest expected hotel room deliveries to date, in 140 response to upcoming EXPO 2020 as 116 developers rush to handover more than 116 103 107 33,000 additional keys before the event • Two new hospitality projects were announced this quarter to add 684 keys. These were Double Tree by Hilton Al Mankhool (458 keys) 2016 2017 2018 2019E 2020E and Revier Hotel Business Bay (226 keys) Hotel & Serviced Apt Rooms New Supply
Source: DTCM, MEED Projects, ValuStrat
Hotel Performance
• Total international guests in 2018 reached 15.9 Source of Dubai Visitors by Region million, up 0.82% YoY Jan-Dec 2018 • 2018 citywide occupancy rate stood at 78%, up 2% annually 2% • Revenue per Available Room (RevPAR) and 5% Average Daily Rate (ADR) continued to witness 6% 21% downward pressures on an annual basis, retreating 7.6% and 5.5%, respectively 9% • The top three source markets during full year 2018 were Western Europe (21%), GCC (18%), South Asia (17%) 10% • Indian tourists remained as the top source by
nationality, albeit seeing 2% annual decline 18% in numbers. Tourists from Russia ranked 4th and China (6th), continuing to display headline 11% growth rates at 28% YoY and 12% YoY, respectively 17% • Dubai Parks and Resorts ended 2018 with higher visitor count at 2.78 million, up 22.5% YoY on foot of growing share of visitors from Western Europe Russia, CIS & Eastern Europe the local market GCC Americas South Asia Africa North Asia & South East Asia Australia MENA
Source: DTCM
www.valustrat.com | 8 Industrial Investment/Supply
• Dubai Silicon Oasis Authority completed Industrial Prices construction of Light Industrial Unit phase 6, (AED/sq m) summing up a total investment of AED 324 million • Lootah Real Estate announced completion of its W10 warehouse project in Dubai 5,000 4,306 4,306 3,900 Investment Park with unit sizes ranging from 4,000 411 sq m (4,425 sq ft) – 560 sq m (6,027 sq ft), 3,000 2,690 2,153 as part of the 3 million sq m (32.3 million 1,938 sq ft) Senaeyat Industrial Hub project 2,000
• Dubai Industrial Park saw the inauguration of 1,000 a 37,161 sq m (400,000 sq ft) complex, housing a corporate headquarters, Al Quoz Dubai Jebel Ali distribution centre and manufacturing facility Investment Free Zone • A new 2,740 sq m (29,493 sq ft) distribution Park centre from a global pharmaceuticals firm was opened in Dubai Logistics District Rent - Upper Range Rent - Lower Range • Dubai Investment Park announced total space sub-leased at their facilities reached more Source: ValuStrat than 464,000 sq m (5 million sq ft) in 2018
Industrial Performance
• Industrial property prices remained relatively • No notable quarterly change in rental rates stable QoQ but declined 1.7% YoY on average recorded during the first three months of this year in monitored locations. However, • Prices generally ranged between AED 1,938 compared to a year ago, rents were down per sq m to AED 4,306 per sq m (AED 180 per 0.48% on average sq ft to AED 400 per sq ft) in established industrial areas with high specification/quality • Asking rents quoted were generally ranging built, and modern cold storage facilities priced between AED 296 to AED 538 per sq m per at the upper end annum (AED 27 to AED 50 per sq ft per annum) depending on factors such as industrial-grade specifications, quality, age, condition and size of the industrial facility
Industrial Rental Rates (AED/sq m)
538 538 538 484 484 484 355 322 300 300 322 296
Rent High
Rent Low Al Quoz Al Qusais Dubai Investment Jebel Ali Jebel Ali Dubai South Free Zone Industrial Area Source: ValuStrat Park
9 | Dubai Real Estate Market 1st Quarter 2019 Review Valustrat In Media
25th March, 2019 6th February, 2019 Dream of a home in the Burj Khalifa? Developers shrink size, ticket price of It is not that hard, say analysts off-plan homes Declan King, Managing Director and Group Head – According to the valuation-based ValuStrat Price Index, Real Estate at ValuStrat Dubai, said price is always the the Burj Khalifa’s price points in February were most immediate tool a developer can use to encourage between Dh2,155 and Dh3,200 per square foot. The net sales. “While the overall ticket price may be falling in yields ranged from 3.6 per cent to 5.2 per cent, said some parts of Dubai, it may not tell the full story, as Haider Tuaima, Head of Real Estate Research at smaller unit sizes may mean buyers are actually paying ValuStrat. relatively resilient rates per sq ft in some areas,” he informed.
12th March, 2019 14th January, 2019 3% growth in sales of Middle-Income Dubai has now become more of an Real Estate in Dubai ‘affordable buyers’ market’ – report Declan King, Managing Director and Group Head Real Haider Tuaima, Head of Real Estate Research at Estate at ValuStrat said: “The fourth quarter often sees ValuStrat Dubai, said 60 per cent of real estate sales in a pick-up in residential transaction volumes, with recent years were for apartments with a price below 1 buyers encouraged by special sales incentives and million UAE dirhams and villas priced between 1.5 and discounted year end pricing from both master 3 million UAE dirhams. developers and motivated home sellers. Increasing numbers of purchasers appear to have committed in Q4."
8th February, 2019 2nd January, 2019 Demand for smart offices in Dubai is Understanding Dubai’s housing demand growing and supply
Real estate experts have reported that the local market When it comes to understanding housing demand in is already requiring more smart offices. Companies are Dubai, we must also acknowledge other factors. Dubai now focusing on office designs and technology to has a unique demographic mix that is rarely found in accelerate business and reduce operating costs. “Real any other city in the world. Valustrat reports say 9 out estate developers are focusing on offices that rely of 10 of the registered 4.4 million Dubai residents are heavily on technology and smart services in response expats. to customer demand,” said Haider Tuaima, Head of Real Estate Research at ValuStrat.
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, Industrial Consulting and Due Diligence services across a diverse range of industry sectors since 1977. Offices in Strategic the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 1,000 corporate Partners of clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and startups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, Financial Institutions entertainment, transport and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program.
VPI ValuStrat Price Index
VPI Online www.valustrat.com/vpi
The ValuStrat Price Index for Dubai’s office capital values is a valuation-based index constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s residential capital values is a valuation-based index constructed to represent the monthly price change experienced by typical residential units within Dubai. The ValuStrat Price Index for Dubai’s residential rental values is constructed to represent the quarterly rental change experienced by typical residential units within Dubai. The VPI applies weighted averages using data samples representing more than 90% of all property types across the city’s freehold locations 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 Director - Commercial Valuations 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 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. 2019 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.