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DUBAI ANNUAL MARKET UPDATE 2020/2021 FOREWORD

MARKET SNAPSHOT 2020/2021

record transaction volumes seen, largely led by end- COVID-19 was a black swan event that user buyers. As an additional measure, we believe a brought unprecedented challenges and lowering of DLD transfer fees could potentially help dominated all our conversations, business transaction activity by further reducing total buying practices and occupier behaviour over 2020 costs. and its impact is expected to continue in 2021. However, outperformed most Although the impact of COVID-19 has pushed global cities as the UAE’s government is one price recovery further ahead, we are starting to of the most efficient and agile leaderships see resilience in the market as sales prices reach in , with a history of successfully development costs in many districts. Villa districts have particularly fared well due to rising demand navigating through regional and global from occupiers requiring more space and open challenges. The government’s efficient areas as they adjusted to changes in working measures to mitigate the impact of COVID-19 arrangements. However, apartment districts maintain while maintaining business continuity, their downward trajectory and are yet to show signs providing multiple stimulus packages to aid of plateauing. the economy and most importantly the recent availability of vaccines has bolstered market The office market continues to face headwinds sentiment and paved the way for a stronger with occupancy levels and rents remaining under 2021. downward pressure as existing supply issues and dampened new demand impact office absorption. Most new demand in 2020 stemmed from relocation Although still not par with pre-COVID levels, we activity, particularly from SMEs and regional have seen green shoots appear in the tourism, occupiers as most businesses adapted to market retail and hospitality industries over Q4 2020 with conditions. International corporates on the other an active winter season and the fact that Dubai is hand are largely continuing to work from home one of the few places globally that is relatively safe, with their real estate decisions deferred to Q2 2021 well connected and open to tourism, resulting in an subject to the wider public being vaccinated. We influx of visitors. Furthermore, the UAE government expect a second wave of relocations in 2021 when signing landmark peace accords and building large corporates inevitably adjust their workplace diplomatic ties with Israel and Qatar is also expected strategies. to boost regional stability and business sentiment. With strong fundamentals and renewed business While disrupting the real estate market, the resilience, we expect 2021 to be the definitive pandemic has also accelerated reforms. Measures year that Dubai has been preparing for years as to curb supply are gradually showing effect with we welcome the world for Expo 2020. With signs major stakeholders collectively addressing Dubai’s of gradual revival seen across sectors, we remain oversupply concerns. cautiously optimistic for a stronger 2021 on the back of efficient governments measures mitigating Furthermore, government-led demand drivers the pandemic’s impact, easing in global travel including a range of visa reforms, low-interest rates restrictions, vaccinations for the wider public and and attractive LTV ratios for first-time buyers are the positive impact created by the Expo 2020 on the supporting and sustaining demand. These steps are overall market. also resulting in a slowdown in the off-plan market and relative resilience in the ready sales market with

This publication

This document was published in January 2021. The data used in the charts and tables is the latest available at the time of going to press. Sources are included for all the charts. We have used a standard set of notes and abbreviations throughout the document.

2 core-me.com/research core-me.com/research 3 Residential Market

4 core-me.com/research core-me.com/research 5 DUBAI ANNUAL MARKET UPDATE 2020 - 2021

RESIDENTIAL SUPPLY Supply Delivered by Area 2020 Supply Delivered by Developers - 2020 , 2% , 2% Select Group, 1% G&Co, 1% Dubai Creek Harbour, 2% Tiger Real Estate, 1% Muhaisanah, 2% Others, 13% , 1% Dubai Sports Al Wasl, 2% City, 3% Others, 39% Dubai Islamic Dubai saw nearly 36,000 units come to market over South, Merano Towers by Damac in , Downtown Bank, 2% Dubai, 2020, bringing total residential stock to 586,000 BLVD Heights and Boulevard Point by Emaar in 4% Danube, 2% Dubai Silicon Deyaar, 3% units. While oversupply concerns remain, the Downtown Dubai, One JBR by Dubai Properties Oasis, 5% realization rate contracted in 2020 compared to in Beach Residences while JLT also saw DIRC, 3% our initial conservative forecasts of 49,000 units, Banyan Tree Residences delivered in 2020. , MAG, 3% partly due to the impact of COVID-19 on the overall 5% , Azizi, 3% supply chain and softening in demand. Although With many major developers announcing to 28% lower in volume than initial estimates, this is still curb supply, we expect a slowdown in 2021 Business a considerable volume being added to existing handovers with nominal new project launches. We Bay, 7% Dubai unabsorbed inventory and we expect absorption to conservatively forecast nearly 39,000 units for 2021, Properties, 6% be relatively slower in the near term. however, further revisions are expected on supply Dubai forecasts as they will inherently depend on buyer DAMAC, 8% South, 7% The most number of handovers over 2020 were confidence and an uptick in market sentiment as seen in Dubailand (Townsquare, Mudon and Akoya developers continue to adjust to ongoing market EMAAR, 15% Meydan & JVC & Nshama, 9% Oxygen) followed by Jumeirah Village Circle, MBR conditions. Mohammad Bin Rashid City and Dubai MBR City, 8% JVT, 12% City and Dubai South. Emaar continues to be Creek Harbour are expected to receive the highest the top developer by handover volumes in 2020 number of deliveries in 2021. contributing nearly 15% of total stock, followed by Supply Forecast by Area 2021 Nshama at 9%, Damac at 8% and Dubai Properties at 6%. Others, 19%

Major villa deliveries include Noor Townhouses by Villas Delivered Apartments Al Furjan, Nshama in Townsquare, Vardon and Pacifica by 30% in 2020 70% 2% Damac in Akoya Oxygen, Casa Dora Villas by Dubai Dubai Silicon Oasis, 3% MBR City, 20% Properties in Dubailand, Maple 3 by Emaar in Dubai Dubai South, 4% Hills Estate and Arabella 2 in Mudon.

Dubai Marina, 5% Prominent apartment handovers in 2020 include 586,000 units 36,000 units Rawda and Hayat Boulevard by Nshama in Total residential stock in Delivered in 2020 Townsquare, multiple deliveries by MAG in Dubai Dubai as of Q4 2020 Jumeirah Village Circle, 7%

Dubai Creek Harbour, 14% Residential Deliveries in Dubai 2011 - 2021 Downtown Dubai, 13%

40 Dubailand, 13%

35 Source: CORE Research

30

25 32 36 39 20 28

15

19 18 17 18 18 Number of units in thousands 10

12 11 5

0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Source: CORE Research

6 core-me.com/research core-me.com/research 7 DUBAI ANNUAL MARKET UPDATE 2020 - 2021

RESIDENTIAL Transaction Volumes TRANSACTION 3000 2500 TRENDS 2000

1500 Despite a challenging 2020, we have seen transaction activity in the ready sales market see 1000 an increase of 7% over 2019 volumes due to many demand drivers such as attractive sale prices, lower Number of Units interest rates and increase in loan-to-value ratios 500 acting as a catalyst. The total buying costs are the lowest than they have been in the more than 0 five years for a given unit, which is the one of the Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 biggest factors driving transaction volumes in recent months. After the initial slump in transaction activity Ready Sales Market Transactions Off-plan Transactions

in April and May 2020 due to movement restrictions, Source: REIDIN, CORE Research ready sales market monthly transaction volumes have steadily risen since the restrictions were lifted in June with December 2020 witnessing the highest contracted significantly by -32% year-on-year Although scaling back of new launches may not monthly volumes in two years. It is interesting to despite heavily incentivised payment plans and have an immediate impact on price recovery due note that this rise in transaction activity is despite a lower entry points as buyers preferred ready units to ample existing inventory, it is welcome news and slowdown in international travel and buyer activity. to avoid further uncertainty and delays that may be will greatly help in aligning the supply and demand We expect this momentum to continue over Q1 2021 expected from the off-plan market. We foresee this equilibrium of the overall market. We expect this as the market is proving to have a sustained demand preference for ready stock to continue in 2021. decrease in new launches, if sustained over the mid- for ready units driven by end-user demand. term, to also cause a slowdown on future off-plan On the other hand, off-plan market activity In line with government directives and recent news market transactions volumes. of many major developers holding on new project launches, 2020 saw a sharp decline in new launches, Over 2020, Emaar led the tally in transactions with dropping by 67% compared to 2019 as developers nearly 19% of all secondary market transactions and Residential Sales Transactions Trends increasingly adjust to market conditions and focus over 26% of off-plan transactions being concluded in on absorption of existing inventories. Emaar projects.

30000

25000

20000

15000

10000

5000 Number of transactions

0 2018 2019 2020 2018 2019 2020 2018 2019 2020

Ready Sales Market Transactions Off-plan Sales Transactions New Launches

Source: REIDIN, CORE Research

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SALES MARKET Apartment Sales Prices Q4 2019 vs. Q4 2020 The Dubai Discovery JLT Dubailand DIFC Jumeirah Business Dubai Downtown Palm Greens Sports Gardens Village Bay Marina Dubai Jumeirah & The City Circle While ready sale transaction volumes are rising The government is implementing many demand Views steadily, residential sales prices continue to follow a drivers to further aid transaction activity with easing downward trajectory with almost all areas showing access to finance while taking strong measures -4% -4% -6% reductions. While demand continues to grow, it is to attract and retain residents. The market is at -7% being outstripped by unabsorbed inventory and historically low interest rates and favourable loan- -10% -11% -11% new supply coming to the market. However, the to-value ratios with an increase of five percentage -13% -14% villa market has displayed relative levels of resilience points for first-time buyers expected to improve -15% -15%

with lower year-on-year reduction in values due affordability in the ready sales mortgage market. -20% to evolving occupier needs for more space and -23% outdoor areas in the wake of COVID-19 supporting In addition to the long-term visa regulations -26% demand. The Springs and The Meadows (+1%), announced in 2019, 2020 saw more reforms being (-3%), (-4%) and implemented such as the retirement visa and remote Jumeirah Park (-5%) were the most resilient villa working visa which are expected to create steady -34% -35% -35% -35% districts with nominal changes in year-on-year sales demand as more resident expats and international -39% -39% -41% -40% prices, bolstered by a strong Q4 transaction market buyers choose UAE to settle down and contribute to performance. sustained population growth. Year-on-Year % Change Change in Price Since Peak 2014 Apartment districts on the other hand continue to We expect these demand drivers and robust Source: CORE Research see sharp declines, with only the prime apartment measures taken to mitigate the risks of COVID-19 districts such as Downtown Dubai (-4%), Palm coupled with a successful vaccine drive to positively Jumeirah (-4%) and Dubai Marina (-6%) showing impact overall market sentiment and in-turn relatively lower levels of change in annual prices. transaction volumes. We are also witnessing some The more affordable and outer apartment districts tenants who have a long-term view, making a shift such as (-14%), from renting to owning as a form of savings plan (-15%) and Dubailand (-15%) have been the weakest due to attractive entry points and easy access to performing districts over 2020. finance. Therefore, we forecast continued market movement and steady transaction volumes, Looking historically from the peak values of 2014, particularly for ready units, as many buyers are villas have dropped nearly 31% while apartment actively looking for competitively priced assets in districts have dropped over 35% with older districts the market. such as JLT and Discovery Gardens witnessing over a 40% drop over the last six years.

Villa Sales Prices Q4 2019 vs. Q4 2020

Emirates Palm The Dubailand Jumeirah The Springs Jumeirah Arabian Hills Jumeirah Lakes Village and The Park Ranches Circle Meadows

1%

-3% -4% -5% -7%

-12% -11% -13%

-26% -27% -30% -31%

-36% -36% -38% -40%

Year-on-Year % Change Change in Price Since Peak 2014 Source: CORE Research

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created the need for larger living and outdoor From peak rents witnessed in 2014, villas have RENTAL MARKET spaces, particularly for families with children, dropped nearly 33% while apartment districts have as tenants accommodated work from home dropped over 40% with many districts displaying arrangements. This trend has boosted demand for reductions over the 45% mark over the last six years. Due to income contraction, repatriation and upon renewals to retain tenants. This has led a large many villa districts, in turn supporting rental values, As rents fall at a faster pace compared to sales oversupply issues, rents continue to fall across the section of tenants remain in their current premises although it is to be seen if this trend is sustained as prices, yield contractions have been witnessed majority of Dubai’s districts. Following a quiet Q2 as they have been able to achieve rental savings more people go back to physical offices over 2021. across villas and apartment districts. We witnessed 2020, Q3 and Q4 2020 saw significantly increased upon negotiations while avoiding uncertainty and both flexibility in headline rents and attractive activity in the rental market as tenants adjusted additional moving costs. However, depending upon Looking at year on year data, rents in apartment payment/lease terms coupled with other incentives/ to their new financial reality. Most tenants either landlord flexibility, tenants’ working arrangements districts in general have fallen sharper than villa waivers as key differentiating factors for developers/ looked to find the current (albeit corrected) rental and financial situation, many have relocated to either districts with a higher share of apartment districts landlords in an attempt to preserve occupancy value of their property to help them negotiate rent achieve more space or considerable savings as rents witnessing double-digit drops. The weakest levels. reductions with their landlords or relocate and have softened markedly over the last 12 months, performing apartment areas are Dubai Sports City reduce their rental outflow. particularly in the apartment districts. (-19%), Dubailand (-19%), The Greens and The Views Furthermore, efficient building and owner’s (-17%), and JLT (-15%). Villa communities witnessing association management in relation to establishing While landlords may push back on increasing Furthermore, tenants upgrading to bigger units the sharpest year-on-year declines are Jumeirah safety protocols in the wake of COVID-19 has helped tenant demands, most landlords are now willing or moving from apartments to villas was a major Village Circle (-13%) followed by Reem-Mira and The developers and landlords provide comfort to tenants to negotiate lower rents and flexible lease terms trend seen over 2020 as the aftermath of COVID-19 Villa in Dubailand (-11%). Prime villa locations like thus further aiding occupancy levels. the Palm Jumeirah (-5%) and (-4%) have shown resilience in rental drops, particularly in With household incomes expected to remain under Villa Rents Q4 2019 vs. Q4 2020 the upper end of the market with high absorption pressure, we foresee relocations to continue with a witnessed over H2 2020 with now limited stock majority of tenants remaining price sensitive.

Dubailand The Springs Jumeirah The Arabian Jumeirah Palm Emirates available in the market. and The Village Lakes Ranches Park Jumeirah Hills Meadows Circle

-4% -5% -5% -6% -6% -8% Gross Residential Yields

-11% 7.7% -13% 7.3% 7.0% 7.2% 7.0% 6.7% 6.4% 5.9% 5.5% 5.4% 5.1% 5.2% 5.4% 5.2%

-30%

-35% -34% -34% -38% -40% -40% -41% 2014 2015 2016 2017 2018 2019 2020

Source: CORE Research Apartment Villa Apartment Rents Q4 2019 vs. Q4 2020

Dubai Dubailand The Greens JLT Business Discovery Dubai Jumeirah DIFC Palm Downtown Sports and The Bay Gardens Marina Village Jumeirah Dubai City Views Circle

-9% -9% -11% -12% -14% -15% -15% -17% -17% -19% -19%

-36% -35% -35% -37%

-40% -41% -43% -43% -45% -44% -46%

Source: CORE Research Year-on-Year % Change Change in Price Since Peak 2014

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2021 Residential Market Forecast

Sales prices and rents to remain under downward pressure Capital values and rents are expected to continue softening with apartment districts facing further headwinds while established villa districts that saw strong take-up over H2 2020 and currently have limited supply are expected to see price resilience.

Flexibility in lease terms as market expected to largely remain tenant friendly As the market remains price sensitive, with most landlords willing to negotiate to retain tenants, flexibility in lease and payment terms are expected to continue.

Steady secondary sales transactions Residential secondary sales transactions are expected to be steady as underlying demand is supported by lower capital values and demand drivers such as financial, visa and social reforms.

Lower new launch volumes While the market continues to see significant handovers and unabsorbed inventory with oversupply concerns persisting in the near term, new launch volumes were at the lowest level in 2020 compared to the last 8 years. We expect new launch volumes to further reduce in 2021 as developers re- strategize and focus on absorption of existing inventory.

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OFFICE SUPPLY Office Rental Market Performance

Mashreq Bank’s purpose-built Dubai Office Supply 2017 - 2022 Office rents over 2020 have been under pressure to undercut the market while single landlords are headquarter in Downtown Dubai 3.50 across all the sixteen districts we track. However, being relatively resilient. This is because most strata and ICD Brookfield Place in freezones with predominantly single owned office buildings have lower occupancy levels, making DIFC were the two prominent assets such as DIFC, Dubai Internet City and Media landlords eager to attract and retain tenants handovers of 2020, adding 3.00 City, DWTC and D3 have displayed relatively lower whereas single landlord buildings have typically nearly 1.5 million sq. ft. of office levels of rental reductions partially due to rents witnessed higher occupancy levels and attracted

space and bringing the total 2.50 being controlled by single landlords. Old Dubai bigger corporates, a distinction they wish to Dubai office stock to 104.9 locations such as Deira, Bur Dubai and Garhoud maintain. Single landlords, therefore, are hesitant to million sq. ft. as of end of 2020. have seen the sharpest drops with average rents drop rents drastically while also wanting to minimize The office supply pipeline for 2.00 falling over 20 - 25% year-on-year as many tenants the impact on their valuations. 2021 is significantly lower than migrated to newer locations. Other strata districts 2.31 previous years with smaller office such Barsha Heights, Busines Bay and JLT continue While top and average rental ranges may still have portfolios in mixed-use buildings 1.50 to face challenges, displaying a steep 20% year-on- some room for contraction, bottom rental ranges

across Dubai expected to be 2.07 1.99 year drop in average rentals. are facing resistance for further rental reductions as GLA in Million sq. ft. handed over. In 2022, phases of 1.00 they near operational costs for landlords, a scenario large-scale projects such as the We have seen strata landlords, particularly those particularly being seen in districts with large levels office portfolio of District 2020 1.56 with mortgaged units be very flexible and willing of strata stock. 1.28 and Uptown Tower (Uptown 0.50 2020) in DMCC are expected 0.68 to be handed over H2 2020. As Dubai Office Rents Q4 2020 - with the residential market, we expect lower realisation rates and 2017 2018 2019 2020E 2021E 2022E 400 potential delays to push these 350

handover dates further. Built Expected 300

250

Dubai Office Market in Numbers 200

150 104.9 million sq. ft. 100

Total office stock ft./year in AED/sq. Rents 50

0

Downtown SZR (Trade SZR (1st D3 One DIFC DIC/ Barsha DIP JLT Business Bur DAFZA Deira Garhoud DHCC Dubai Center INTCHG Central DMC/ Heights Bay Dubai 34.3 million sq. ft. 70.6 million sq. ft. to 1st to 3rd KV Grade A office stock Grade B & C office stock INTCHG INTCHG) Rental range Average rent AED / sq. ft.

Change in Average Office Rents Q4 2019 vs Q4 2020

250

200

22% 25% 150

100

Rents in AED/sq. ft./year in AED/sq. Rents 50

Average Grade A Office Grade B & C Office 0 Vacancy Levels Vacancy Levels Bur Barsha JLT Business Deira Garhoud SZR* Downtown DHCC DIC/DMC/ One D3 DIFC Dubai Heights Bay Dubai KV Central

Source: CORE Research Source: CORE Research *Sheikh Zayed Road (refers to the stretch from Trade Centre to first interchange Q4 2019 Q4 2020

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Office Occupancy Levels Office Demand Trends While demand and enquiry levels slowed cases, etc. Such stringent measures are generally considerably over Q2 2020, we saw a significant missing in Grade B and Grade C buildings. As rents spike over Q3 and Q4 2020 due to pent-up demand have softened across grades, the advantage of and restructuring measures taken by many firms. moving into a Grade A building is multi-fold - from As most new office demand over 2020 stemmed Total Office Occupied vs. Vacant Stock While Q4 is historically a busy period for office a financial as well as user experience and safety from relocation or downsizing activity while new enquiries, Q4 2020 was busier than previous years perspective. market entrants remain limited, occupancy levels 120 and we expect this momentum to be continued over contracted across the board and the net absorption in Q1 2021. Another emerging office trend is that of occupiers continued to be negative. In addition to new office 100 moving between freezones. With most freezone deliveries, a significant amount of secondary market We have seen growing demand from technology office stock being largely single owned and at 19.8 19.5 24.6 25.2 stock has also been brought to market as firms’ re- clients who have witnessed a marked rise in business considerably higher rents, we have seen occupiers structure their manpower and spatial requirements 80 activity as COVID-19 disrupted occupier behaviour consider more competitively priced strata freezones in the wake of COVID-19, creating further downward and increased their market penetration. Most such as DMCC. Furthermore, we continue to see the 101.1 99.8 103.5 pressure on occupancy levels. 104.9 technology clients with healthy cashflows are in fact trend of old Dubai occupiers migrating to properties 60 looking to secure better commercial terms, longer located in Business Bay and Sheikh Zayed Road. We have seen an increase in subleasing activity 80.0 81.6 78.9 79.7 lease terms and early break clauses. Landlords by firms occupying purpose-built facilities such as 40 are also willing to provide the same as longer- The preference for fully fitted and partitioned HSBC, Standard Chartered and tenants in DIFC. The lease terms helps limit vacancy levels across their offices or CAT-A finishes (finished ceiling and raised trend for repurposing retail and other mixed-use portfolio. flooring) remains strong while shell and core stock 20 space into commercial space is also coming into in Million Sq. ft. Area Leasable Gross has seen limited movement as potential tenants are effect with offices at City Walk, Roof Top in Nakheel In the aftermath of the pandemic, most SMEs saw hesitant to invest in fit-outs and require immediate Mall and Golden Mile on Palm Jumeirah being prime 0 the immediate business impact of COVID-19 and occupancy. This decision driver has led well priced, examples. 2017 2018 2019 2020 were quick to restructure and adjust to market maintained, fully fitted units to witness good conditions. This reduction of staff coupled with absorption, particularly in strata markets such as Downtown Dubai and DIFC both saw the sharpest Approx. Occupied Stock Approx. Vacant Stock the need to lower office rents to reduce capital Business Bay and JLT. decline in occupancy levels (-10% year-on-year) as expenditure led to a significant rise in office enquiry new and secondary stock came to market. Older levels from this tenant segment with nearly 60% of Lastly, we have also seen many occupiers enquire Dubai districts of Bur Dubai, Garhoud and Deira also Of the total 104.9 million sq. ft. of office stock, the demand in 2020 focused below the 2,000 sq. ft. and analyse the market and use this data to saw a marked drop in occupancy levels, averaging nearly 25.2 million sq. ft. of stock is vacant (24% of area requirement. renegotiate with current landlords (who are being around -10% year-on-year as tenants relocated to all Dubai office stock), with the volume of vacant extremely flexible to retain tenants) and remain in newer areas such as Busines Bay and Sheikh Zayed stock gradually increasing over the last five years. This high concentration of enquiries below the 2,000 their present units. Most of these renegotiations Road. That said, we have seen a polarizing performance sq. ft mark is also due to most large corporates and are for a one-year term as tenants are deferring amongst Grade A and Grade B areas with most blue-chip occupiers continuing to work from home decision-making and not wanting to commit to Overall vacancy levels across Grade A stock of the market witnessing a flight to quality with or deploying hybrid models of work from home and longer terms due to business uncertainty. In other increased to over 22% as of Q4 2020 while Grade B Grade A areas typically witnessing resilience in both phased office occupancy. These large occupiers are instances where landlords were unable to meet stock vacancy levels remained steady at 25%. occupancy levels and rental drops. yet to restructure with many deferring real estate tenants’ expectations has resulted in tenants moving decisions to Q2 2021 subject to most of their staff out to more economical units. being vaccinated while awaiting instructions from their global headquarters. Many of these large multi- Office Occupancy Q4 2019 vs. Q4 2020 nationals who are headquartered in the US or UK are Office Enquiries by Area 100% 18 also taking a company-wide approach on workplace strategies and are thus slow to move back to Others 90% 16 physical offices. 7% Downtown Dubai, 2% 80% DIC/DMC/ 14 On the other hand, over Q4 2020, we saw an KV, 3% 70% Barsha Heights & 12 increase in leasing enquiries from large local or JLT Al Qouz, 4% 60% regional occupiers as they gradually phase back 34% DIFC 10 staff into physical offices. 6% 50% 8 Old Dubai (Bur 40% Office tenants are also becoming increasingly Dubai, Deira, Occupancy aware of the importance of building maintenance Garhoud) 6 7% 30% and facilities management. Tenants are looking to District GLA in Million sq. ft. District 20% 4 move to superior managed and built properties to bolster employee confidence and safety while not 10% 2 Sheikh Zayed significantly altering cash outflows. Most Grade A Road, 11%

0% 0 buildings which are largely single owned have been Downtown SZR* D3 DIFC DIC/ DAFZA Barsha JLT Business Bur Deira Garhoud DHCC proactive with better COVID -19 risk mitigation Business Dubai DMC/ Heights Bay Dubai Bay, 26% KV protocols such as visitor security, thermal screening, Occupancy Q4 2019 Occupancy Q4 2020 District GLA in Million sq. ft. frequent cleaning and disinfecting measures and Source: CORE Research building management protocols for COVID positive Source: CORE Research

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2021 Office Market Forecast

Office is here to stay Although flexibility around remote working will remain prevalent with hybrid models the largely accepted workplace strategy, the importance of the physical office is unlikely to be diminished as businesses will need common spaces to foster innovation, productivity, company culture and teamwork that are hard to sustain through remote working.

Second wave of relocations We expect a second wave of relocations in 2021 when global corporates inevitably adjust their workplace strategies. Most of the demand for these relocations/ consolidations are expected in the Grade A market.

Resistance in headline rents Landlords, particularly of single owned assets are hesitant to sharp rental reductions to minimize the impact on the overall portfolio value, however, they are providing a variety of incentives to attract and retain tenants as tenant retention continues to be the most important issue for landlords.

Occupancy and tenant retention As most new office demand is dominated by relocation or downsizing activity while sub-leasing activity also gathers pace, we foresee maintaining occupancy levels and retaining tenants be the main focus for commercial landlords

Rise of technology clients Globally, technology and allied sectors are the new major landlords, superseding the BFSI and service industries. We are also seeing rising volumes of technology clients and take-up in Dubai.

Furnishing and fitting out shell and core spaces As most enquiry levels are for fitted/plug and play offices, we expect landlords to increasingly convert their shell and core assets to CAT A fit-out (raised floor and ceiling) or completely furnish to aid absorption.

Repurposing building use With some of the older stock underperforming, developers and landlords are looking at refurbishing office units or repurposing retail/mixed use into office space to optimise asset classes and footprint.

Grade A supply performance With nearly 67% of new supply coming in the Grade A segment (2018 - 2020), most of the large occupier activity is expected to be in this segment in the next few years.

Rise in retail logistics With the pandemic accelerating acceptance of online retail, retail logistics is a growing segment, and we expect more players expanding to improve their omnichannel offering.

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