Dubai Real Estate Market Overview

Q1 2013
Dubai
Macroeconomic overview
2
Indicator 2011 2012 (e) 2013(f)
UnitedArab Emirates
Population (millions) 7.89 8.11 8.21
Real GDP Growth (Y-o-Y) 4.2% 4.2% 2.7%
Consumer Price Index (% change) 0.9% 0.7% 1.9%
Dubai
Population (millions) 2.0 2.1 2.2
Real GDP Growth (Y-o-Y) 3.4% 4.5% 4.0%
Inflation (% Change) 0.5% -1.7% n/a
Sources: IHS Global Insights (March 2013); Dubai Statistics Center 2012
e: estimated f:forecasted
Market Highlights Q1 2013
The Dubai economyis expected to sustain its growth momentum.
According to the Department of Economic Development, the Gross
Domestic Product of Dubai will grow by more than 4% in 2013.
Tourism, trade, transportation and logistics are all witnessing strong
performance, while construction and real estate have started to show
encouraging signs of recovery.
The businessoutlookof Dubai is certainly looking brighter as
macroeconomic fundamentals are stronger and investor confidence is
rising. This positive outlook has been reflected in the Department of
Economic Developments Business Confidence Index (BCI), which
reached 135.9 points in Q4-2012, up 11% compared to Q3-2012.
The real estate investment market has been very active in the first
quarter of 2013, with a number of residential transactions. There has
also been increased interest for full buildings in Dubai from investors
from the GCC and the Middle East. Continued uncertainties in the
Eurozone, highlighted by the Cyprus banking crisis, could lead to a
transfer of capital into the Dubai real estate market as it is perceived as
politically stable and attractive to offshore investors.
Rents for prime officespace have started to recover in Q1 2013, with
the flight to quality remaining a main trend in the market. Demand
remains driven by larger companies seeking portfolio optimisation and
upgrades of their premises, rather than new entrants to the market.
The residential market has maintained the strong performance of
2012, with villas and apartments showing similar increases in sale
and rental prices in Q1. Well established locations continue to attract
strong demand, while projects in newly developed areas are still
lagging behind and will need more time before picking up.
The retail market continues to be dominated by the best performing
super-regional malls (eg: Dubai Mall, Mall of the Emirates).
Secondary and old malls continue to witness subdued demand and
falling occupancy rates & rents, resulting in a wider differential
between primary and secondary malls.
The hotel sector maintained its strong performance, supported by a
growing number of tourist arrivals in Dubai. Occupancy rates have
been rising to 88% while Average Daily Rates (ADRs) reached USD
276. This positive trend is expected to continue throughout 2013.
The industrial market remains dominated by the traditional onshore
areas located in dense residential and commercial areas. However,
the trend is moving more towards newer areas which offer well
developed infrastructure, good connectivity, proximity to major
infrastructure projects, in addition to better quality products.
3
For the first time since mid 2008, all sectors of the Dubai real estate market are currently positioned in the
recovery stage of their market cycle. However, the positive performance remains largely concentrated in the
best quality projects in prime locations, with secondary locations and poor quality projects continuing to
experience high vacancy rates and stable or even falling rental values.
Talking Points Q1 2013
4
Following discussions with the banking
sector, the UAE Central Bank is now
proposing somewhat higher limits on loan
to value ratios for mortgages of 75% for
expatriates and 80% for Emiratis for first-
home loans, and 60% for expatriates and
65% for nationals for second and third-
home loans. These new guidelines are
expected to be made official soon.
With investor confidence on the rise, a
number of large scale projects have been
announced recently. The most ambitious of
these is the Mohammad Bin Rashid City
(MBRC), including the worlds biggest
shopping mall, around 100 hotels, a public
park and a Universal Studios theme park,
which is supposed to be developed over a
decade.
Another major recent announcement is the
Bluewatersproject, an AED 6 billion mixed
use development by Meraas. This new
development will be located off the JBR
coastline and will include an AED 1 billion
Dubai Eye wheel, in addition to retail,
residential, hospitality and entertainment
components. Construction is scheduled to
start in April 2013.
property investments, followed by British
citizens (AED 5 billion), Pakistanis
(AED 4 billion) and Iranians (AED 3 billion).
Americans, Canadians, Italians, French,
Italians and other nationalities pumped AED
16 billion into the Dubai property market in
2012.
The Dubai Land Department featured on a
World Bank list of the top 10 agencies
worldwide for swift and accurate property
registration.
The Dubai International Financial Centre
(DIFC) is aiming to double the number of its
companies over the next five years and is
targeting institutions from China, South
Asia and Africa. The number of registered
companies within the DIFC reached 912 in
2012, up 7% compared to 2011, while the
number of employees increased by 16% to
14,000.
Dubai International Airport saw more than
5.5 million passengers in January 2013, a
record for a single month, with 4.8 million in
February. Dubai is now the worlds second
busiest airport for international passenger
traffic, overtaking Paris Charles de Gaulle,
and just behind Londons Heathrow.
DAMAC Properties recently launched a
AED1 billion master development in
Downtown. The four-tower project,
developed in collaboration with Paramount
Hotel & Resorts, will include 540 hotel
rooms and over 1,400 serviced apartments
and is expected to be completed by the end
of 2015.
Nakheel have also announced plans to
start construction of the Nakheel Mall on
Palm Jumeirah, with more than 100,000 sq
m of retail space.
The Dubai Mall hosted 65 million visitors in
2012, 20% up from 2011, establishing itself
as one of the most visited shopping and
leisure destinations worldwide. The Dubai
Mall also achieved a 24% growth in retail
sales in 2012 and is expanding its retail
space, taking its total area to over 1.2
million sqm.
Data from the Dubai Land Department
shows GCC nationals invested AED 17.7
billion in Dubais real estate in 2012. UAE
nationals were the single biggest group of
investors (with AED 13 billion spent).
Indians came second with AED 9 billion of
5
Dubai prime rental clock
*Hotel clock reflects the movement of RevPAR.
Note: The property clock illustrates where Jones Lang LaSalle estimate each prime market is within its individual rental cycle as at end of relevant quarter.
Source: Jones Lang LaSalle
Q1 2012
Q1 2013
Dubai office market overview
Office supply
The total office stock within areas monitored by JLL stood at
approximately 7 million sqm at the end of Q1 2013.
The first quarter of the year saw an additional 145,000 sqm of office
space entering the market. New completions include the Conrad
Tower on SZR, two buildings in Logistics City, part of Dubai World
Central, Grosvenor Business Tower and Iranian Business Tower in
Business Bay and the S.I.T project in Silicon Oasis.
According to developers, there remains around 1.0 million sqm of
office supply that could enter the market before the end of the year.
However, some of the proposed space might be postponed beyond
2013. The majority of new office supply will be located in Business
Bay, followed by DIFC, Dubai World Central, JLT, SZR and Dubai
Investment Park.
With confidence returning to the market, some previously stalled
projects are re-starting, such as the Central Park project in DIFC
and the Dubai World Trade Centre District.
Source: Jones Lang LaSalle, Q1 2013
The potentially significant new office supply in Business Bay over the
next two years could be reduced as some projects in the area are
being converted from office to residential use.
The share of office stock located in freezonesincreased with respect
to previous years, supported by less stringent restrictions on
occupancy. As of Q1 2013, around 47% of office space was located
in free zones with the remaining 53% in onshore areas.
Single ownership buildings constitute the majority of the existing
office stock (60%) while the remaining (40%) is strata space. Strata
buildings in locations such as TECOM C, JLT and Business Bay
remain less popular and continue to display higher vacancy rates.
There was however an increase in demand for strata space for sale
from smaller local companies noted in Q1 2013.
7
Breakdown of Expected Completions by Sub Market
(2013-2016)
Source: Jones Lang LaSalle, Q1 2013
Dubai Office Stock (2010 2015)
CBD
8
JLT
JBC 4
Business Bay
Grosvenor
Business Tower,
Iranian Business
Tower
SZR
Conrad Tower
Downtown Dubai
Standard Chartered
Bank Building
Business Bay
The Burlington,
Bay Gate
DIFC
Buildings by Daman
Silicon Oasis
S.I.T Tower
Major office completions - 2012/2013
Under Construction
Completed
Office demand
With market confidence and optimism improving, demand for office
space is picking up.
Activity remains focused on prime buildings in the top locations, while
demand for dated and poor quality space continues to be weak. The
market continues to see a flight to quality as occupiers are relocating
from the old areas to New Dubai.
With demand increasing, more space has been committed. A good
example is Boulevard Plaza by Emaar in Downtown, although around
30% of the space in this project remains physically vacant, much of
this has been committed and is no longer available within the market.
Jones Lang LaSalle is aware of approximately 190,000 sqm of current
potential demand for office space. Professional Services firms account
for 38% of total active tenant demand, followed by energy (12%), and
telecoms (11%). Most demand continues to result from existing
tenants with few new entrants to the market.
Demand continues to be driven by portfolio optimisation, especially
among global occupiers. However, the emphasis is now shifting from
reducing the floor space to a more efficient use of the space available.
Global corporates aim to achieve an occupational density of 7 or 8
sqm per person. This is often not achievable in Dubai, as the design
and floor plate of most buildings in Dubai do not allow for efficient
space utilisation. In general, ratios of 9 or 10 sqm per person are the
best that can be achievedin the Dubai market.
A number of cash-rich global corporates are today increasingly looking
to allocate investment on new fit outs and refurbishments.
Source: Jones Lang LaSalle, Q1 2013
9
Examplesof recent deals
Industry Area Acquired
(sqm)
Location Comment
Energy 5,575 BusinessBay Relocation / expansion
Services 5,575 DIFC Relocation
Consumer 2,000 JLT Expansion from TECOM
Chemicals 1,700 The Galleries,
Jebel Ali
Expansion from JAFZA
Distribution of Current Tenant Demand
Rental performance
Increased leasing activity is now being reflected in the growth of rental
levels within the Dubai office market. The rise in asking prices,
noticeable during the last six months, has now been translated into an
increase in the dealing rents. Average headline dealing rents in quality
office buildings in selected areas have seen a rise of 10% Q-o-Q.
The top open-market rent in the CBD (prime rent*) remained
unchanged at AED 2,370 per sqm in the DIFC but improved by 4%
Q-o-Q to AED 1,690 per sqm elsewhere in the CBD.
The improvement in average dealing rents during Q1 2013, reflects
the recovery of demand and therefore rentals in some new but
previously largely unoccupied buildings.
Prime locations such as TECOM A&B, SZR and Burj Downtown have
all seen increase in their rental values. Business Bay has also
witnessed an increase in popularity recently as more of the areas
infrastructure has been completed.
Landlords have become firmer on rents in the most prime locations
but remain flexible elsewhere, offering rent-free periods to attract
tenants to fill unoccupied buildings.
As the flight to quality continues, older areas continue to suffer from
lower occupancy rates while the newer buildings in areas such as
Business Bay, Downtown and even Jebel Ali, are filling up.
Vacancy rates within the CBD remained flat at 31% in Q1 as the take
up was in line with the new supply entering the market. However,
vacancy rates are expected to decline in the coming quarters driven
by stronger demand.
While the office market appears on a recovery path, it is important to
note that growth remains concentrated within prime buildings and is
not being experienced in secondary and lower quality office space.
* See Definition & Methodology for definition of Prime rents.
Source: Jones Lang LaSalle, Q1 2013
10
Note: The average office rents are based on a basket of quality office buildings across Dubai
Index of Average Office Rents
Dubai Prime Office Rents (Q1 2012 Q1 2013)
Indicator Level Comment / Outlook
Current Office Stock 7.0 million sqm
Includes all grades. Limited supply (less than 1 million sq m) of single
ownership space in the CBD.
Future Supply
(2013 2015)
1.5 million sqm
Assuming that all pipeline supply tracked by Jones Lang LaSalle will
complete.
CBD Single
Ownership Vacancy
31%
CBD vacancy levels remained flat at 31%. Some areas
outside the CBD continue to experience much higher
vacancies.
Prime CBD Rental
(excl. DIFC)
Prime City-wide
Rental (excl. CBD)
AED 1,690 / sqm
AED 1,670 / sqm
Prime rents started to pick up in Q1 2013 as confidence and
optimism are returning to the market. Demand remains
driven by consolidation and upgrades rather than new
entrants.
Prime Capital Value AED 15,500 / sq m
Prime Capital Value refers to the market price for the best
office space (excluding DIFC). Prime Capital Values
increased in Q1 2013, reflecting the increase in prime rents.
Office market summary
11
Dubai residential market overview
Residential supply
As of Q1 2013, the total residential stock in areas monitored by JLL
stood at around 357,000 units.
Around 2,200 residential units, mostly apartments, have been handed
over in Q1-2013. The most notable deliveries include Spirit Tower in
Sports City, Lakeside Tower in JLT, Bay Central in Dubai Marina as
well as the Al FurjanVillas by Nakheel.
The largest proportion of residential stock added to the market since
2009 is located in International City (14%), followed by Dubai Marina
(13%), Discovery Gardens (9%) and JLT (6%).
A total of 28,000 dwellings are expected to be completed in 2013.
Among the anticipated deliveries are are the 29 Boulevard towers in
Downtown, BalqisResidencies on The Palm, the CentriumProject in
IPMZ as well as Silicon Gate in Dubai Silicon Oasis.
Around 40,000 residential units are scheduled to enter the market
over the next two years, which will represent a 11% increase on the
current stock. While demand has started to pick up and a number of
previously stalled projects are now resuming, we do not expect all the
announced space to be delivered within this timeframe.
Most of the upcoming residential supply will be located outside of
Central Dubai in areas to the South and East of the city. The largest
proportion of future stock from 2013 to 2015 will be delivered in the
submarkets of Dubailand(7,900 units); Business Bay (3,800 units);
and Dubai Sports City (3,800 units).
Source: Jones Lang LaSalle, Q1 2013
Source: Jones Lang LaSalle, Q1 2013
13
Breakdown of Expected Future Completions
Dubai Residential Stock (2010 2015)
14
Silicon Oasis
Silicon Gate 1,
City Oasis
Dubai Sports City
The Spirit, Zenith
Tower A1, Elite 2
Jumeirah Park
Nakheel Villas
Dubai Marina
Bay Central, Elite
Residence
Dubai Sports City
Canal Residence
West, The Bridge
Dubai Marina
Infinity Tower,
MarsaTower
Downtown Dubai
29 Boulevard,
Standpoint
PalmJumeirah
BalqisResidences,
Royal Amwaj
Major residential completions - 2012/2013
Under Construction
Completed
Residential performance
The positive performance of the overall residential market observed
in 2012 has continued into the first quarter of 2013.
The REIDIN general Residential Sale Index improved by 18% Y-o-Y.
with the apartment and villa sectors showing similar gains in Q1
2013. The villa sale price index and the apartment sale price index
increased by 17% and 18% Y-o-Y respectively. They both remain
however below their peak values in Q3 2008 with villas 8% less than
its peak and the apartment index 22% less than in Q3 2008.
The rental market maintained its positive trend in Q1 2013 with the
REIDIN Rental Indices recording an improvement of 10% Y-o-Y. Both
the villa and apartment rent indices went up by 10% Y-o-Y. While the
villa rental index has achieved its peak value in February 2013, the
apartment rental index remains 26% lower than in January 2009
(when the index commenced). Rentalshave increased in the most
sort after areas such as Burj Downtown, Dubai Marina and Palm
Jumeirah, while remaining stable in secondary and less completed
locations.
While well established residential communities in Central Dubai are
expected to see further price and rental growth over the rest of 2013,
less completed projects in more remote areas will need more time
before seeing increased demand and performance.
Note: REIDIN.comRPPIs use monthly sample of offered/asked listing price data and land registry price data (transaction data). Dubai sales/ rent index series are calculated monthly
andcover 7city-wide, 8maindistrictsand4major communities/ projects.
Source: REIDIN, Q1 2013
15
Dubai Residential Property Sale Indices
Dubai Residential Property Sale Indices
Residential market summary
Indicator Level Comment/Outlook
Current Residential Stock 357,000
Around 2,200 units were added to Dubais residential stock inventory
in Q1 2013.
Future Supply (2013 2015) 42,000
Assuming that all supply tracked by Jones Lang LaSalle will
complete. In reality, some of the proposed projects may be delayed
beyond their scheduled date.
Apartment Rent
Asking rents went up by 10% Y-o-Y and are expected to increase
further during 2013.
Apartment Sale Price
Asking apartment sale prices went up by 18% in prime buildings
within established locations year-on-year.
Villa Rent
Villa rents have increased by 10% Y-o-Yin prime established
locations and this trend is likely to continue. Asking rents in less
established prime locations expected to remain stable.
Villa Sale Price
Asking prices for villas have increased by 17% year-on-year and are
expected to continue their upward trend during 2013 in well
established prime areas.
Note: Direction arrows are based on the performance of the REIDIN monthly index.
16
Dubai retail market overview
Retail mall supply
The total stock of mall based retail space in Dubai at the end of Q1
2013 remains unchanged at around 2.8 million sqm. as no new
projects were delivered in the first quarter of the year.
The major completion for Q2 2013 is Phase I of The Avenue by
Meraas, adding 13,000 sqm of retail space. Other projects underway
include the 35,000 sqm phase 2 of Al Ghurair Center due later in
2013, as well as the 158,000 sqm extension to Dragon Mart and The
Beach by Meraas, a 5,000 sqm boutique mall on JBR with 40 F&B
units, retail shops and entertainment area scheduled for 2014.
The main proposed retail centers for 2015 include the 112,000 sqm
Dubai Pearl Shopping Mall and the 67,000 sqm Agora Mall in
Jumeirah.
The Nakheel Mall and the Pointe Mall, both located on The Palm
Jumeirah, have been re-launched in Q1 2013 and construction is
expected to start very soon.
Other large-scale shopping centres remain announced but not yet
under construction. These include the 200,000 sqm Phase II of the
Avenue, the 400,000 sqm Phoenix Mall in International City, Bawadi
Mall in Dubailand, and the Phase II of Dubai Outlet Mall. Other
projects that have commenced construction remain on hold (eg: Mall
of Arabia.)
Many existing retail centres have recently launched expansion and
redevelopment plans. These include Dubai Mall (93,000 sqm), Ibn
Battuta Mall, Al Ghurair Center and DeiraCity Centre.
Large Super Regional Centres continue to dominate the Dubai market
and constitute 66% of mall based retail space. Despite the entry of a
number of community centres in the coming years, the share of Super
Regional malls is expected to keep on growing and is projected to
account for 78% of the total retail GLA by the end of 2015.
Source: Jones Lang LaSalle, Q1 2013
Source: Jones Lang LaSalle, Q1 2013
18
Dubai Retail Stock (2010 2015)
Breakdown of Under-Construction Retail Space by Type of Mall
19
Downtown Dubai
Dubai Mall - Phase 2
Al Wasl
The Avenue
Al Barsha
Outlet Village
JBR
The Beach
International City
Dragon Mart -
Phase 2
TECOM
Dubai Pearl Mall
Deira
Al Ghurair Centre -
Phase 2
Expected major retail projects
Under Construction
Rental Performance Estimated Rental Value (ERV)
The top open market net rent for a notional standard shop in prime
super regional centres has remained unchanged in Q1 2013. The
premium Super Regional malls such as Dubai Mall and Mall of the
Emirates continue to dominate the market in terms of footfall, sales
volumes, rental values and occupancy rates. Secondary and older
malls continue to witness subdued demand, resulting in their rents
and occupancy rates either remaining flat or dropping marginally.
The Dubai retail market continues to be supported by a number of
factors, including population growth, an increase in the number of
residents, as well as the strong inflow of tourists to Dubai.
Despite the strong retail supply pipeline, many of the upcoming malls
are expected to perform well. Most forthcoming projects have been
planned to cater to a specific demand. The Beach project on JBR, for
example, is targeting the growing population living in Dubai Marina,
while the newly announced Nakheel Mall will meet the demand from
residents of Palm Jumeirah.
As the resident population is growing, retail sales in community malls
are increasing year-on-year. Demand for household goods such as
home furniture, electronics, as well as groceries and services (e.g.
doctors) has been seen rising.
The best quality retail centres continue to display strong performance.
However, secondary malls remain less popular and continue to
struggle to attract demand, resulting in a widening the gap between
primary and secondary malls.
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.
Source: Jones Lang LaSalle, Q1 2013
AED / sq m Q1 2013
Primary Secondary
Super Regional 4,300-5,700 1,000-2,200
Regional 1,350-2,155 970-1,900
Community 1,300-2,700 1,100-1,350
Neighbourhood 2,450-2,700 800-1,100
Convenience 1,500-1,900 1,300-1,400
20
Note: Based on a basket of malls of different size. (See definitions for further details)
Breakdown of Under-Construction Retail Space by Type of Mall
Retail Sector Summary
Indicator Level Comment / Outlook
Current Retail Space (GLA) 2,815,000 sq m No major retail completions in Q1 2013.
Future Supply (2013 2015) 390,000 sq m
The mainretail completion in Q2 is likely to be Phase I of the
Avenue by Meraas. Other large-scale retail projects to be
delivered thereafter include The Beach Mall, the extension to
Ghurair Center, The Dragon Mart expansion, the Dubai Pearl
Shopping Mall and the Nakheel Mall on Palm Jumeirah
Retail Rents in Primary
Malls
Retail Rents in Secondary
Malls
AED 5,000/ sq m
AED 1,595/ sq m
Rents of prime units in better performing centers have
remained flat in Q1 2013. Secondary and older malls
continue to see their rental levels declining.
Average Regional Mall
Vacancy
13%
Citywide retail vacancy has dropped to 13% supported
by the strong occupancy levels in the better performing
super regional and regional centres, despite higher
vacancy levels in tier-two malls.
21
Dubai hotel market overview
Hotel supply
The first quarter of 2013 witnessed the addition of approximately
500 branded rooms in the Dubai hospitality market. The openings
included Ocean View Hotel on JBR and the extension of the Ritz
Carlton also on JBR.
According to Dubai Tourism and Commerce Marketing (DTCM),
approximately 3,500 hotel rooms were added to the Dubai
hospitality supply in 2012, representing a growth of 6.5% Y-o-Y.
Some projects scheduled to be completed by end of 2012 have
been delayed into 2013, with around 4,700 additional rooms now
scheduled this year.
Major expected openings during 2013 include the Conrad on
Sheikh Zayed Road, Sofitel The Palm, Novotel Al Barsha, Oberoi
Business Bay and Anantara Royal Amwaj on Palm Jumeirah.
The hotel industry has been growing strongly in the last few years,
supported by a booming tourism industry and increasing number
of international airport passengers. The increase in Emirates
Airlines capacity, coupled with the announcement of various
tourism and leisure projects, will also contribute in attracting
further tourism demand, which will be instrumental in absorbing
the robust hotel supply pipeline planned for the next 5 7 years.
Source: Jones Lang LaSalle, Q1 2013
Dubai Hotel Supply (2012 2015)
23
24
Sofitel Palm Jumeirah
543 Rooms
JW Marriott Marquis
(First Phase)
804 Rooms
Ocean View
342 Rooms
Conrad
559 Rooms
Novotel (Al Barsha)
466 Rooms
Expected major hotels completions 2012/2013
Under Construction
Completed
Hotel performance
Source: STR Global
Hotel Performance (YT February 2010 -2013) Dubai received over 10 million tourists for the first time during
2012, reflecting a 9% increase over 2011. The positive upward
trend in tourist arrivals has continued into 2013 and is reflected in
the improved hotel performances across the city.
Airport arrivals registered a 13% increase in 2012, supporting the
demand for hotel accommodation. Dubai airport is currently the
worlds second busiest (after London Heathrow) for international
visitors, and continues to experience rapid passenger growth.
Occupancy rates as at YT February 2013 have increased by 2
percentage points over the same period in 2012, reaching 88%
on a city-wide basis.
Average Daily Rates have witnessed a 5% improvement
compared to the same period in 2012, reaching USD 276 in YT
February 2013.
As a result, RevPAR levels showed an impressive 9% growth
over the same period in 2012, reaching USD 243 in YT February
2013.
25
Hotel market summary
Indicator Level Comment / Outlook
Current Hotel Supply 57,850 rooms
First quarter of 2013witnessed the addition of nearly 500 hotel rooms.
Notable openings included the Ocean ViewHotel on JBRand the Ritz
CarltonextensiononJumeirahBeach.
Future Supply
(2013 -2015)
11,200 rooms
Major openings scheduled for 2013 include the Conrad Sheikh Zayed
Road, Novotel Al Barsha, Oberoi Business Bay, Sofitel PalmJumeirah
andAnantaraRoyal Amwaj amongst others.
2013 YTD Occupancy 88%
Increase in YTD levels of occupancy with resurgence
witnessed across all sub-markets.
2013 YTD ADR USD 276
Average room rates continued to improve during Q1 2013.
As a result of resurgence in occupancy and increased
ADRs; RevPAR levels have experienced a notable (9%)
increase on a city-wide basis.
26
Dubai industrial market overview
Industrial supply & demand
28
The industrial market in Dubai has been showing strong performance,
supported mainly by the growth of the transport and logistics sectors.
Jones Lang LaSalle estimates the industrial stock in Dubai to stand at
approximately 66 million sqm of built space, representing around
20% of the total industrial land, with JAFZA North believed to have
the largest stock in Dubai.
Dubai Industrial City (DIC) is the largest industrial project to-date and
is spread across 52 million sqm (560 million sqft) of land.
Most of the current enquiries involve the expansion or consolidation
of companies already located in Dubai. However, as global economic
conditions improve this trend is expected to change with increased
interest from new entrants.
Occupier demand falls into two categories: most smaller tenants
prefer to rent or buy existing facilities, while large global corporates
prefer to acquire land plots on which to develop their own facilities, as
they can not find high quality speculatively built premises.
The industrial sector in Dubai benefits from being less exposed to
oversupply than other segments and is therefore projected to be one
of the best performing sectors in the short-to-medium term
As the volume of freight through both Jebel Ali port and the new Al
MaktoumInternational airport at Dubai World Centre continues to
increase, there is likely to be continued demand for warehousing and
logistics space in the major industrial locations to the south of Dubai.
Dubais Main Industrial Areas
Traditional/Onshore areas FreezoneAreas NewOnshoreAreas
Examples: Al Quoz, Ras Al
Khor; Al Qusais; Umm
Ramool; Al Khabaisi
Examples: JAFZA, DAFZA;
parts of Dubai World
Central
Examples: Dubai
Industrial City, Dubai
Investment Park
Oldest areas, Well established
and close to commercial areas
within the city. Fully occupied
and with stock of inferior
quality
Operate under a free zone
status. High quality
products. Sophisticated
and advanced
infrastructure
Good connectivity
Dubais newest
industrial areas. Offer
large space available
for global occupiers.
Recent Industrial Transactions
Company Industry Location Area Date
DHL Logistics Meydan 17,200 sqm To open in Q3
2014
CWT-SML Logistics DWC 12,500sqm March 2013
NMC
Healthcare
Pharmaceuticals DIP n/a October 2012
Nestle FMCG DWC 175,000 sqm
land plot
July 2012
R&M Telecom DAFZA n/a July 2012
Source: Jones Lang LaSalle, Q1 2013
Industrial supply & demand
29
The market remains dominated by the traditional onshore areas that
have organically grown with the city over time and are now located in
dense residential and commercial areas.
However, the trend is moving more towards the newer areas, which offer
well developed infrastructure, good connectivity, proximity to major
infrastructure projects, in addition to better quality products. The
freezoneareas are capitalizing on their proximity to major ports and
airports while the non-free zone areas such as Dubai Investment Park
(DIP) or Dubai Industrial City (DIC) are seeing increased demand.
The growth of the industrial sector in Dubai is illustrated by the following
figures:
Jebel Ali sea port is opening its third terminal that will increase its
capacity to 19 million TEUs* a year, by 2014.
DAFZA reported a 26% increase in revenue in 2012, in addition to a
37% growth in the number of construction and engineering
companies and a 25% increase in the number of registered UK
companies. DAFZA hosts 1,600 companies.
Abu Dhabi Islamic Bank (ADIB) announced it will provide AED 500
million for the expansion of DAFZAs facilities.
Dubai Industrial City witnessed a strong year in 2012, with a reported
growth of over 80% in the number of registered companies and an
82% warehouse occupancy rate. DIC now hosts 471 companies, up
from 259 in 2011.
JAFZA has seen an increase of 26% in the number of companies in
occupation in 2012, bringing the total number of companies in JAFZA
to over 6,900.
Area Land Area
(sqm)
Number of
Companies
(2012)
Growthduring 2012
DAFZA
2,000,000
1,600 37% growthin
registered companies
JAFZA
JAFZA North:
45,000,000
JAFZA South:
35,000,000
6,918 26% growthin
registered companies
Dubai Industrial
City
52,000,000
471 82% growth in
registered companies
Dubai
Investment
Park
16,500,000
2,162 n/a
Approximate figures
Source: Jones Lang LaSalle, Q1 2013
* TEU: Twenty-Foot Equivalent Unit
30
Main industrial areas
DIC
DWC
DIP
Technopark
JAFZA North
Jebel Ali Industrial JAFZA Extension Umm Ramool
Al Qouz DAFZA
RasAl Khor Al Qusais
31
Industrial performance
Rental rates in completed industrial units in Dubai currently vary
significantly from one area to another, with no real standardization of
logistics facilities.
The average rent across onshore areas is around AED 350 per
sqm. The older areas command average rents of 320-550 per
sqm, due to their proximity to local markets, despite the poor quality
of their stock and the relatively underdeveloped infrastructure
systems. Completed units in newer but more peripheral locations
(such as DIC and DIP) offer somewhat lower average rents.
The free zone areas of Jebel Ali and Dubai Airport command a higher
average of between AED 350 800 per sqm for completed
warehousing units
Currently quality does not seem to be driving price. Price remains
determined by critical mass, clustering and location as companies
prefer being positioned close to the CBD.
Demand is likely to shift over time towards those areas offering better
quality products, well developed infrastructure and access to ports
and/or airports. Al MaktoumInternational Airport will start
transforming into an integrated logistics platform over time,
increasing the attraction of industrial areas to the south of Dubai.
The industrial market has been much less cyclical than other sectors
over recent years and continues to be dominated by long term
commitments to single tenants.
Area Unit Lease
AED / sqm/ p.a
Lease term
Older Onshore Areas 320-550 Annual
Newer Onshore areas (excl.
Freezoneareas)
180-350 3-5-10 years (DIC)
1 year (DIP)
Freezoneareas 350-800
(DAFZA rates 600-800)
1- 2 years
Area Land Lease
AED / sqm/ p.a
Older Onshore Areas 50-80
Newer Onshore areas (excl.
Free Zone areas)
30-50
Free Zone areas 20-80 (JAFZA)
40-100 (DAFZA)
Warehouse rents
Land lease sales
Definitions and methodology
Office:
The supply data is based on our quarterly survey of 20 sub
markets, starting from 2009.
Completed building refers to a building that is handed over for
immediate occupation.
Central Business District includes DIFC, DTCD, Sheikh Zayed
Road, Burj KhalifaDowntown. Free Zone areas include Jumeirah
Lake Towers, DIFC, TECOM, Dubai Silicon Oasis, DWC, Dubai
Outsource Zone and IMPZ.
Prime Office Rent represents the top open-market rent (open
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.
Prime Capital Value represents the top open-market capital value
that could be expected for a notional office building of the highest
quality and specification in the best location on the survey date.
Prime capital values are a calculation, derived from prime rents
and yields:
Capital Value = (Prime Annual Rent / Prime Yield From) * 100
Residential:
The supply and stock data is based on our quarterly survey of 37
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.
Residential performance data is based on the REIDIN monthly
index. REIDIN.com Dubai Residential Property Price Indices
(RPPIs) use monthly sample of offered/asked listing price data and
land registry price data (transaction data). Index series are set at
100 starting at the beginning of each data set.
32
Definitions and methodology
Retail:
Classification of Retail Centres is based upon the ULI definition and
based on their GLA:
Super Regional Malls have a GLA of above 90,000 sqm
Regional Malls have a GLA of 30,000-90,000 sqm
Community Malls have a GLA of 10,000-30,000 sqm
Neighbourhood Malls have a GLA of 3,000-10,000 sqm
Convenience Malls have a GLA of less than 3,000 sqm
Primary Malls are the good performing malls with high levels of
turnover. Secondary Malls are the average performing malls with
lower levels of turnover.
Prime Rent Shopping Centre represents the top open market net
rent that could be expected for a notional standard in line unit shop
of 100 sq.\ m situated in a specified shopping centre as at the
survey date.
Hotels:
Hotel room supply is based on existing supply figures provided by
DTCM as well as future hotel development data tracked by
Jones Lang LaSalle Hotels. Room supply includes all graded supply
and excludes serviced apartments.
STR performance data is based on monthly survey conducted by
STR Global on a sample of more than 32,000 rooms across Dubai.
Industrial:
Industrial Stock is calculated on the basis of applying a site
coverage to the total developed industrial land.
Industrial rental values are based on average asking rents across
14 major industrial areas in Dubai.
33
Robin Pugh
Head of Agency
MENA
robin.pugh@jll.com
Gabriel Matar
Director, MEA
Hotels & Hospitality Group
gabriel.matar@jll.com
AndrewWilliamson
Associate, Retail
MENA
andrew.williamson@jll.com
Michael Heitmann
National Director, Industrial
MENA
michael.heitmann@jll.com
Craig Plumb
Head of Research
MENA
craig.plumb@jll.com
Cynthia Nasseh
Senior Research Analyst
MENA
cynthia.nasseh@jll.com
www.jllmena.com
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