QUARTER REVIEW 2018 Real Estate Market Real Estate Performance

Market Intelligence. VPI Simplified. ValuStrat Price Index

ValuStrat Price Index Residential

-10.9% Q4 Y-o-Y

Source: ValuStrat

Key Indicators

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

-5.5% -8.9% -5.0% 1.5% 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

-4.8% 0.5% -2.2% -2.7% Jan-Nov Y-o-Y Jan-Nov Y-o-Y Q-o-Q Q-o-Q

Sources: ValuStrat, REIDIN, DCTAD

1 | Abu Dhabi Real Estate Market 4th Quarter 2018 Review VPI ValuStrat Price Index Residential

The ValuStrat Price Index (VPI) is a valuation-based weighted price index that represents the quarterly price change experienced by key residential locations in Abu Dhabi City. The VPI – Residential fourth quarter 2018 stands at 77.6 points, this is compared with 100 points from the base two years ago.

Abu Dhabi’s softening residential capital values were 19.5% lower than the same period in 2016, 10.9% lower than last year and 4.3% below the previous quarter. The weighted average residential value this quarter was AED 10,506 per sq m (AED 976 per sq ft), apartments stood at AED 11,657 per sq m (AED 1,083 per sq ft), and villas at AED 7,772 per sq m (AED 722 per sq ft).

Abu Dhabi’s gross yields increased to an average of 7.0%, apartments at 7.2% and villas with 6.7%. All ten locations monitored by the VPI witnessed single-digit quarterly declines in capital values. Highest quarterly price falls of 5%-6% were registered for villas in and Hydra Village. On an annual basis, apartments on and villas located in Mohamed Bin Zayed City were the least affected by the downturn, with capital values declining 7.3% and 7.4% respectively.

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 77.6 80

70

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017 2018

Source: ValuStrat

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

• A higher 2019 federal budget of AED 60.3 billion brought by improved oil prices was announced by the UAE government, with 59% allocated mainly to education and social development • Standard & Poor (S&P) affirmed Abu Dhabi’s 'AA/A-1+' sovereign credit rating and gave a stable economic outlook • International Monetary Fund (IMF) estimated the emirate’s economy to accelerate 3.7% in 2019 • Latest gross domestic product (GDP) released in October 2018 estimates oil related activities contributed 40.7% to the city’s total GDP • Statistics Centre Abu Dhabi announced total value of Abu Dhabi exports rose 40.9% YoY and reached AED 13.4 billion, as per a report released in December 2018

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

Abu Dhabi City Population Source: Statistics Centre Abu Dhabi

• Abu Dhabi’s Supreme Petroleum Council (SPC) approved ADNOC’s capital expenditure budget of AED 486 billion related to its five-year (2019-2023) growth plan • As of November 2018, the annual inflation rate was 2.1%, softening by 0.4% when compared to the previous month • Housing and Utilities Expenses retreated 4% annually and saw no monthly difference • For the fourth time, US Fed Reserve increased interest rates by a quarter point with UAE Central Bank following suit. As a result, borrowing costs increased

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 Oct Apr Apr Apr Jan Jan Jan Jun Jun Feb Sep Sep Jun Dec Nov Nov Aug Aug Feb Feb Sep Mar May May Dec Nov Aug Mar Mar May

2016 2017 2018 Source: Statistics Centre Abu Dhabi

3 | Abu Dhabi Real Estate Market 4th Quarter 2018 Review ResidentialSupply

• 3,304 apartments and villas, 62% of the total Abu Dhabi Residential Supply supply expected at the start of 2018 were 2015-2019 300 completed (‘000 UNITS) 2015

250 • saw 945 apartments completed in City of Lights (550 units), (322 units), Najmat Abu 222 200 2016 Dhabi (73 units) 226

• Al Reef 2 located in Al Samha saw 860 villas completed 230 2017 • 1,499 residential units were completed in 230 3.2 (549), Al Raha Beach (647) and 0.9 Abu Dhabi Island (303)

235 200 • 2019 is expected to add 3,249 apartments 2018E 3.2 2.9 and 2,867 villas, however, these estimations are subject to downward adjustments 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 fell Residential Asking Sales Prices 6.3% QoQ and 8.3% when compared to last year

• The median asking price for ready apartments stood at AED 12,292 per sq m (AED 1,142 per sq ft) displaying a decline of 5.5% QoQ, and 4.7% lower than the same -16.0% -8.3% Last 2 Years Last Year period last year

• For ready villas, the median asking price was AED 8,299 per sq m (AED 771 per sq ft). A drop of 8.9% compared to past quarter, 19.1% less than the same period last year -6.9% -6.3% 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 3.6%

• Median apartment asking rents fell 10.9% -13.8% -11.0% Last 2 Years Last Year YoY and 5% QoQ

• Citywide villa asking rents saw the first quarterly increase in 3 years of 1.5%, but were 11.1% lower than the same period last year -4.9% -3.6% 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 (%)

61 100 Al Reef 76 -1.7% MBZ City 137 -1.8% 97 152

69 118 Al Reem 98 -2.9% Al Reef 143 -1.0% 138 153

87 153 Al Raha Al Muneera -0.5% -2.0% 129 Beach 182 167 230

110 310 145 3.0% Saadiyat 346 -2.2% 220 430

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 4th Quarter 2018 Review OfficeRents

• Office asking rents in primary commercial Office Asking Rents districts saw a 2.7% drop QoQ and 1.4% 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 915 per sq m (AED 85 per sq ft) -14.0% -1.4% Last 2 Years Last Year • Abu Dhabi main island office rents averaged AED 958 per sq m (AED 89 per sq ft) while in Al Reem Island rental rates averaged AED 850 per sq m (AED 79 per sq ft) -6.1% -2.7% Last 6 Months Last Quarter

Source: REIDIN, ValuStrat

OfficeSupply

• Estimated office Gross Leasable Area Abu Dhabi Office Supply (GLA) completed in Abu Dhabi stood at 2016-2019 51,845 sq m (558,054 sq ft) (Million sq m GLA) 0.26 • An additional 19,810 sq m (213,233 sq ft) office GLA scheduled for 2018 0.07 3.58 were delayed 3.51 • Expected supply until 2020 composes 3.51 of 21 commercial projects from various 3.10 private developers with an estimated GLA total of 331,032 sq m (3.6 million sq ft)

2016 2017 2018E 2019E

Existing Stock Expected Supply

Source: REIDIN, MEED Projects, ValuStrat RetailSupply

• Al Maryah Central was announced to house Retail Malls & Shopping Centres about 40 international brands from global (‘000 sq m GLA) franchise operator Al Shaya Group. Set to open during Q3 2019 1196

• Tamouh Investment’s Paragon Bay with 24,385 sq m (262,456 sq ft) GLA in Reem 706 Island completed construction, it’ll feature no less than 73 shops and cafes

• Abu Dhabi City is expected to receive an estimated 317,594 sq m (3.4 million sq ft) GLA of shopping space in the next two years 181

• These includes Mall 55,000 sq m 56 (591,965 sq ft) GLA, Mafraq Mall 35,652 sq m (383,722 sq ft) GLA and Reem Mall 269,000 sq m (2.9 million sq ft) GLA 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

• Aldar’s retail assets posted healthy Number of Malls and Shopping Centres occupancy close to 90%, amidst a very challenging market condition 13 • United Nations Conference on Trade and 11 Development (UNCTAD) 2019 B2C 9 E-commerce Index released in December 7 2018, ranked the UAE as fourth most prepared developing economy for online 3 trade. Projected e-commerce spending to reach almost AED 100 billion in 2022

Convenience Super Regional Neighbourhood Community Regional 3k sq m 90k sq m 3k-10k sq m 10k-30k sq m 30k-90k sq m • Euromonitor International expects UAE < > retail sales to see headline growth rates as high as 16% during the next five years, when Source: REIDIN, ValuStrat compared to other GCC countries

7 | Abu Dhabi Real Estate Market 4th Quarter 2018 Review HotelSupply

• As of November 2018, Abu Dhabi City had a Hotel Room Supply total of 29,214 rooms within 137 2016-2019 establishments (‘000 KEYS)

• An estimated total of 1,058 keys were added during Q4 from the opening of four hotels

• The four hotels were Abu Dhabi Edition (198 rooms) in Al Bateen Marina, Andaz Capital 1.5 0.2 Gate (189 keys) at Capital Centre, Rixos Saadiyat Island (378 rooms) and Jumeirah at Saadiyat Island (293 keys)

• One key announcement made during the 27 29 quarter was to build the world’s first Warner Bros cartoon themed hotel (156 keys) 27 27

connected to the theme park 2018E 2019E 2016 2017

Hotel & Hotel Apt Rooms New Supply

Source: DCTAD, MEED Projects, ValuStrat

HotelPerformance

• Total international guests for Jan - Nov Source of Abu Dhabi Visitors by Region period rose 4.6% YoY to 4,035,088 visitors Jan-Nov 2018

• Average occupancy rate remained relatively stable at 73%, up 0.5% as compared to the same period in 2017

• However, the Average Room Rate (ARR) and 28% Revenue per Available Room (RevPAR) continued to witness downward pressure 40% and fell 4.8% YoY and 4.3% YoY, respectively

• Local tourists (28%) remained to be the top 9% source market for Abu Dhabi visitors, 9% followed by Chinese (9%), Indian (9%) and 4% British (6%) tourists 4% 6%

• posted strong visitor count and successfully reached a million-visitor milestone UAE US China Philippines • The capital's tourism and hospitality sector India Others could see improved key performance UK

indicators - on foot of new demand drivers Source: DCTAD IndustrialInvestment/Supply

• Styro opened a 40,000 sq m (430,520 sq ft) sq ft production facility in Industrial City Abu Dhabi (ICAD), equivalent to AED 70 million investment • expansion project has been 3,000 awarded to National Marine Dredging 2,691 Company, to provide additional 60,000 sq m 2,476 (645,780 sq ft) of new quay wall for cargo 2,000 1,938 handling 1,776 • Amana built its central storage and logistics facility measuring 50,000 sq m (538,150 sq ft) in Construction City at Khalifa Industrial 1,000 Zone Abu Dhabi (KIZAD) • Gerab Group announced to establish its ICAD presence in KIZAD by occupying an Price High Price Low estimated 867,000 sq m (9.3 million sq ft) of Source: ValuStrat development land • The city saw the completion of approximately 478,000 sq m (5.1 million sq ft) of industrial space in 2018 • Estimated supply as per available data stood at 309,000 sq m (3.3 million sq ft), to be delivered by 2021

IndustrialPerformance

• Industrial property prices remained stable when compared to the previous quarter. 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

• Rentals also remained relatively static. 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

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

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

9 | Abu Dhabi Real Estate Market 4th Quarter 2018 Review 27.12.18 It was a buyer’s market for UAE real estate in 2018 “This came as no surprise as off-plan projects with competitive payment plans were preferred by purchasers as the cost of bank borrowing saw four increases during 2018. No change was seen to existing mortgage cap 26.12.18 loan-to-value ratios,” explained a ValuStrat report. UAE developers change strategy to adapt to softening market Analysts point to a renewed sense of optimism, while noting that the “tenant’s market” that characterised 2018 will continue next year. “Prime residential areas, which saw relative resilience in 2018, may continue to see some improvement,” leading consultancy ValuStrat said in its 2019 outlook this month. 04.12.18 20.11.17 Visa reforms to help UAE retain appeal as an investment hub “Most transactions, 75 per cent, were for homes priced less than Dh2 million. Therefore, the new visa could increase the share of high-end home sales,” reckons Haider Tuaima, Head of Real Estate Research at ValuStrat. 05.11.18 Abu Dhabi property prices down 8.3% “The highest price declines of 4 per cent to 5 per cent were registered for villas in Al Reef and Hydra Village, while a marginal drop of 1.6 per cent was found in Mohamed Bin Zayed City. Meanwhile, residential rents in the capital fell 1.3 per cent over the last three months and 11 per cent year-on-year,” as per report released by leading consulting firm ValuStrat. 25.10.18 Remodelling an investment villa for a higher rate of return “Energy-saving upgrades, solar panels and energy-efficient heating or cooling devices make your home more efficient and generate savings on utility costs. They also make the property more marketable by delivering long-term benefits to the occupants”, according to Cheryl McAdam MRICS, Director – Residential 15.10.18 Valuation at ValuStrat. Diversify your investments: alternative real estate assets in the UAE “Expanding beyond villas and apartments offers investors portfolio diversification and the possibility of enjoying a more hands-off investment,” says Declan King MRICS, Managing Director & Group Head of Real Estate at ValuStrat. 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 Abu Dhabi’s freehold residential sector is constructed to represent the quarterly price change experienced by typical residential units within Abu Dhabi City. The VPI is a valuation-based weighted price index that uses a data 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. The new supply database does not take into account most private building projects. Prices are calculated from actual Director - Commercial Valuations 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.