Property Review Real Estate Report Q2 2020 SPECIAL NOTE FROM MANAGEMENT

Asteco’s research reflects the latest market trends. Our data is obtained from an extensive range of sources, including transactional evidence, valuation evidence (internal and external), discussions with major UAE lenders, brokers (internal and external) and data from managed portfolios comprising assets situated across the UAE. To date, the UAE real estate market has shown a surprising level of resilience in the face of serious challenges created by COVID-19. However, despite a number of positive reports suggesting that the economy is moving into a recovery phase, it is widely perceived that the full economic impact has yet to be felt. Rather, there is considerable risk that the economic unwinding from the pandemic has yet to begin in earnest. The Calm before the Storm? Whilst it might be surprising to describe recent tumultuous months as calm, the current data indicates a lag in real estate market trends to events that have already unfolded, and continue to unfold. This would appear evident from our Q2 2020 figures, which indicate no significant drop in values and rents over the past quarter. Rather, the declines were broadly in line with Q1 2020 results. On this point, it is worth noting that these drops were already anticipated based on significant levels of supply and weak demand. As such, it would appear that the ‘new’ headwinds created by COVID-19 have yet to bare teeth. It is widely expected that this picture will become much clearer following the resumption of international travel and the repatriation of unemployed workers. Nevertheless, measures have been made to offset the full economic impact of Covid, both at Federal and Municipal levels, through a series of stimulus packages. These packages will mitigate some of the short term Elaine Jones effects and provide a platform for improvement in the overall economy in the medium to long term. FRICS These stimulus packages are supported by existing commitments to infrastructure spending / delivery, such as the Expo 2020 metro line (Dubai extension) with 7 new stations, which will officially open to the public Executive Chairman and Founder in September this year. The opening of UAE airports to international tourists will also undoubtedly provide welcomed relief to the hospitality and retail sectors, two of the hardest hit segments of the economy. The recovery of these sectors is ultimately critical to returning the economy to full health. However, the pace of this recovery remains uncertain and will ultimately be influenced by a range of factors, many outside of the UAE’s borders. Nevertheless, with an increased probability of business downsizing and potential job losses, there is a high risk that demand for real estate (rental and sales) will weaken further. This potentially sharp drop in decline is set to coincide with the continued delivery of pre-pandemic committed supply. As such, significant corrections in values (rents in particular) during the second half of the year and into 2021 are likely.

2 DUBAI MARKET OVERVIEW

SUPPLY* RENTAL RATES SALES PRICES New Apartment supply slowed markedly in Q2 2020 with the The rate of decline for Apartment, Villa and Office Rental rates over Q2 2020 was more or Whilst there is definite traction in the market, handover of 4,200 units, compared to over 5,750 in the first less similar to previous quarters, recording quarterly drops of 4%, 3% and 5%, respectively. sales prices for Apartments, Villas and Offices quarter of the year. Similarly, new Office supply fell short of contracted by 4%, 4% and 2% compared to last quarter’s output, with the delivery of 0.3 million sq.ft. of Annual changes were also broadly aligned with preceding trends and amounted to 13%, the previous quarter, and recorded annual Office space compared to 0.5 million sq.ft. in Q1. 10% and 13%, respectively. Asteco anticipates that this pattern is likely to prevail, or even declines of 11%, 11% and 9%, respectively. intensify due to the expected volume of additional supply combined with a potentially sharp Interestingly, Villa stock increased marginally, from 2,150 drop in demand in the short to medium term due to the impact of COVID on employment. The reduction of the LTV ratio by 5% and units in Q1 to 2,300 dwellings in Q2 2020. partial release of pent-up Buyer demand There has been a marked rise in the number of small (circa. 100 - 500 sq.ft.), fully resulting from the lifting of movement Despite post-completion linked payment plans that furnished / fitted / serviced offices available for Lease, especially in areas with a large restrictions resulted in an immediate bounce previously encouraged Developers to complete projects in a amount of strata title space, such as and Lakes Towers. Incentives in sales activity towards the end of the second timely manner, new supply is likely to fall short of earlier offered are extensive and include items such as free licenses, rent-free periods (up to 12 quarter. estimates. months), zero commission, free chiller, free parking, flexible payment options, etc. However, there has been a significant drop in Recent research revealed that approximately 20% of Despite discounts and incentives offered by Residential and Commercial Landlords, we off-plan Sales launches, a trend we expect will previously tendered or under construction projects have expect a reduced number of new Leases and renewals in the short term as Tenants adopt a continue for the short term. been put on hold, temporarily or indefinitely, and our wait and see approach. projections have been revised accordingly. Despite extensive Government initiatives on Whilst prolonged economic challenges and the general level of employment uncertainty both Federal and Municipal level, oil price Whilst these figures represent a notable decline on previous have and will result in Residents downsizing and seeking value-for-money accommodation, volatility and the threat of a breakdown in projections, it is still a significant volume, particularly given preliminary data suggests an increase in enquiries for larger (competitively priced) units with trade relations between China and the USA the current situation. extensive facilities. This is predominantly due to the rise in ‘work from home’ policies will continue to weaken global economic and implemented by companies, often on a permanent basis. therefore local recovery. Although Real Estate demand is likely to slow based on current uncertainties, it is reasonable to assume that the In addition, there may well be a trend for more flexible Residential options in terms of Lease Whilst we initially expected the fall out of number of new project announcements will be very limited terms and more limited upfront capital requirements due to shorter term employment Covid-19 to manifest in Q2, we do not believe until economic conditions and market sentiment improve. opportunities and in order to address concerns over job security. this to be the case just yet. Until greater This may aid in the absorption of pent-up demand in the stability returns to the market, it is difficult to medium to long term. In any event, monthly payments by direct debit / credit cards will become the market norm predict when conditions will normalise and and the Property Management structure will need to be able to address these how transactional volumes and values will be requirements going forward in terms of enhanced level of Tenant management and affected. Moreover, it is difficult to anticipate responsive maintenance services to retain Tenants. whether long term changes to purchaser habits and change in work-place, work-life habits will manifest.

*It is important to note that whilst a number of projects may have received completion certificates, Asteco does not consider a project delivered until the handover process has been initiated and the units are available for Lease in the open market.

3 Dubai Real Estate Report - Q2 2020 DUBAI SUPPLY

COMPLETED IN COMPLETED IN PROJECTED Q1 2020 Q2 2020 H2 2020

5,750 4,200 12,650 APARTMENTS NO. OF UNITS

2,150 2,300 3,750 VILLAS NO. OF UNITS

0.5 0.3 1.15 OFFICES MILLION SQ.FT.

4 Dubai Real Estate Report - Q2 2020 DUBAI APARTMENT RENTAL RATES

(All figures in AED 000’s p.a.)

STUDIO 1 BEDROOM 2 BEDROOMS 3 BEDROOMS % CHANGE FROM TO FROM TO FROM TO FROM TO Q1 2020 - Q2 2020 Q2 2019 - Q2 2020 HIGH TO LUXURY END DIFC 45 65 60 100 70 140 95 205 -3% -11% 35 65 50 80 70 120 100 180 -6% -14% 50 70 60 110 85 155 110 190 -3% -8% SHEIKH ZAYED ROAD 50 60 50 85 60 120 80 150 -2% -9% MID TO HIGH END BUSINESS BAY 30 47.5 40 65 60 95 95 125 -6% -15% 30 60 40 75 55 115 70 160 -5% -12% GREENS 35 47.5 45 70 65 105 85 140 -6% -12% RESIDENCE 45 60 55 75 70 100 90 135 -6% -13% JUMEIRAH LAKES TOWERS 30 45 37.5 65 45 85 60 120 -6% -12% AFFORDABLE DEIRA 15 40 25 55 37.5 70 55 95 -4% -14% 22.5 32.5 35 50 60 80 - - -4% -10% 20 30 30 45 40 65 60 80 -6% -16% INTERNATIONAL CITY 15 25 22.5 32.5 35 50 65 80 -3% -9% JUMEIRAH VILLAGE 22.5 32.5 30 45 45 70 65 90 -3% -15%

Q-o-Q Y-o-Y Since peak Since market low % Change Since Q1 2020 Since Q2 2019 Q2 2014 Q3 2011 -4% -13% -41% 0%

5 Dubai Real Estate Report - Q2 2020 DUBAI APARTMENT SALES PRICES

% CHANGE

(All figures in AED per sq.ft.) 0 500 1,000 1,500 2,000 2,500 Q1 2020 - Q2 2020 Q2 2019 - Q2 2020 HIGH TO LUXURY END

DIFC 800 1,750 -2% -7%

DOWNTOWN DUBAI 775 1,800 -4% -9%

PALM JUMEIRAH 675 1,850 -4% -8%

MID TO HIGH END

BUSINESS BAY 650 1,275 -3% -8%

DUBAI MARINA 600 1,500 -3% -10%

THE GREENS AND THE VIEWS 650 1,100 -3% -11%

JUMEIRAH BEACH RESIDENCE 625 1,150 -3% -8%

JUMEIRAH LAKES TOWERS 525 1,100 -3% -11%

AFFORDABLE

DISCOVERY GARDENS 450 650 -5% -17%

DUBAI SPORTS CITY 400 775 -4% -15%

INTERNATIONAL CITY 350 700 -6% -20%

JUMEIRAH VILLAGE 400 800 -4% -15%

9%

Q-o-Q Y-o-Y Since peak Since market low % Change Since Q1 2020 Since Q2 2019 Q2 2014 Q3 2011 -4% -11% -40%

6 Dubai Real Estate Report - Q2 2020 DUBAI VILLA RENTAL RATES

(All figures in AED 000’s p.a.)

2 BEDROOMS 3 BEDROOMS 4 BEDROOMS 5 BEDROOMS % CHANGE FROM TO FROM TO FROM TO FROM TO Q1 2020 - Q2 2020 Q2 2019 - Q2 2020

ARABIAN RANCHES 75 115 85 155 130 230 160 260 -3% -6% DUBAI SILICON OASIS (CEDRE VILLAS) - - 125 137.5 130 140 150 160 -2% -12% DUBAI SPORTS CITY (VICTORY HEIGHTS) - - 95 125 125 165 170 245 -5% -13% JUMEIRAH - - 105 185 120 210 130 240 -4% -7% JUMEIRAH PARK - - 130 165 150 200 200 250 -2% -4% JUMEIRAH VILLAGE 70 105 80 120 80 135 110 150 -3% -11% MEADOWS - - 140 180 160 200 175 250 -2% -4% 55 85 65 105 75 125 80 130 -1% -10% PALM JUMEIRAH - - 160 250 220 380 275 650 -1% -7% SPRINGS 70 110 95 135 - - - - -5% -9% THE LAKES - - 135 170 170 240 240 275 -2% -6% - - 110 190 130 230 150 280 -2% -6%

Q-o-Q Y-o-Y Since peak Since market low % Change Since Q1 2020 Since Q2 2019 Q2 2014 Q2 2012 -3% -10% -41% -10%

7 Dubai Real Estate Report - Q2 2020 DUBAI VILLA SALES PRICES

% CHANGE

(All figures in AED per sq.ft.) 0 1,000 2,000 3,000 4,000 Q1 2020 - Q2 2020 Q2 2019 - Q2 2020

ARABIAN RANCHES 550 1,050 -3% -11%

DUBAI SILICON OASIS 525 650 -4% -12% (CEDRE VILLAS)

DUBAI SPORTS CITY 725 900 -3% -9% (VICTORY HEIGHTS)

JUMEIRAH PARK 575 850 -4% -14%

JUMEIRAH VILLAGE 300 700 -5% -13%

MEADOWS 700 1,000 -3% -8%

PALM JUMEIRAH 700 3,500 -3% -5%

SPRINGS 525 825 -4% -13%

Q-o-Q Y-o-Y Since peak Since market low % Change Since Q1 2020 Since Q2 2019 Q2 2014 Q3 2011 -4% -11% -44% -5%

8 Dubai Real Estate Report - Q2 2020 DUBAI OFFICE RENTAL RATES

(All figures in AED per sq.ft. p.a.)

AVERAGE RENTAL RATES % CHANGE FROM TO Q1 2020 - Q2 2020 Q2 2019 - Q2 2020

BARSHA HEIGHTS (FORMER TECOM) 35 75 -8% -20% 40 90 -7% -13% BUSINESS BAY 35 80 -8% -18% DIFC 60 275 -8% -15% JUMEIRAH LAKES TOWERS 25 85 -8% -21% SHEIKH ZAYED ROAD 50 120 -5% -14%

0%

Q-o-Q Y-o-Y Since peak Since market low % Change Since Q1 2020 Since Q2 2019 Q3 2015 Q4 2012 -5% -14% -31% 0%

9 Dubai Real Estate Report - Q2 2020 DUBAI OFFICE SALES PRICES

% CHANGE

(All figures in AED per sq.ft.) 0 500 1,000 1,500 2,000 Q1 2020 - Q2 2020 Q2 2019 - Q2 2020

BARSHA HEIGHTS 450 800 -4% -12% (FORMER TECOM)

BUSINESS BAY 525 1,200 -3% -10%

DIFC 950 1,750 -2% -10%

JUMEIRAH LAKES TOWERS 350 950 -4% -8%

Q-o-Q Y-o-Y Since peak Since market low % Change Since Q1 2020 Since Q2 2019 Q1 2015 Q2 2012 -2% -9% -36% -1%

10 Dubai Real Estate Report - Q2 2020 1 Veneto 45 Jumeirah Village 2 Badrah Triangle DUBAI 3 Bluewater Island 46 Jumeirah Village Circle 4 JBR 47 Dubai Science Park PROPERTY MAP 5 Dubai Marina 48 Arjan 6 Dubai Internet City, 49 Dubai Hills Estate Dubai Media City 50 Living Legends & Knowledge Village 51 Al Barari 7 Palm Jumeirah 52 MBR City 8 Umm Suqeim 53 Meydan 9 Jumeirah 54 Dubai Creek Harbour 10 Jumeirah Bay Island 55 Commercial District 11 City Walk 56 Golf District 12 57 Logistic District 13 Sheikh Zayed Road 58 Aviation District 14 La Mer 59 Expo 2020 A 15 Pearl Jumeirah 60 Residential District 16 Bur Dubai 61 Dubai Investment 17 Park 18 Port Rashid 62 Green Community 19 Deira Island 63 Dubai Production 20 Deira City (IMPZ) 21 Downtown 64 Jumeirah Golf Estates 22 Wasl Gate 65 Victory Heights 66 Dubai Sports City 23 67 MotorCity 24 Discovery Gardens 68 Dubai Studio City 25 Jumeirah Park 69 Damac Hills 26 70 27 Jumeirah Lakes T A Towers 71 Mudon 28 Springs / Meadows 72 Arabian Ranches T 29 73 30 The Lakes 74 Falcon City of 31 The Greens Wonders 32 Barsha Heights 75 The Villa (Tecom C) 76 Liwan 33 77 Dubai Residence 34 Business Bay Complex 35 Downtown Dubai 78 Dubai Silicon Oasis 79 Dubai Academic 36 DIFC International City 37 80 International 38 Dubai Healthcare City Phase 2 & 3 City Phase 2 81 International City 39 Al Jadaf 82 Al Warqaa 40 Jaddaf Waterfront () 83 Mirdif 41 84 Uptown Mirdiff 42 Al Nahda 85 43 86 Mira 44 87 Akoya Oxygen

11 Dubai Real Estate Report - Q2 2020 About Asteco

The Middle East’s largest full service Real VALUATION & ADVISORY SALES BUILDING CONSULTANCY Estate Services Company, Asteco was formed Our professional advisory services are Asteco has established a large regional The Building Consultancy Team at Asteco have in Dubai in 1985. Over the years, Asteco has conducted by suitably qualified personnel property Sales division with representatives a wealth of experience supporting their Clients gained enormous respect for consistently all of whom have had extensive Real Estate based in the UAE, Qatar and Jordan. Our throughout all stages of the built asset lifecycle. delivering high quality, professional, value- experience within the Middle East and Sales teams have extensive experience in the Each of the team’s highly trained surveyors added services in a transparent manner. It is internationally. negotiation and sale of a variety of assets. have an in-depth knowledge of construction also widely recognised for its involvement with technology, building pathology and effective many of the projects that have defined the Our valuations are carried out in accordance LEASING project management methods which enable landscape and physical infrastructure of the with the Royal Institution of Chartered Asteco has been instrumental in the Leasing us to provide our clients with a comprehensive Surveyors (RICS) and International Valuation Emirates. of many high-profile developments across the building consultancy service. Standards (IVS) and are undertaken by GCC. Asteco has an essential combination of local appropriately qualified valuers with extensive FRANCHISE knowledge and international expertise. local experience. ASSET MANAGEMENT Our brand, network, system and procedures A deeply established brand, renowned for Asteco provides comprehensive Asset are now available in territories across the its application of the latest technological The Professional Services Asteco conducts Management services to all property Owners, MENA region. Our Licensing services currently advances, its commitment to transparency, throughout the region include: whether a single unit (IPM) or a regional include Real Estate Brokerage Franchising and winning strategies and human expertise. mixed-use portfolio. Our focus is on maximising associated support services with many of the • Consultancy & Advisory services Undisputed Real Estate experts, Asteco value for our Clients. key elements designed specifically around represents a significant number of the • Market research the Franchisee, making it a truly unique and region’s top property Owners, Developers and • Valuation services OWNERS ASSOCIATION bespoke franchise opportunity. Investors. Asteco has the experience, systems, procedures and manuals in place to provide streamlined comprehensive Association Management and Consultancy services to Residential, Commercial and mixed-use communities throughout the GCC Region.

Elaine Jones John Stevens John Allen James Joughin Jenny Weidling Ghada Amhaz Tamer Ibrahim Chaaban FRICS MSc, BSc (Hons), MRICS BSc, MRICS BSc (Hons), MRICS BA (Hons) MSc BE Executive Chairman and Managing Director/ Executive Director - Senior Associate Manager - Research and Manager - Research and Associate Director / Founder / Director - Director - Asset Management Valuation & Advisory Director - Head of Valuations Advisory, Dubai Advisory, Abu Dhabi General Manager - Al Ain Transactional Services +971 4 403 7777 +971 4 403 7777 +971 4 403 7777 +971 4 403 7777 +971 2 626 2660 +971 3 766 6097 +971 4 403 7777 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

DISCLAIMER: The information contained in this report has been obtained from and is based upon sources that Asteco Property Management believes to be reliable; however, no warranty or representation, expressed or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. Asteco Property Management will not be held responsible for any third-party contributions. All opinions and estimates included in this report constitute Asteco Property Management’s judgment, as of the date of this report and are subject to change without notice. Figures contained in this report are derived from a basket of locations highlighted in this report and therefore represent a snapshot of the UAE market. Averages, however, represent a wider range of areas. Particularly exclusive or unique projects have been excluded from the data to avoid distorting averages. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, involve risk and uncertainty because they relate to future events and circumstances which are beyond Asteco Property Management’s control. For a full in-depth study of the market, please contact Asteco Property Management’s Research team. Asteco Property Management LLC. Commercial License No. 218551. Paid-up Capital AED 4,000,000. | ORN 180

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