JLL Dubai Real Estate Market Overview Q1 2014
Dubai Real Estate Market Overview
Q1 2014 Macroeconomic overview
Indicator 2012 2013 (f) 2014 (f)
United Arab Emirates
Population (millions) 8.9 9.1 9.3
Real GDP Growth (Y-o-Y) 4.2% 3.9% 3.9%
Consumer Price Index (% change) 0.9% 0.9% 0.8%
Real Estate Mortgage Loans (millions AED) 159,800 158,700* n/a
Dubai
Population (millions) 2.0 2.2 2.3
Real GDP Growth (Y-o-Y) 3.7% 4.4% n/a
Inflation (% Change) -1.7% 1.3% n/a
Sources:Oxford Economics; UAE Central Bank; Dubai Statistics Center 2013 f: forecasted * Figure for September 2013
2 Market highlights – Q1 2014
The Dubai real estate market commenced 2014 with optimism, driven by last year’s strong performance and positive sentiment from the Expo 2020 win. This optimism remains focussed on the residential sector which witnessed increased prices and rents across all areas, with rates growing faster in secondary locations. The retail, hotel and industrial segments continue to experience strong growth, while the office sector remains more selective with the potential for a broader based recovery throughout the year.
• The Dubai economy is expected to sustain its growth momentum. According • The residential market maintained its momentum with average prices to the Department of Economic Development, the GDP of Dubai will grow increasing 33% Y-o-Y and average rents improving 23% Y-o-Y. While 4.7% in 2014. Tourism, trade, transportation and real estate are all the market remains shy of it’s 2008 peaks in most locations, prices in witnessing strong performance and will continue to be the main drivers of some areas have now reached peak levels. Prices are expected to the economy. continue their upward trajectory over the remainder of 2014, albeit at a • The business outlook for Dubai continues to improve, with higher slower rate. expectations of future business conditions, sales volumes and profits. The • The retail market continues to improve, registering rental growth in both Department of Economic Development’s composite Business Confidence primary and secondary malls. Street shops also continue to witness Index (BCI) stood at 144.3 points in Q4 2013, up 8% from Q4 2012, with popularity with a number of new project launches. more businesses willing to invest in expansion, recruitment and technology upgrades. • The hotel sector maintained its strong performance supported by a • Activity in the real estate investment market remains strong. Dubai Land growing number of tourist arrivals. Year-to-February saw occupancy Department has revealed that the total value of real estate transactions in rates reach 88% and Average Daily Rates rise to USD 298. The hotel Dubai rose from AED 154 billion in 2012 to AED 236 billion in 2013. A major sector is expected to maintain it’s positive performance and growth, as component of this increase was the return of significant land transactions. the government introduces new initiatives to attract further tourists and Despite this increased activity, there remain few reported transactions of diversify the hospitality sector. completed, income producing assets. • The industrial market continued to perform well in Q1 2014. The area to • The office market sustained its recovery as overall occupancy rates and the south of Dubai continues to attract most attention, given prices have increased in Q1 2014. With occupier demand continuing to be improvements to the surrounding infrastructure, good connectivity, and focused on good quality space, average rents in prime locations are proximity to the Expo 2020 site. expected to increase with 2014 seeing a broader based recovery with increased interest in secondary office locations given the declining choice in prime locations.
3 Talking points – Q1 2014
• Abu Dhabi Department of Finance and the • The Dubai Land Department (DLD) has • Dubai Silicon Oasis has announced plans to Central Bank of the UAE have signed two announced that international buyers from 162 develop an AED 1.1 billion (150,000 sq m) separate agreements with Dubai Government different nations purchased AED 114 billion of ‘Silicon Park’ as the first integrated “smart to refinance a total of USD 20 billion in loans real estate in 2013, nearly half of the AED 236 city”, built using green architectural processes. and bonds for five years at a fixed coupon of billion total. Construction work is scheduled for completion 1%. • Dubai Roads and Transport Authority (RTA) by Q4 2017. • Inflation is running at the highest level since have announced planned expenditure of • Trident have announced that construction will December 2009. Prices in Dubai rose 2.6% in AED 7 billion for the year 2014, of which resume on the world’s tallest residential tower the year to February, according to figures AED 3.6 billion is allocated for construction (516 meters) in Dubai, Marina later in 2014. released by Dubai Statistics Centre. projects. Major schemes include The Dubai The Pentominium tower will feature 122 floors • According to ECA International, Dubai is Creek Canal (AED 2 billion), Al Itihad Bridge and house 172 luxury penthouses. (AED 1 billion) & the Dubai Tram project. among the 20 most expensive locations in the • The JW Marriott Marquis is set to overtake world for high-end rental apartments. Dubai • To meet the demand of hosting the Expo, Atlantis as the largest hotel in Dubai by th th jumped 19 places to be ranked 16 vs. 35 in DEWA will lead three major expansion projects number of rooms. The Marriott released 294 2012. worth AED 20 billion. The projects aim to rooms in March, bringing the room count of • January 2014 saw the establishment of two diversify Dubai’s fuel mix by adding new energy the property to 1,098. Once fully operational, new Government agencies, the Dubai sources such as clean coal, solar & nuclear the JW Marriott Marquis Dubai will have 1,608 Investment Development Agency & The Dubai power, and gas. rooms (compared to the 1,537 rooms in Corporation for Tourism & Commerce • Dubai Internet City announced it has welcomed Atlantis). Marketing, aimed at further regulating & 181 new companies in 2013. Continued growth • Emaar has launched a Preferred Access reinforcing the Emirates attractiveness to is expected given the forecast 5% increase in global investors & tourists respectively. IT spending in the UAE in 2014. Program providing investors & end-users the opportunity to make investments in new • The masterplan for the Dubai World Expo • Q1 2014 has witnessed the return of IPO and project launches. A down payment of 30% of 2020 site is to be submitted by Q3 2015. Total other capital raising activity amid the market the total property value is required & infrastructure works are estimated at rally. Emaar has announced plans to list its ownership must be retained until hand-over. AED 12.54 billion, with capital expenditure retail business and Emirates REIT, could within the actual “Expo area” of AED 8.24 become the UAE’S first publically traded real billion & spending on the surrounding areas estate investment trust later in 2014. totaling another AED 5.24 billion.
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4
Dubai prime rental clock
Q1 2013 Q1 2014
Rental Growth Rents Rental Growth Rents Slowing Falling Slowing Falling
Residential
Rental Growth Rents Rental Growth Rents Hotel* Hotel* Accelerating Bottoming Out Accelerating Bottoming Out Residential
Retail
Retail Office Office
*Hotel clock reflects the movement of RevPAR.
Note: The property clock illustrates where JLL estimates each prime market is within its individual rental cycle as at end of the relevant quarter. Source: JLL
5 Dubai office market overview Office supply
• Total city-wide office stock within areas monitored by JLL stood at • According to developers, around 1.5 million sq m of additional office space around 7.4 million sq m at the end of Q1 2014. The first quarter saw the is expected to enter the market by the end of 2016. Awaited projects addition of 83,000 sq m of office space, with completions including Burj include Park Central in Business Bay, Jumeirah Business Center 6 in JLT, Al Salam on Sheikh Zayed Road and The Burlington in Business Bay. the Business Park in Dubai Design District and mid-rise developments in • More than 600,000 sq m of office supply is expected to enter the market Dubai Trade Center District. by the end of the year, increasing the total office space in FY 2014 by • Business Bay remains the fastest growing area, accounting for 42% of total 9%. However, we remain cautious on the delivery of some of these new supply over the next three years. Other areas tipped to witness major projects within the timeframe. completions between 2014-2016 include DIFC, JLT, Silicon Oasis and Dubai Investment Park.
Dubai Office Supply (2011 - 2016) Breakdown of Expected Completions (2014-2016) by Sub Market
10 6% 0.4 3% 9 0.6 Business Bay 0.6 4% 8 SZR 7 4% DIFC 6 5 6% Dubai Design Destrict 4 8.6 7.3 7.4 8.0 42% JLT 6.3 6.9 3 6% Dubai World Central
Total Stock (million m) sq 2 Greens 1 0 8% Dubai Investment Park 2011 2012 2013 2014 2015 2016 DTCD Completed Stock Future Supply 9% Others 11% Source: JLL, Q1 2014 Source: JLL, Q1 2014
7 Major office completions - 2014
CBD
SZR Al Yaquob Tower SZR Burj Al Salam
Business Bay Tecom C The Burlington, The One Tower Prime Tower Silicon Oasis Donna Towers, The Lynx
DIP Schon Business Park
Completed
Under Construction
8 Office demand
• Q1 2014 saw office occupancy rates in • Landlords of prime buildings are adopting Dubai improve on the back of strong a more mature approach, gradually Examples of Recent Leasing Deals economic fundamentals and growing increasing their asking rents as business activity. occupancy rates increase. Area Acquired Industry Location • Vacancy rates within the CBD have • With around 277,000 jobs estimated to be sq m decreased to 26%, with a number of deals created by Expo 2020, more closing as corporates have sought new multinationals and start-ups are expected space. to establish offices in Dubai, providing a Architects 1,115 Media City further boost to the commercial market in • While there remain a number of large the future. active enquiries, most deals completed in Property Developer 520 Business Bay Q1 were relatively small, typically • The area around the Expo 2020 site is between 400 sq m and 1,000 sq m. expected to benefit most from this additional demand, with the attraction of Property Developer 370 Downtown Dubai • Occupier demand remains focused on this area being boosted by its established high quality office space in prime infrastructure facilities such as Al Sheikh Zayed locations. Due to limited availability within Hospitality 460 Maktoum International Airport and Jebel Road these offerings, some corporates are Ali Free Zone. considering built-to-suit options. Technology 460 Downtown Dubai • Single ownership buildings continue to account for the majority of demand, while Sheikh Zayed Private Equity 200 strata projects remain less popular. Road • Corporates are becoming increasingly aware of the importance of sustainability Financial Services 460 DIFC and there has been an increasing demand for LEED certified buildings. This is in line with the Dubai Municipality’s Media 460 Dubai Media City initiatives aimed at placing the Emirate on the list of the world’s top ten sustainable cities by 2020. Source: JLL, Q1 2014
9 Rental performance
• There was no significant change in office rents recorded in Q1 2014. • Prime rents in JLT remained relatively stable in the last quarter, having While rents increased marginally in some prime buildings, they remained witnessed a 36% increase Y-o-Y. Once again, this increase has been relatively unchanged elsewhere as landlords competed to attract limited to the best quality buildings that have been able to capitalise on occupiers. JLT’s metro access and free zone status. • The top open-market rent* in the DIFC recorded a 1% increase in Q1 • The rate of annual rental growth declined in the year to Q1 2014, 2014 to reach AED 2,630 per sq m. Elsewhere in the CBD, rents compared to that experienced in the year to Q1 2013, reflecting landlords’ improved slightly to AED 1,860 per sq m. more realistic attitudes which have seen asking rents increase at a • The office market in Dubai continues to see a “flight-to-quality”, with the gradual rate in line with demand and occupancy levels. best performing locations being DIFC, Burj Downtown and TECOM A&B. • 2014 is expected to see a continuation of the two-tier office market in • This two tier market is also evident within individual locations such as Dubai, although secondary locations may also benefit as occupier interest Business Bay and JLT. Prime rents in Business Bay have improved by increases. The strong pipeline is likely to restrain any pressure for rental 11% Y-o-Y. However, not all the commercial buildings in the area have increases in secondary locations but further declines are considered seen such increases. Towers overlooking SZR, in proximity to the metro unlikey. station and those with single ownership remain the most popular. Yearly Performance of Prime Rents in Selected Commercial Locations 100 Areas Yearly Change Index of Average Office Rents
80 DIFC 11%
60 Burj Downtown 10%
40 SZR 24% Q2 2009 = 100 = 2009 Q2 20 TECOM A & B 29%
0 Business Bay 11%
JLT 36%
Q2 2012 Q2 Q3 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 Q2 2009 Q2 Downtown Jebel Ali 5% Note: The average office rents are based on a basket of quality office buildings across Dubai * See Definition & Methodology for definition of Prime rents. Source: JLL, Q1 2014
10 Office market summary
Indicator Level Comment / Outlook
Includes all grades within 20 sub-markets, monitored by Current Office Stock 7.4 million sq m JLL.
Future Supply 1.5 million sq m Assuming that all pipeline supply tracked by JLL will complete. (2014 – 2016)
CBD vacancy levels dropped but remain high at around 26%. CBD Single The take up of office space continues to be counterbalanced 26% Ownership Vacancy by new supply entering the market.
Prime rents continue to improve in the best quality offices in Prime CBD Rental the prime locations. Secondary locations are seeing AED 1,860 / sq m (excl. DIFC) increased occupier interest as rents remain stable and space therefore becomes relatively more affordable.
11 Dubai residential market overview Residential supply
• As of Q1 2014 the total residential stock in areas monitored by JLL stood • Most of the upcoming residential supply will continue to be located on the at 365,000 units. peripheries; in areas to the South and East of Dubai. The largest • Around 1,800 residential units, mostly apartments, were handed over in proportion will be delivered in Mohammed Bin Rashid City, Business Bay Q1 2014. Notable deliveries include further villas in Phase 1 of Falcon and Dubailand. This is supported by the growth of surrounding City in Dubailand, Atlantic Tower in Dubai Marina, Rixos Residences on infrastructure particularly Al Maktoum International Airport. The Palm Jumeirah, Green Park in Jumeirah Village as well as Park • There is a shortage of middle income housing in the Dubai market. The Central in Business Bay. demand for middle income housing is expected to further increase over • An additional 24,000 residential units are expected to be handed over in the next few years, widening the current gap. This creates an opportunity 2014. Among the anticipated deliveries are Lakeside in IMPZ, Silicon for the real estate industry to deliver sufficient product to meet and Gate 1 in Dubai Silicon Oasis, Madison Platinum 1&2 in Dubailand and benefit from this growing demand. The Matrix in Dubai Sports City among others. • Around 39,000 residential units are scheduled to enter the market over Breakdown of Expected Future Completions the next two years, which will represent a 9% increase on the existing Mohammed Bin Rashid City stock. However, we expect some delays in the delivery of projects. 12% Business Bay Dubai Residential Supply (2011 - 2015) 21% Dubailand 500 Dubai Marina 9% 15 400 24 DSO 3% Dubai Sports City 300 3% 9% IMPZ 4% Burj Dubai Downtown 200 389 342 355 365 365 Jumeirah Village 4% 7% 100 SZR
Numberof Units (in000's) 4% JLT 5% 7% 0 5% 7% Arabian Ranches 2011 2012 2013 2014 2015 Palm Jumeirah Completed Stock Future Supply Source: JLL, Q1 2014 Source: JLL, Q1 2014 Others
13 Major residential completions - 2014
Business Bay Park Central Silicon Oasis Palm Jumeirah Silicon Gate 1, Rixos La Vista Residences
Dubai Marina Dubailand Atlantic Tower Madison Platinum 1&2
Dubai Sports City Champions Tower 1, The Matrix, Elite 5
Completed
Under Construction
14 Residential performance • The residential sector in Dubai started the year on a strong note with sale • Q1 2014 saw the continued recovery of secondary locations. As such, and rental price indices for both apartments & villas growing at a faster rental values have increased the most on a yearly basis in areas such as rate than during Q4 2013. Sports City (41%), International City (35%) and Discovery Gardens (33%). Values in the prime locations of Downtown and Marina improved 24% and • The REIDIN general Residential Sale Index improved by 30% Y-o-Y as of 21% respectively. February 2014, with apartments outperforming the villa sector. The villa sale price index and apartment sale price index have increased by 20% • As rent values and sale prices continue to rise in Dubai’s established and 33% Y-o-Y respectively. While figures for most locations remain shy of communities, tenants are likely to relocate to more affordable areas within their 2008 highs, some areas around Dubai have recorded peak levels. Dubai, with some moving to the neighbouring Northern Emirates. • On the leasing front, the REIDIN general Rent Index recorded an • As Dubai’s economy and property market continue to recover, new tighter improvement of 23% Y-o-Y and 7% Q-o-Q. The apartment rental index regulations were introduced in 2013 to avoid further speculation and increased by 26% Y-o-Y while the villa rental index has progressed by prevent a bubble. These efforts are expected to continue into 2014 as 12%. Y-o-Y. At this rate, rental prices remain lower than peak levels with similarities are drawn between today’s market and the speculative activity more room for growth over the year, albeit at a slower rate. witnessed in 2008.
Dubai Residential Property Sale Indices 140 Dubai Residential Property Rent Indices 600
120 500 100 400 80 300 60
200 40 January2009 = 100 January2003 = 100 20
0 0
Jul 2008 Jul 2009 Jul 2010 Jul 2011 Jul 2012 Jul 2013 Jul
Jul 2010 Jul Jul 2009 Jul 2011 Jul 2012 Jul 2013 Jul
Jan2008 Jan2009 Jan2010 Jan2011 Jan2012 Jan2013 Jan2014
Jan2009 Jan2010 Jan2011 Jan2012 Jan2013 Jan2014
Mar2012 Mar2008 Mar2009 Mar2010 Mar2011 Mar2013
Nov2009 Sep2008 Nov2008 Sep2009 Sep2010 Nov2010 Sep2011 Nov2011 Sep2012 Nov2012 Sep2013 Nov2013
Mar2009 Mar2010 Mar2011 Mar2012 Mar2013
Sep2012 Sep2009 Nov2009 Sep2010 Nov2010 Sep2011 Nov2011 Nov2012 Sep2013 Nov2013
May2008 May2009 May2010 May2011 May2012 May2013
May2009 May2010 May2011 May2012 May2013 Residential General Residential Apartment Residential Villa Residential General Residential Apartment Residential Villa Note: REIDIN.com RPPIs use monthly sample of offered/asked listing price data and land registry price data (transaction data). Dubai sales/ rent index series are calculated monthly and cover 7 city-wide, 8 main districts and 4 major communities/ projects. REIDIN tracks asking prices and rents Source: REIDIN, Q1 2014
15 Residential market summary
Indicator Level Comment / Outlook
Around 1,800 units were added to Dubai’s residential stock inventory in Current Residential Stock 367,000 Q1 2014.
Assuming that all supply tracked by JLL will complete. In reality, some Future Supply (2014 – 2016) 38,000 of the proposed projects may be delayed beyond their scheduled date.
Asking rents went up by 26% Y-o-Y. The secondary and more Apartment Rent affordable areas recorded faster growth rates than the prime locations.
Asking apartment sale prices went up by an average of 33% Y-o-Y, Apartment Sale Price with noticeable growth recorded in almost all areas of Dubai.
Villa rents have increased by 12% Y-o-Y. Asking rents for villas in the Villa Rent secondary and more affordable locations have been increasing at a faster rate than in the well established areas. Asking prices for villas have increased by 20% Y-o-Y. Villa Sale Price
Note: Direction arrows are based on the performance of the REIDIN monthly index.
16 Dubai retail market overview Retail mall supply
• The Dubai retail market has witnessed the completion of one major project • It is estimated that around 496,000 sq m of new retail space will enter the over the first quarter of 2014. The Beach on JBR (8,400 sq m) has Dubai market over the next three years. This includes Phase II of the increased the existing retail stock to 2.9 million sq m. Dragon Mart, the Agora Mall in Jumeirah, the expansion of Ibn Battuta • 2014 is forecasted to see an additional 31,000 sq m of retail space enter Mall (all scheduled for 2015); in addition to the Phase II of The Avenue the market. The year will continue to see the development of community and the expansion of the Dubai Mall (due for completion in 2016). and neighborhood centers including the Jumeirah Park Community Center • The Dubai retail market continues to be largely dominated by mega-malls and the Discovery Gardens Retail Centre by Nakheel. (80%). However, there is a growing trend aimed at serving the expanding • Q1 2014 saw the announcement of one new major retail space in Dubai, niche communities. Over the next three years, it is estimated that around with Majid Al Futtaim announcing a 93,000 sq m shopping mall in The 38,000 sq m of community & neighbourhood retail space will be delivered. International Media Production Zone (IMPZ). The mall will target the Projects under construction & announced include the International City growing communities around the area such as Jumeirah Village and Community Center by Nakheel and Wasl District by Wasl Properties Jumeirah Golf Estates. Phase 1 of the project is scheduled for completion among others. in 2015. Breakdown of Under-Construction Retail Space by Type of Mall Dubai Retail Supply (2010 – 2016) 251 3% 2% 3,200 214 14% 3,000 Super Regional 31
2,800 Regional 3,119 2,600 Neighbourhood
GLA GLA '000s in sq m 2,904
2,865 2,874 2,775 2,817 Community 2,400 2,649
2,200 80% 2010 2011 2012 2013 2014 2015 2016 Completed Under Construction
Source: JLL, Q1 2014 Source: JLL, Q1 2014
18 Major retail projects 2013 / 2014
Deira Al Ghurair Centre - Phase 2
Al Wasl The Avenue
International City Dragon Mart - Downtown Dubai Phase 2 Dubai Mall - Phase 2
Al Barsha Mall of the Emirates - Extension
Completed
JBR Under Construction The Beach
19 Rental performance – Estimated Rental Value (ERV)
• Oxford Economics estimates that Dubai’s retail sales (current prices) for • With the primary Super Regional Malls asking for high rental values and 2013 were AED 8.7 billion. This is projected to increase at a CAGR of offering very limited vacant space, retailers are now shifting their 6% from 2014-2020, reaching AED 14 billion in 2020. With this increase offerings to community centres. As demand has increased for these, in spend, the retail sector is expected to maintain it’s position as one of rental values are improving for both primary centres (e.g. Emirates Hills the fastest growing real estate sectors in the Emirate. Town Centre) and more secondary locations (e.g. Gold & Diamond Park). • The Dubai Mall has maintained its position as a prime retail destination, receiving 75 million guests in 2013; a 15% and 39% increase from 2012 • Outdoor shopping spaces are now gaining popularity. In addition to The and 2011 respectively. With a planned expansion of 93,000 sq m, the Beach on JBR, Al Wasl Properties are expected to complete Phase 2 of mall is expected to further strengthen its supremacy as the retail market The City Walk in 2016, and Nakheel have announced plans to develop leader. The Pointe on The Palm Jumeirah. • The top open market net rent for a notional standard shop in prime super • The retail market in Dubai has maintained it’s momentum this quarter regional centres has increased in Q1 2014 to stand at around AED 8,000 and is projected to continue its robust growth as the sector is expected to sq m. The average rent across primary super regional malls stands at be one of the biggest gainers from Expo 2020. AED 6,900 sq m. 7,000 Dubai Retail Rents Q1 2009 – Q1 2014 6,000 AED / sq m Q1 2014
5,000
Primary Secondary 4,000
Super Regional 4,800-8,000 1,000-3,200 3,000 AED sq AED m 2,000 Regional 1,400-3,200 1,000-2,400 1,000 Community 2,400-2,800 1,200-1,350 0
Neighbourhood 2,600-2,900 1,100
Q3 2010 Q3 Q1 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Convenience 1,600-2,700 1,350-1,475 Primary Secondary Note: Chart shows mid-point ERV for an in-line store in a basket of Primary and Secondary Super Regional shopping malls. The rent quoted reflects a notional “standard” line store unit of 100 sq m. Note: Based on a basket of malls of different size. (See definitions for further details) Source: JLL, Q4 2013
20 Retail sector summary
Indicator Level Comment / Outlook
One new major addition in Q1 2014: The Beach on JBR by Current Retail Space (GLA) 2,873,000 sq m Meraas
The main retail completions for 2014 will be Jumeirah Park Community Centre and the Discovery Gardens Retail Centre, Future Supply (2014 – 2016) 496,000 sq m both by Nakheel; the expansion of the Mall of the Emirates & Dubai Mall; phase 2 of Dragon Mart.
Average Retail Rents in Primary Malls AED 6,900 / sq m Rents of prime units in better performing centers have improved significantly in Q1 2014. Rental growth is expected to continue in 2014 in most primary and Average Retail Rents in AED 2,290 / sq m modern secondary malls. Secondary Malls
Citywide retail vacancy is estimated to have dropped Average Regional Mall slightly to 10% in Q1 2014 as demand for retail space 10% Vacancy remains strong and large primary centres are almost fully occupied.
21 Dubai hotel market overview Hotel supply
• The first quarter of 2014 saw some notable hotel completions Dubai Hotel Stock (2013 – 2016) including the Marriott Hotel and Marriott Executive Apartments, 4,850 75,000 both in Al Jaddaf. This has increased the existing hotel number of keys to 61,150; up 2% from FY 2013. 4,650 70,000 • In addition, the Waldorf Astoria on the Palm saw a full opening 4,150 after a partial release in 2013, and the second tower of the JW 65,000
Marriott Marquis opened 294 of its 804 total rooms.
• Numerous hotel developments are expected to be completed in Keys 60,000 the second quarter of 2014. These include the city’s first Hyatt 69,950 No. of No. 55,000 65,300 Place in Deira, the Sofitel Downtown and the Pullman Hotel in 61,150 Jumeirah Lakes Towers 60,150 50,000 • Several new hotel developments were announced during the first quarter, including two Hilton Garden Inn hotels and an InterCity 45,000 Hotel in Culture Village. Once open, these hotels will be the first 2013 2014F 2015F 2016F for each brand. Current Supply Future Additions
• Supply increases are expected to remain focussed on upscale Source: JLL, Q1 2014 properties in the short-term, but government incentives could encourage the expansion of the midscale segment in the medium- term.
23 Major hotels completions – 2013/2014
Hyatt Place Deira 210 Rooms
Mariott (Al Jaddaf) 352 Rooms
JW Marriott Marquis Waldorf Astoria (Second Phase) 319 Rooms 800 Rooms
InterContinental Marina 132 Rooms Completed
Under Construction
24 Hotel performance
• Dubai received over 11 million tourists in 2013, registering a 10% Dubai Hotel Performance (YT February 2011 - 2014) increase from FY 2012. The Emirate has continued to see robust tourist demand growth driving strong performance metrics, and 350 90% 88% 88% this is expected to continue into the future. 86% 300 • Total number of guest nights has also seen an increase. In 2013, hotels recorded 41.6 million guest nights, up 11% from 2012. 85%
250 82%
• Airport traffic in 2013 registered a 15% increase compared to 2012, reaching 66.4 million. The growth has continued into 2014 200 80%
as January saw 6.4 million passengers, up 15% from the same ADR (USD)
period in 2013. 150 Occupancy • Year-to-February occupancy rates remained stable on a city-wide 75% basis in 2014, maintaining 88% occupancy. 100 • Average Daily Rates reached USD 298 in YT February, marking a 50 70% 7.7% growth rate from 2013. 2011 YTD 2012 YTD 2013 YTD 2014 YTD ADR Occupancy • The stable occupancy levels and increase in ADRs resulted in an impressive 7.7% growth in RevPAR compared to the same period in 2013, reaching USD 262. Source: STR Global
25 Hotel market summary
Indicator Level Comment / Outlook
The first quarter of 2014 witnessed the addition of the Marriott Hotel and Marriott Executive Apartments in Al Jaddaf, plus partial opening Current Hotel Supply 61,150 rooms of the second JW Marriott Marquis tower and the official opening of the Waldorf Astoria on the Palm.
Major openings scheduled for 2014 Q2 include Hyatt Place in Deira, Future Supply (2014 - 2016) 13,650 rooms Sofitel Downtown Dubai and Pullman Jumeirah Lakes Towers.
YTD levels of occupancy remained stable and led the Middle East 2014 YTD Occupancy 88% region.
Average rates have continued to increase, and YT February ADR increased 7.7% from the same period in 2013. As a result of stable 2014 YTD ADR USD 298 occupancy, RevPAR growth matched the impressive 7.7% increase in ADR on a city-wide basis.
26 Dubai industrial market overview Industrial supply & demand
• Activity in the industrial market continued to be strong in Q1 2014, • Business licenses issued by the Department of Economic Development especially in the new industrial areas and free zones. over Q4 2013 increased 12% compared to Q4 2012. Commercial licenses accounted for the highest share (73%) of the total issued in Q4 2013, • The main contributors to the growth of the industrial and logistics sector in reiterating Dubai's prominence as a trading hub. Dubai are the transportation, oil and gas, food, metal, automotive and aviation sectors. • January 2014 saw Dubai Exports, the export promotion agency of the Department of Economic Development, open an office in Mumbai, India. • With the expansion of Al Maktoum International Airport and the The move comes as the organization looks to further boost trade with preparation for hosting Expo 2020 within Dubai World Central (DWC), the Dubai's biggest trade partner. area to the south of Dubai is likely to emerge as the preferred industrial location in future years. • The new areas are capitalising on their large plots of land to attract heavy industries such the automobile sector. DIP for example has recently
opened a new car showroom and have around 14 automobile vehicle outlets and repair facilities, in addition to a number of service centres, workshops, spare parts and accessories outlets.
• DAFZA, saw a 42% increase in revenue Y-o-Y in 2013. The freezone
licensed 196 new tenants and accounted for 8% of Dubai’s trade. The number of registered companies now exceed 1,600 with 39% from Europe and North America, 38% from the GCC and Middle East and 17% from Asia. • A number of government delegations from various countries visited JAFZA and Dubai Chamber in Q1 2014, to explore opportunities to strengthen commercial relations with the Emirate and the Free Zone. Officials from Ecuador, Malta, India and China among others, discussed bilateral economic relations particularly in the field of commerce, logistics, tourism and financial services.
Source: JLL, Q1 2014
28 Industrial supply & demand
Overview of main industrial areas in Dubai Area Age Land Area (sq m) Regulatory Status Selected tenants Al Quoz 1973 18,500,000 Onshore Fedex, Mercedes-Benz
Al Qusais 5,450,000 Onshore Maxell, Sabco Traditional 3,900,000 Al Futtaim, Al Ghurair Group, Al Habtoor Areas Umm Ramool Onshore Leighton 12,000,000 Aramex, Total, Unilever, Easa Saleh Ras Al Khor 1976 Onshore Al Gurg Group
JAFZA North- 45,000,000 DHL, Danube, LG, Kenwood, Heinz, Kraft, JAFZA 1985 Offshore JAFZA South- 35,000,000 Mars, P&G
Free Zone Clarins, Rolls-Royce, National Foods DAFZA 1996 2,000,000 Offshore Areas Products Company, Fedex Logistics Free Zone Areas – Dubai World Central 2009 105,000,000 Logistics and Dnata, RSA, Caliper Aviation City only 21,240,000 Jebel Ali Industrial Area Onshore Landmark Group, Jumbo, Bridgestone,
New 16,500,000 Onshore Dubai Investment Park 1997 Onshore Paris Group, Drake & Scull Areas Dubai Industrial City 2004 52,000,000 Onshore Nestle, Baker Hughes
29 Main industrial areas
DIC Jebel Ali Industrial JAFZA Extension Umm Ramool DWC JAFZA North Al Qouz DAFZA DIP Technopark Ras Al Khor Al Qusais
30 Industrial performance
• The industrial sector is considered one of Dubai’s most resilient real Warehouse Rents estate markets, with rates remaining stable due to the lack of speculation Unit Lease Lease term Area in the market. AED / sq m / p.a. • Rental rates in completed industrial units in Dubai currently vary 300-550 Annual significantly from one area to another, with no real standardization of Older Onshore Areas logistics facilities. Newer Onshore areas (excl. 200-400 3-5-10 years (DIC) • Excluding the freezone areas such as JAFZA and DAFZA, the areas Freezone areas) 1 year (DIP) located in the older parts of Dubai like Al Qouz, Al Qusais and Ras Al Khor continue to command high warehouse average rents, despite the 350-600 JAFZA 1 or 3 years JAFZA lower quality of their stock and the relatively underdeveloped Freezone areas 600-800 DAFZA 1-2 years DAFZA infrastructure systems. Completed units in newer but more peripheral locations (such as DIC and DIP) have started to offer higher average rents as they are seeing increasing demand. Land Lease • Land is typically leased from the relevant authority for a term of 15, 25 or Area Land Lease 30 years, on renewable terms. On occasion, TECOM has provided land AED / sq m / p.a on a 99 year leasehold basis. • Although hypothetically land sales are permitted to GCC nationals in free Older Onshore Areas 50-80 zones, the typical practice observed in the market is long-term leasing. Newer Onshore areas (excl. • With trade activity strongly picking up in Dubai and the recent Expo 40-80 Free Zone areas) 2020 win, the industrial market is expected to benefit accordingly and areas located towards the South of Dubai and in proximity to the Expo 20-80 (JAFZA) Free Zone areas site (e.g. DIC, DIP, JAFZA) are projected to see higher rates in the future 40-100 (DAFZA) and stronger demand. Source: JLL, Q1 2014
31 Definitions and methodology
Office: Residential: • The supply data is based on our quarterly survey of 20 • The supply and stock data is based on our quarterly survey of 37 sub-markets, starting from 2009. sub markets, starting from 2009. This data excludes labour accommodation and local Emirati housing supply. • Completed building refers to a building that is handed over for immediate occupation. • Completed building refers to a building that is handed over for immediate occupation. • Central Business District includes DIFC, DTCD, Sheikh Zayed Road, Burj Khalifa Downtown. Free Zone areas include Jumeirah • Residential performance data is based on the REIDIN monthly Lake Towers, DIFC, TECOM, Dubai Silicon Oasis, DWC, Dubai index. REIDIN.com Dubai Residential Property Price Indices Outsource Zone and IMPZ. (RPPIs) use monthly sample of offered/asked listing price data and land registry price data (transaction data). Index series are set at • Prime Office Rent represents the top open-market rent (open 100 starting at the beginning of each data set. market refers to a new leasing – not to a sitting tenant) that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date. Data relates to headline rents, exclusive of incentives.
32 Definitions and methodology
Retail: Hotels: • Classification of Retail Centres is based upon the ULI definition and • Hotel room supply is based on existing supply figures provided by based on their GLA: DTCM as well as future hotel development data tracked by • Super Regional Malls have a GLA of above 90,000 sq m JLL Hotels. Room supply includes all graded supply and excludes • Regional Malls have a GLA of 30,000 - 90,000 sq m serviced apartments. • Community Malls have a GLA of 10,000 - 30,000 sq m • STR performance data is based on monthly survey conducted by • Neighbourhood Malls have a GLA of 3,000 - 10,000 sq m STR Global on a sample of more than 32,000 rooms across Dubai. • Convenience Malls have a GLA of less than 3,000 sq m Industrial: • Primary Malls are the good performing malls with high levels of turnover. Secondary Malls are the average performing malls with • Industrial Stock is calculated on the basis of applying a site lower levels of turnover. coverage to the total developed industrial land. • Prime Rent Shopping Centre represents the top open market net • Industrial rental values are based on average asking rents across rent that could be expected for a notional standard in line unit shop 14 major industrial areas in Dubai. of 100 sq m situated in a specified shopping centre as at the survey date.
33 Contacts
Dana Williamson Andrew Williamson Chiheb Ben-Mahmoud Head of Agency Head of Retail Head of Hotels & Hospitality MENA MENA MEA [email protected] [email protected] [email protected]
Michael Heitmann Craig Plumb Dana Salbak National Director, Industrial Head of Research Senior Research Analyst MENA MENA MENA [email protected] [email protected] [email protected]
@JLLMENA youtube.com/joneslanglasalle linkedin.com/company/jones-lang-lasalle joneslanglasalleblog.com/EMEAResearch
www.jll–mena.com
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