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. 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 sq m) 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.