ABOUT Established in 2008, Cavendish Maxwell is one of the largest and most respected property consultancies in the region. An influential partner and trusted advisor to key stakeholders in real estate markets throughout the Middle East and North Africa, we offer a comprehensive range of exceptional property services across a diverse mix of sectors and asset classes. Cavendish Maxwell is a certified member firm of the Royal Institution of Chartered Surveyors (RICS), bringing together a world-class team of handpicked property consultants and surveyors, unmatched elsewhere in the region. Our team of highly qualified professionals is trusted by real estate market stakeholders throughout the region, including international and domestic banks, property developers, governments, owners and investors, asset managers and professional services firms. We service a diverse mix of specialist property sectors including retail, offices, hospitality, healthcare, education, industrial and logistics. Cavendish Maxwell also publishes independent reports, prepared to globally accepted standards, for loan security, bank lending, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, purchase and sale advice, and third-party reliance purposes. Our quarterly market reports provide updates on price movement, rent and yield statistics, residential transactions, and upcoming supply of residential properties through Property Monitor, the real estate intelligence platform, powered by Cavendish Maxwell. The reports also incorporate the Property Monitor Residential Survey, conducted among partner agents operating within the UAE. The survey provides an overview of how new enquiries, leasing activity and transactions, among other metrics, changed compared to the previous quarter.
FOREWORD The year 2019 marked a period of extended pressure on property prices and rents across communities in the UAE. However, it was also the year where the highest number of property transactions took place, surpassing levels of previous years, as investors and end-users increasingly recognise value amid early signs of stabilisation. A question still on the minds of many is whether we have seen the end of the correction. Indicators might provide mixed signals as we head into 2020, a year of exceptional significance to the UAE being the year Dubai hosts the Expo. Whilst the event itself is expected to have far-reaching positive effects on the economy, government initiatives to address oversupply fears and encourage investments are doing their part to boost confidence in the economy. Cavendish Maxwell’s full year report for 2019 explores these developments and their impact on the UAE real estate market, giving an overview of the residential, office, retail, hospitality and industrial sectors in Dubai, Abu Dhabi and the Northern Emirates.
CONTENTS 4
Key Policy Changes
6
Residential Market Overview
28
Commercial Market Overview
32
Hospitality Market Overview
34
Industrial Market Overview
2O19
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
KEY POLICY CHANGES The year 2019 saw a number of landmark policy changes introduced to boost investor confidence and spur investments in sectors such as real estate, an important pillar of the UAE economy. Along with Expo 2020, these changes are likely to have a significant positive impact on the economy for years to come.
LEHMAN BROTHERS COLLAPSE
NAKHEEL AND DWC ANNOUNCE PLANS FOR DEBT RESTRUCTURING
OIL PRICES COLLAPSE TO $32/BARREL
ABU DHABI’S $10 BILLION LOAN TO DUBAI
NEW MARKET PEAK
Property Monitor Dynamic Price Index Value
170
160
150 UAE REAL ESTATE BOOM
REBOUND GROWTH FOR THE GENERAL MARKET - OIL PRICES
EARLY SIGNS OF TROUBLE
EXPO 2020 ANNOUNCEMENT
OIL PRICES COLLAPSE TO $47/BARREL
CENTRAL BANK MORTAGE CAP
RUSSIAN CURRENCY CRISIS
140 OIL PRICES PEAK TO $145/BARREL
BOND ISSUANCE BY THE UAE CENTRAL BANK
130
120
110
100
90
2008
2009
2010
2011
2012
2013
2014
The Property Monitor Dynamic Price Index (DPI) tracks trends of property prices throughout 42 key communities in Dubai and is indexed to a base period of January 2008.
4
2015
5
2O19
Interest rate cut AUGUST
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
Higher Committee for Real Estate Planning formed DLD and RERA split responsibilities
Real Estate Investment Opportunities initiative launched JULY
Golden Card, a permanent residency system announced
Interest rate cut SEPTEMBER
Age limit removed for last mortgage repayment 3% early settlement fee for mortgages removed
MAY
OIL PRICE DEREGULATION
New joint ownership law announced
OPEC LIMITS CRUDE OUTPUT
Interest rate cut Abu Dhabi updates freehold ownership law
OCTOBER
APRIL
20% cap for banks’ property lending removed BREXIT VOTE
2016
AFFORDABLE HOUSING ARRIVES
2017
2018
NOVEMBER
JANUARY 2019
APRIL 2019
JULY 2019
OCTOBER 2019
2020
5
2O19
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
DUBAI APARTMENT PRICE PERFORMANCE According to Property Monitor, average apartment prices declined by 15% over the 12-month period from Q4 2018 to Q4 2019. Apartments in International Media Production Zone (IMPZ) registered the steepest decline of more than 24% followed by Discovery Gardens and Jumeirah Village Triangle at over 23% each. Whilst supply remains the primary driver for price declines, some locations have started to show signs of stabilisation, and even recovery. Softening prices have also generated buyer interest as displayed in the higher volume of sales transactions during the year, with November 2019 marking one of the strongest months in the past decade.
-7.7%
Palm Jumeirah
-18.0% -1.5%
DIFC Al Furjan
-11.8% 6.9% 9.8% -7.8%
The Views
-18.9% -0.7%
Jumeirah Village Circle (JVC)
-12.3% -3.1%
Business Bay
-15.0% -7.1%
Jumeirah Beach Residence (JBR) Dubai Marina
-13.9% -5.2%
Uptown Motor City
-16.2%
-3.5%
Dubai Sports City International City (Clusters)
-18.3%
-1.2%
-15.2% 7.7% -5.5% -3.2%
Jumeirah Village Triangle
-23.3% -2.3%
Downtown Burj Khalifa
-16.4%
-1.6%
Dubai Silicon Oasis
-13.0% -3.3%
Jumeirah Lakes Towers (JLT)
-18.1% -0.8%
The Greens
-15.9% -8.4%
Discovery Gardens
-23.6% -1.5%
IMPZ
-24.3%
10
8
6
4
2
0
-2
-4
-6
-8
-10 -12 -14 -16 -18 -20 -22 -24 -26 -28 -30
% change
Quarterly Q3 2019 - Q4 2019 Source: Property Monitor 6
Yearly Q4 2018 - Q4 2019
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
Business Bay AED 1,181/sq ft
DIFC AED 1,480/sq ft
Downtown Burj Khalifa AED 1,882/sq ft
Palm Jumeirah
International City (Clusters)
AED 1,693/sq ft
AED 520/sq ft
Jumeirah Beach Residence AED 1,250/sq ft
Dubai Silicon Oasis AED 670/sq ft
Jumeirah Lakes Towers AED922/sq ft
The Greens AED 1,032/sq ft
The Views AED 1,206/sq ft
Jumeirah Village Circle AED680/sq ft
Dubai Marina AED 1,336/sq ft
Jumeirah Village Triangle AED 767/sq ft
Uptown Motor City AED 663/sq ft
Discovery Gardens
Dubai Sports City
AED 573/sq ft
AED 737/sq ft
IMPZ Al Furjan
AED 598/sq ft
AED 930/sq ft
7
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
DUBAI VILLA/TOWNHOUSE PRICE PERFORMANCE According to Property Monitor, average villa/townhouse prices declined nearly 18% over the 12-month period from Q4 2018 to Q4 2019. Price declines were more pronounced in villas/townhouses compared to apartments during the period as buyer interest generally gravitated towards the affordable properties segment. Communities such as The Meadows, Jumeirah Village Triangle and Victory Heights registered declines of over 20% each.
-3.1%
Victory Heights
-22.3% -3.4%
Cedre Villas Silicon Oasis
-17.5% -5.8%
The Meadows
-24.3% -7.4%
Jumeirah Islands
-20.2% -5.3%
Arabian Ranches
-18.9% -3.3%
Al Furjan Villas
-15.4%
-2.3%
The Lakes
-13.7% -5.4%
The Springs
-15.9% -8.9%
Jumeirah Park
-19.5% -12.8%
Jumeirah Village Triangle
-22.8% -3.5%
Jumeirah Golf Estates
-11.5% -2.0%
Green Community Motor City
-9.7% -8.2%
The Fronds Gardens Homes Palm Jumeirah
-18.1% 0
-1
-2
-3
-4
-5
-6
-7
-8
-9 -10 -11 -12 -13 -14 -15 -16 -17 -18 -19 -20 -21 -22 -23 -23 -24 -25
% change
Quarterly Q3 2019 - Q4 2019
Source: Property Monitor 8
Yearly Q4 2018 - Q4 2019
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
The Fronds Garden Homes Palm Jumeirah AED 1,997/sq ft
Jumeirah Park AED 805/sq ft
Jumeirah Islands Cedre Villas Silicon Oasis
AED 1,091/sq ft
AED 700/sq ft
The Meadows AED 923/sq ft
The Lakes AED 1,107/sq ft
Green Community Motor City AED 835/sq ft
Arabian Ranches
The Springs
AED 892/sq ft
AED 816/sq ft
Jumeirah Village Triangle AED 691/sq ft
Victory Heights AED 843/sq ft
Al Furjan Villas
Jumeirah Golf Estates
AED 662/sq ft
AED 1,044/sq ft
9
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
DUBAI RENT PERFORMANCE Rental declines for apartments in Dubai averaged 13.4%, whilst villas/ townhouses registered a single-digit 9% fall over the 12-month period from Q4 2018 to Q4 2019. Tenants appear to have taken advantage of falling rentals and incentives from landlords, such as rent-free periods and multiple cheque payments, to upgrade to larger units and sought-after villa communities. In areas such as The Meadows, prices declined at a faster pace than rents, improving the yields on properties here for new buyers.
-15.8
Annual rent by bedroom * Data as of November 2019
-12.3
Dubai Marina
The Greens
AED 54,040
AED 50,140 AED 59,250
AED 78,910 AED 114,530
APARTMENT Studio
VILLA/TOWNHOUSE 3 BR
1 BR
4 BR
2 BR
5 BR
12-month % change
12-month % change
AED 91,000
-15.9 -14.4
JLT
JBR
AED 42,250
AED 63,850 AED 82,440
AED 64,240
-12.2 The Views
AED 85,800
AED 110,610
AED 57,340 AED 75,225
-6.9
AED 100,100
The Lakes AED 162,500 AED 250,100 AED 333,320
-5.4 The Meadows AED 156,750 AED 196,000
-8.4
AED 239,200
Jumeirah Islands
-10.1
AED 228,800 AED 316,800
-7.9 -11.3
Jumeirah Park
Discovery Gardens
AED 155,200
AED 31,470
AED 187,050
AED 46,465
AED 213,900
AED 78,270
-12.5
Al Furjan Villas AED 122,150 AED 121,060 AED 162,330
Source: Property Monitor 10
The Springs AED 135,600 AED 142,800
-6.6 Jumeirah Golf Estates AED 222,300 AED 237,500 AED 276,000
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
-9.7 Downtown Burj Khalifa AED 63,450 AED 91,140 AED 132,890
-14.4 -16.9 Business Bay AED 54,840
DIFC AED 63,000
-9
AED 86,925 AED 134,125
International City (Clusters)
AED 74,160
AED 24,640 AED 34,930
AED 101,300
AED 50,940
-14.0
-15.4
-12.8
Dubai Sports City
Motor City
Arabian Ranches
AED38,500
AED 46,000
AED 56,840
AED 53,170
AED 149,730 AED 198,000
AED 86,800
AED 88,475
AED 252,000
-12.5 Victory Heights AED 152,250 AED 225,600
NUMBER OF RENTAL CHEQUES FOR APARTMENTS AND VILLAS/TOWNHOUSES 3.7% 6 cheques
0.2% 7 cheques
0.6% 5 cheques
1.7% 12 cheques
28.2% 4 cheques
42.4% 1 cheque
6.0% 3 cheques
17.2% 2 cheques
11
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
DUBAI 2020 UPCOMING SUPPLY According to Property Monitor, over 4,500 apartments and 2,300 villas/ townhouses were handed over in Dubai during Q4 2019. Developers announced fewer than half the launches in 2019 compared to 2018 and seem to instead focus on completing existing projects in their pipeline. Our research indicates that over 50,000 new units from projects already under construction will hit the market in early 2020, with apartments making up majority of the upcoming supply. Â The higher number of deliveries can be attributed to the spill over of expected handovers from 2019.
APARTMENTS
83%
VILLAS/TOWNHOUSES
17%
SUPPLY SCHEDULED TO BE COMPLETED BY Q1 2020 >2,500 1,501 - 2,500 1,001 - 1,500 501 - 1,000 <500
Source: Property Monitor 12
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
Deira
The World Islands
Downtown Burj Khalifa
Mohammed Bin Rashid City
Al Barsha Dubai Marina
Dubai Silicon Oasis
Dubailand
Wadi Al Safa 7
Jumeirah Village Circle
Arjan
Dubai Production City Al Furjan
Mudon
Akoya Oxygen
Damac Hills
Dubai South (Dubai World Central)
13
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
DUBAI TRANSACTION OVERVIEW
Off-plan transfers continued to dominate in Q4 2019, accounting for more than 60% of total transfers. The total number of transfers in this period was 12,444 for both villas/townhouses and apartments. Dubai Creek Harbour, Mohammad Bin Rashid City and Business Bay were the most sought-after locations for off-plan apartment transfers in Q4 2019. For villas/townhouses, the total volume of off-plan transactions increased from 491 to 1,944 transactions between Q4 2018 and Q4 2019.
14
450
400
350
300
250
200
150
100
50
145 0
OFF-PLAN
600
550
0 352 309 265 257 Jumeirah Village Circle
308
Bluewaters Island
100
Al Khail Heights
200
Dubai Marina
300
International City
400
Number of transfers
500
148
134
112
95
68
Damac Hills (Akoya By Damac)
500
Number of transfers
375
Downtown Burj Khalifa
600
Mudon
156
Serena
545
La Mer
700
Emirates Living
309
Cherrywoods
Business Bay
800
Akoya Oxygen
447
Arabian Ranches 3
582
Mohammed Bin Rashid City
Number of transfers
OFF-PLAN
Mohammed Bin Rashid City
555
Villanova
0 1,036
Dubai Creek Harbour
0
Dubai South (Dubai World Central)
Number of transfers
2O19
TOP 5 LOCATIONS FOR APARTMENT TRANSFERS IN Q4 2019 SECONDARY MARKET
582
1,000
900
400
350
300
250
200
150
100 50
164
TOP 5 LOCATIONS FOR VILLA TRANSFERS IN Q4 2019
SECONDARY MARKET
150
125
100
75
50
25
Source: Property Monitor
15
RESIDENTIAL
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
LOOKING FORWARD – Q1 2020 Q1 2020 PRICE OUTLOOK Decrease by more than 5%
Decrease by up to 5%
Increase by more than 5%
Increase by up to 5%
Remain the same
APARTMENTS
VILLAS/TOWNHOUSES
% of agents who predicted apartment prices would:
% of agents who predicted villa/townhouse prices would:
18%
28%
22% 28%
12%
12%
38%
4%
4%
34%
Q1 2020 RENT OUTLOOK Decrease by more than 5%
Decrease by up to 5%
Increase by up to 5%
Remain the same
APARTMENTS
VILLAS/TOWNHOUSES
% of agents who predicted apartment rents would:
% of agents who predicted villa/townhouse rents would:
26%
22%
24%
28%
4%
8% 6%
6%
38%
38%
Q1 2020 TRANSACTION OUTLOOK Decrease
Increase
Remain the same
NEW BUYER ENQUIسبيسRهههههههIESييشيسشيش
NEW SELLER INSTRUCTIONS
AGREED SALES
% of agents who predicted new buyer enquiries would:
% of agents who predicted new seller enquiries would:
% of agents who predicted agreed sales would:
27%
16%
57%
31%
22%
47%
27%
16%
57%
Source: Property Monitor 16
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
SURVEY RESULTS Q4 2019
PREDICTIONS
REALITY
The majority of agents surveyed predicted apartment and villa/townhouse prices would decrease by up to 5%.
Apartment and villa/townhouse prices declined by 3.7% on average in Q4 2019, with a 12-month decline of 16% on average.
For apartment and villa/townhouse rents, the majority of agents surveyed predicted that rates would decrease by up to 5%. New buyer enquiries and agreed sales were predicted to increase by the majority of agents surveyed.
vs
Apartment and villa/townhouse rents declined by 1% on average in Q4 2019, with a 12-month decline of 11.6% on average. According to data from real estate agencies, transaction levels in Q4 2019 were higher than Q3 2019.
17
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
ABU DHABI PRICE PERFORMANCE Average sales prices declined in Abu Dhabiâ&#x20AC;&#x2122;s major investment zones by 13% for apartments from Q4 2018 to Q4 2019. Villa/townhouse prices registered an average decline of 11% over the same period, outperforming apartments.
18
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
Although the pace of declines in the capital slowed overall, price depreciation in certain areas such as Al Reem Island were more pronounced than others. The location witnessed prices drop over 20% on a yearly basis and close to 5% on a quarterly basis due to increased supply and rental declines in communities such as Saadiyat Beach Residences. Recent launches in Jawaher, Mamsha, and Yas Acres may also impact price performance going forward. After the long-term UAE residency visa announcement, the other big announcement that is likely to continue to positively influence purchase decisions, and therefore property prices in the capital, is the opening up of the real estate market to foreigners, allowing them to buy property or land within 15 designated investment zones. Previously Abu Dhabi granted a 99-year lease to investors but not full ownership. Areas that generated maximum buyer interest include Al Reem Island, Al Raha Beach, Al Reef and Saadiyat Island because of their popularity and, in the case of some, increased affordability after the price correction. In a bid to improve transparency and leverage data to drive investment in the region, Abu Dhabi released its first biannual report on real estate transactions, which showed that the capital witnessed deals worth AED 31 billion in the first six months of 2019.
APARTMENT PRICE PERFORMANCE
Al Raha Beach % change
-2.2%
-11%
-2.9%
-12%
Al Reem Island
1,310
1,150
-4.8%
-13.5%
Al Ghadeer
-12%
Al Reef Downtown
-12%
915
-3.2%
745
-2.7%
-22% -20% -18% -16% -14% -12% -10% -8%
-6%
Yearly Q4 2018 - Q4 2019
AED/sq ft
Saadiyat Beach Residences
-4%
670
-2%
0
200
400
600
800
1000
1200
1400
1600
Average Price Per Sq Ft
Quarterly Q3 2019 - Q4 2019
Source: Property Monitor
VILLA/TOWNHOUSE PRICE PERFORMANCE
Al Reef Villas Saadiyat Beach Villas
-2.8%
-12%
-2.2%
-8%
620
-3.6%
-11.5%
-14% -12% -10% -8%
Yearly Q4 2018 - Q4 2019
765
-6%
-4%
AED/sq ft
% change
Al Raha Gardens
1,345
-2%
0
200
Quarterly Q3 2019 - Q4 2019
400
600
800
1000
1200
1400
1600
Average Price Per Sq Ft
Source: Property Monitor 19
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
ABU DHABI RENT PERFORMANCE Rents in Abu Dhabi continued to fall in Q4 2019, for both apartments and villas/townhouses. The average annual decline was 12% for the 12-month period from Q4 2018 to Q4 2019, with apartments facing steeper declines compared to villas/townhouses. Communities such as Al Raha Beach saw lower rental averages due to more affordable offerings such as Muzoon and Amirah within the same location. A similar situation is likely to play out in Saadiyat Island due to the launch of competitively- priced products such as Park View and Soho Square. Efforts by developers continued to retain and attract tenants and turn them into owner-occupiers in view of the increased affordability of properties. Looking to target a larger pool of investors, including those who might have limited resources for a lump sum down payment, Aldar Properties launched a rent-to-own scheme at three of its developments - Ansam, Al Hadeel and Meera. The scheme allows customers to build equity in apartments over a 1-3 year period with the opportunity to exercise the option each year with no rent escalations or additional fees.Â
APARTMENT RENT PERFORMANCE
88,500
-13%
85,000
-14%
Al Reem Island
61,500 45,000
-5.7%
51,925 38,500 27,100
-13%
Al Ghadeer
-4.2%
-13%
Al Reef Downtown
52,000 36,200
-8%
-16%
104,500
71,000 55,000
-3.5%
Rent (AED/annum)
-7%
Al Raha Beach % change
140,000
-11.5%
Saadiyat Beach Residences
-14%
-12%
-10%
-8%
-6%
-4%
-2%
Quarterly Q3 2019 - Q4 2019
Yearly Q4 2018 - Q4 2019
0
50,000
Studio
78,125
100,000
1 BR
150,000
200,000
2 BR
Source: Property Monitor
% change
-2.7%
-2.4%
368,230 321,480 304,100
-10.8%
Saadiyat Beach Residences
-1.5%
-15%
-14%
-12%
Yearly Q4 2018 - Q4 2019
20
129,520 121,388 101,730
-13.1%
Al Reef Villas
Source: Property Monitor
182,585 157,180 124,750
-14.4%
Al Raha Gardens
-10%
-8%
-6%
-4%
Quarterly Q3 2019 - Q4 2019
-2%
0
3 BR
100,000
4 BR
200,000
300,000
5 BR
400,000
Rent (AED/annum)
VILLA/TOWNHOUSE RENT PERFORMANCE
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
ABU DHABI 2020 UPCOMING SUPPLY According to Property Monitor, apartments will dominate deliveries in Q1 2020. Al Raha Beach, Al Reem Island and Abu Dhabi City will witness the highest number of apartment deliveries whilst Yas Island will have an increased number of villa/townhouse handovers. One of the major announcements of the year was the launch of Saadiyat Grove by Aldar Properties, an AED 8 billion community located in the Cultural District of Saadiyat Island.
Supply scheduled to be completed in Q1 2020
APARTMENTS
77%
>1,000 501 - 1,000
VILLAS/TOWNHOUSES
100 - 500
23%
<100
Source: Property Monitor
Sowwah Square
Wahat Al Zaweya
Saadiyat Island Al Zahiyah
Abu Dhabi City
Shams Abu Dhabi Al Reem Island
Al Raha Beach Yas Island Khor Al Raha (Samaliyah Island)
Danet Abu Dhabi Rawdhat
Khalifa City
21
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
NORTHERN EMIRATES RESIDENTIAL MARKET OVERVIEW
Yields in the Northern Emirates remain attractive with average apartment gross rental yields ranging between 5-7%.
AVERAGE APARTMENT RENTAL RATES Q4 2019 45,000
20,000
22,000
16,000
14,000
15,000
15,000
20,000
15,000
25,000
21,000
28,000
30,000
17,000
Rent (AED/annum)
35,000
25,000
40,000
10,000 5,000 0 Studio
1 BR
Sharjah
Source: Cavendish Maxwell 22
Ajman
Ras Al Khaimah (excluding premium locations)
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
Market conditions remained largely similar to the previous quarters with few areas displaying signs of stabilisation. However, with prices and rents still softening in Dubai and Abu Dhabi, we exercise caution in interpreting the quarterly changes as an accurate gauge of the overall market condition.
2 BR
Fujairah
30,000
40,000 33,000
37,000
23,000
32,000
27,000
30,000
34,000
42,000
Tenants and investors continued their flight to Dubai as the emirate continued to offer increasingly affordable property options for those keen to move out of the Northern Emirates and closer to their place of work.
3 BR
Umm Al Quwain
23
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
SHARJAH RESIDENTIAL MARKET OVERVIEW
Extending the trend of the year, rents in Sharjah continued their decline, mirroring the situation in Dubai. Tenants continued their flight to quality, upgrading to better areas and bigger homes and even relocating altogether from nearby emirates like Ajman. In turn, existing tenants in Sharjah were seen taking advantage of the lower rents in Dubai. Increasingly more homeowners and investors seem to find Sharjah property affordable, as reflected in the healthy growth of 31% in sales transactions for the first nine months of the year versus a year ago. Most of the sales transactions were recorded in Al Khan, whilst the highest transaction value, worth AED253 million, was recorded for the Muwaileh Commercial Area. Among the upcoming projects, the focus is on prime developments in Sharjah including the Sharjah Waterfront City, a collection of eight natural islands offering villas, town houses, apartments, commercial and retail facilities, and Al Maryam Island â&#x20AC;&#x201C; comprising luxurious residential ventures such as Azure Beach Residences and Sapphire Beach Residences.
AVERAGE RENTAL RATES (AED/ANNUM) Q4 2019 PRIME APARTMENTS
PRIME APARTMENTS
Studio
1 BR
2 BR
3 BR
Studio
1 BR
2 BR
3 BR
18,000 - 20,000
23,000 - 27,000
30,000 - 34,000
40,000 - 45,000
23,000
37,000
50,000
60,000
SECONDARY APARTMENTS
SECONDARY APARTMENTS
Studio
1 BR
2 BR
3 BR
Studio
1 BR
2 BR
3 BR
12,000 - 15,000
20,000 - 23,000
25,000 - 27,000
35,000 - 37,000
18,000
25,000
32,000
40,000
Note: Abu Shagara trades at a premium to Rolla
24
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
Al Azra Rolla Wasit Suburb Abu Shagara Al Majaz Al Khan
Al Rahmaniya
Al Taawun Al Nahda
Al Jurainah
Hoshi
Al Suyoh
Al Tai
PRIME VILLAS 4 BR
5 BR
6 BR
90,000 - 100,000
110,000 - 120,000
130,000 - 140,000
4 BR
5 BR
6 BR
75,000 - 85,000
90,000 - 100,000
110,000 - 115,000
SECONDARY VILLAS
25
RESIDENTIAL
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
AJMAN RESIDENTIAL MARKET OVERVIEW Increased affordability, a wide range of accommodation options and attractive yields are helping attract investor interest to Ajman.
Al Jurf
Al Bustan
Al Rashidiya Bucking the trend of declining rental prices in neighbouring emirates such as Sharjah, rental rates and sales prices in Ajman are displaying signs of stabilisation after a prolonged softness.
Al Rawda
Al Naemiya
AVERAGE RENTAL RATES (AED/ANNUM) Q4 2019 Areas that showed resilience included Al Rashidya, Corniche Ajman, Emirates City and Al Jurf, among others.
PRIME APARTMENTS Studio
1 BR
2 BR
3 BR
17,000
24,000
31,000
40,000
2 BR
3 BR
26,000
35,000
SECONDARY APARTMENTS Studio
1 BR
14,000
18,000
Source : Property listings as of December 2019
UMM AL QUWAIN RESIDENTIAL MARKET OVERVIEW
As of Q4 2019, the annual rent for apartments in Umm Al Quwain ranged from AED 13,000 to 16,000 per annum for studios to AED 25,000 to 30,000 per annum for three-bedroom apartments based on the property location, condition and specification.
There are masterplans underway in the emirate by private developers, which could impact the relatively quiet landscape of Umm Al Quwain in the medium term.
26
UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
RAS AL KHAIMAH RESIDENTIAL MARKET OVERVIEW In the three months ending December, apartment rents in older developments have slightly declined from the previous quarter.
Al Marjan Island Al Hamra Village Mina Al Arab Al Seer Al Uraibi
During Q4, rents ranged between AED 14,000 per annum for studios to AED 30,000 per annum for three-bedroom apartments. In the newer areas of Mina Al Arab, Al Hamra Village and Al Marjan Island, rents were stable over the previous quarter, ranging between AED 20,000 per annum for studios to AED 60,000 per annum for three-bedroom apartments. Upcoming projects in the emirate include the 2020 completion of the two phases of Bateen Al Samar and the Sheikh Zayed Housing Programme providing public housing for Emiratis. By July 2022, Emaar Properties is set to complete The Address Residential Apartments on Al Marjan Island. In a bid to digitalise all its services, the Ras Al Khaimah Municipality is offering 12 electronic services free of charge, of which four are in the field of real estate management marking a positive move for the sector.
AVERAGE RENTAL RATES (AED/ANNUM) Q4 2019 PRIME APARTMENTS Studio
1 BR
2 BR
3 BR
20,000
30,000
45,000
60,000
2 BR
3 BR
25,000
30,000
SECONDARY APARTMENTS Studio
1 BR
14,000
20,000
Source : Property listings as of December 2019
FUJAIRAH RESIDENTIAL MARKET OVERVIEW
Rental rates in Fujairah were largely unchanged from the previous quarter.
As of Q4 2019, the annual rent for apartments in Al Fujairah ranged from AED 16,000 to 20,000 per annum for studios to AED 35,000 to 40,000 per annum for three-bedroom apartments based on the property location, condition and specification. Work is progressing on several projects aimed at diversification, including Sheikh Khalifa Central Hospital, a crude oil storage facility, the airport expansion, and housing developments in Sheikh Mohammed Bin Zayed City and the Fujairah Beach project.
27
RESIDENTIAL
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DUBAI OFFICE MARKET OVERVIEW Office rental rates in Q4 extended declines from the previous quarter falling around AED 5 per sq ft as demand remained tepid while newer supply came into the market. Landlords focussed on maintaining headline rents but settled on lower net effective rates. They also continued to provide incentives such as rent-free periods of up to one year on long-term leases, capex contribution for the upgrade of units and extended car-parking facilities in a bid to raise or retain occupancy levels. Shared and co-working office spaces continue to grow in popularity as they offer more cost-effective options for start-ups and early-stage companies. Even the larger multinational companies are recognising and responding to the need for flexible office spaces fully integrated with technology and experience-based infrastructure by their younger workforce. New licensing schemes that ease requirements for free zone and onshore locations in Dubai are also working in favour of the sector. Landlords and owners of existing traditional spaces are responding to their higher vacancy rates by offering units or floors to co-working and serviced office operators to cater to the demand from this sector.
Dubai World Trade Centre
DUBAI OFFICE RENT PERFORMANCE (AED RANGE PER SQ FT PER ANNUM)
70-185 240-260
Sheikh Zayed Road
Dubai Marina
Shell and Core (Min/Max)
80-95
Fitted (Min/Max)
but excluding chiller/utilities)
Downtown Dubai
60
Business Bay 45-75 85-105
Barsha Heights 50-75
Dubai Healthcare City
95-115 145-160
85-95 175-205
80-95
150-170 240-260
Dubai Media City, Internet City, Knowledge Village
(Rates quoted are inclusive of service charge
DIFC
60-95 115-135
95-115
Deira 50-80
115
Dubai Design District 135-150 170-190
75-95
JLT 25-85 80-95
JAFZA 40-135 165-175
Dubai South (Dubai World Central) 40-50
60-70
Dubai Investment Park 20-60
6% 8%
Source : Cavendish Maxwell
35%
Office
16%
10%
85-105
DUBAI OFFICE ENQUIRIES BY SIZE (SQ FT) - Q4 2019
4%
8%
28
40-60
50-70
DUBAI OFFICE ENQUIRIES BY SECTOR - Q4 2019
6%
Dubai Silicon Oasis
55%
Professional Services
0-1,000
Technology
1,001 - 5,000
Construction-related
5,001 - 10,000
Financial Services
>10,000
Healthcare, Beauty and Pharma
51%
UAE MARKET REPORT A YEAR IN REVIEW
DUBAI RETAIL MARKET OVERVIEW Retail rental rates remained similar to the previous quarters despite significant new supply entering the market. Among the new openings were Palm Jumeirah’s very own 5-storey Nakheel Mall with over 1.1 million sq ft of leasable area, Festival Plaza by Al Futtaim in Jebel Ali which also houses an IKEA store, and the Souq Extra extension in Dubai Silicon Oasis, spread over 77,000 sq ft. The Dubai Mall Zabeel, an extension of the largest mall in the world, is another popular project, though it is yet to see many stores open to the public. The expansion in the retail sector is expected to meet the demand anticipated during and after Expo 2020. The year will also see the Dubai Festivals and Retail Establishment supported by various retail groups step up efforts to further enhance the overall Dubai offering to the world. The 25th edition of the Dubai Shopping Festival on 26 December 2019 kicked off Dubai’s Retail Calendar 2020 which boasts a gamut of activations, festivals and events throughout the year. In parallel, e-commerce continues to gain ground as factors such as high smartphone penetration rates and a young and digitally-driven population increasingly prioritises convenience and comfort. Efforts are underway to execute the e-commerce strategy of the Dubai Government to increase the contribution of e-commerce to AED 12 billion in the local economy by 2023. To ensure that the retail sector remains competitive and resilient, Smart Dubai and the Dubai Department of Economic Development also announced a joint data initiative for the sector which would help formulate successful strategies depending on variables such as demographics, spending and visiting patterns.
RETAIL RENTAL RATES Q4 2019 (AED/SQ FT) Retail Type
Minimum
Maximum
Strip Retail or retail in residential buildings
60
250
Community Malls
60
275
Regional Mall/Destination Retail
165
350
Central Business District (DIFC/Downtown/ Sheikh Zayed Road/City Walk)
150
400
Super Regional Malls
250
1,500
* Rates are inclusive of service charge and exclude rent fee/CapEx
Source: Cavendish Maxwell
FUTURE MALL SUPPLY Malls
Gross Leasable Area (sq ft)
Meydan One
3,000,000
Nakheel JVC - The Circle Mall
44,500
Meadows Village (Expansion)
95,000
Dubai Hills Mall
2,000,000
Burj Al Nahar
240,000
The Avenue - Dubai Silicon Oasis
775,000
Source: Cavendish Maxwell 29
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
ABU DHABI OFFICE MARKET OVERVIEW In Q4, office rents extended their declines from the previous quarter as tenants adjusted to renewed requirements of smaller or consolidated spaces and continued to settle on lower rates in a relatively subdued market. There were increasing instances where landlords accepted payments in multiple cheques, absorbed service charges and prolonged rent-free periods for tenants. In some areas, the spread between the rental range is seen shrinking as rates at the higher end of the band decline whilst the lower end remains stable. From the upcoming office supply, whilst projects such as Eclipse Twin Towers and Reem Tower 1 were expected to be completed by the end of the year, the Parsons regional headquarters in Capital District is now slated for completion in 2020, altogether bringing close to 1.5 million sq ft of office space to the market.
OFFICE RENT PERFORMANCE (AED/SQ FT) Al Reem Island/Al Maryah Island Shell and Core
Fitted High Low
Grade A
-
95
175
Grade B
58
65
85
Grade C
35
40
60
Note: Prices on Al Reem Island range from 40 – 100 AED/sq ft, whereas prices on Al Maryah Island range from 120 – 175 AED/sq ft.
Abu Dhabi MainIand Shell and Core
Fitted Low High
Grade A
-
100
130
Grade B
50
60
75
Grade C
30
35
55
Mussafah Shell and Core
Fitted Low High
Grade B
40
55
70
Grade C
-
27
40
RETAIL MARKET OVERVIEW The momentum after the opening of the extension of The Galleria Al Maryah Island, which had over 400,000 people visit in the first few days post the launch, seems to have continued into Q4, with footfall at elevated levels, prompting retailers to request additional space to expand. This is, however, in contrast to the situation with older malls struggling to attract visitors and retain tenants. With the 450-store Reem Mall in Reem Island and Forsan Central Mall in Khalifa City expected to open doors to the public in 2020, older establishments will need to devise new tactics to remain relevant and adequately compete with the newer entrants. Majid Al Futtaim marked its entry into Abu Dhabi this year with its 18,500 sq m mall, My City Centre Masdar which has a focus on sustainability. Another player expanding its footprint in the capital is Jumbo Electronics who launched a new store, a regional office, warehouse facilities and a service centre. Another retail project in the capital is the upcoming Midfield Terminal of the Abu Dhabi International Airport, which includes 28,000 sq m of retail space for duty-free shopping, dining, relaxing and entertainment. Lulu Group will operate a specialist gifting retail space and a dedicated nonfood department store spread across 1,833 sq m at the terminal. 30
UAE MARKET REPORT A YEAR IN REVIEW
NORTHERN EMIRATES OFFICE MARKET OVERVIEW Office rates have largely remained unchanged from the previous quarter with only some areas displaying a marginal decrease in rents. Looking at efforts on an emirate-wide level, the Department of Economic Development in Umm Al Quwain has lowered trade licence fees by 20% to boost economic activity in the emirate and encourage investment. With advantages such as cost-effectiveness, regulations that are easy to understand and accessibility to the hubs of Dubai and Abu Dhabi, Ras Al Khaimah is increasingly gaining popularity among businesses of all sizes. In a major development for the emirate, India’s secondlargest airline SpiceJet recently announced plans to set up its first international hub in Ras Al Khaimah. Earlier in the year it was also announced that the AED 460 million Fujairah Business Centre project, comprising a 19-level office tower and 19-level hotel and apartment tower along with a retail area, is on track for an early completion by June 2020.
SHARJAH OFFICE RENTAL RATES (AED/SQ FT) Abu Shagara/Al Qasemiah Shell and Core 25 - 30
Fitted 40 - 50
Corniche Area (Al Khan, Al Majaz) Shell and Core 25 - 35
Fitted 40 - 60
Al Taawun Road Shell and Core 25 - 35
Fitted 40 - 60
Industrial Area Shell and Core 25 - 30
Fitted 40 - 50
RETAIL MARKET OVERVIEW In the run up to the end of 2019, a spate of new malls and mall expansions opened in the Northern Emirates. The Safari Mall in Sharjah, with a leasable area of 1.2 million sq ft, opened in September and houses the largest hypermarket in the UAE. In neighbouring Ajman, City Centre Ajman completed its multi-phase redevelopment, transforming into a shopping and lifestyle destination that houses a diverse mix of 130 international brands and restaurants. In Ras Al Khaimah the Grove Village was inaugurated, a community and lifestyle boutique mall spread across 73,200 sq ft and made entirely out of containers. Among the upcoming projects, the Tilal Mall, part of the Tilal City project in Sharjah, will become the emirate’s largest mall upon completion, spread over 21 million sq ft. In Umm Al Quwain, plans are progressing for the Umm Al Quwain Coop commercial and residential project managed by Union Coop - comprising shops, residences and a hypermarket.
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
DUBAI HOSPITALITY MARKET OVERVIEW According to STR Global, for the year to date period, occupancy declined across hotel categories in Dubai barring the Upper Midscale segment where it rose over 6% versus the same period a year ago. However, Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) declined across categories over the year ago, with increased supply being the prime driver of declines. Supply is expected to increase further as the emirate readies itself to welcome an expected 25 million visitors during the course of the six-month Expo 2020 event kickstarting in October 2020. According to Dubai Tourism, Dubai’s hotel room inventory was expected to reach 132,000 by the end of 2019, up from 107,000 at the end of 2017. Among the new openings towards the end of 2019, Dubai counted Hyatt’s Hotels’ Andaz Dubai The Palm, Avani Ibn Battuta and Address Sky View. The emirate is also set to break its own record of having the world’s tallest hotel, a title currently held by the Gevora Hotel on Sheikh Zayed Road. Expected to be complete in 2023, the new 82-storey Ciel in Dubai Marina will be four metres taller than Gevora and feature 1,209 luxury hotel suites and serviced residences.
OCCUPANCY % AND REVPAR (AED)
74.2%
600
75% 74%
550
73%
500
72%
450
616
538
2018
2019
ADR
71%
500 Rate (AED)
75%
Occupancy
Rate (AED)
650
75%
75% 74.2%
450
300
74% 73%
400 350
Occupancy
OCCUPANCY % AND ADR
461
399
2018
2019
OCC %
Rev PAR
72% 71%
OCC %
Data as of Nov 2019
Source: STR Global
ABU DHABI HOSPITALITY MARKET OVERVIEW In the first nine months of 2019, the Department of Culture and Tourism Abu Dhabi figures showed that the capital welcomed 3.8 million hotel guests, a 2.9% increase from 2018, with locations such as Saadiyat Island and Abu Dhabi National Exhibition Centre performing particularly well. Through the year, events such as the Special Olympics, AFC Asian Cup 2019, and Abu Dhabi Showdown Week, among others, were key drivers of visitor numbers. The higher numbers corresponded to an increase in occupancy whilst RevPAR held steady or increased slightly across property types. The last quarter of the year also saw the debut of W Hotels’ W Abu Dhabi – Yas Island with 499 rooms and suites. Other anticipated projects include the opening of the Fairmont Marina Abu Dhabi in 2020 and the first Warner Bros. themed hotel in the world, The WB Abu Dhabi is set to open in 2021 adjacent to the Warner Bros. World Abu Dhabi amusement park on Yas Island.
OCCUPANCY % AND REVPAR (AED)
76.7%
260
200
32
77%
280
75% 289
302
2018
2019 ADR
Data as of Nov 2019
300
76%
240 220
78%
OCC %
74% 73%
Rate (AED)
Rate (AED)
280
77.3%
Occupancy
300
77.3%
78% 77%
76.7%
260
76%
240
75%
220 200
222
233
2018
2019
Rev PAR
74%
Occupancy
OCCUPANCY % AND ADR
73%
OCC % Source: STR Global
UAE MARKET REPORT A YEAR IN REVIEW
NORTHERN EMIRATES HOSPITALITY MARKET OVERVIEW Among the Northern Emirates in the year-to-date period, Ras Al Khaimah recorded an increase in occupancy over the previous year but saw double-digit declines in ADR and RevPAR. Meanwhile, Fujairah registered lower levels across all - occupancy, ADR and RevPAR - from a year ago. The emirate of Ras Al Khaimah is set to open several projects in line with its 3-year strategy launched earlier in 2019 which aims to attract 1.5 million tourists to the emirate by 2021. The Mövenpick Resort Al Marjan Island, set to begin operations in 2021, will be an addition to the island which has over 1,600 operational five-star hotel keys. Adventure tourism is a key pillar of the tourism strategy of the Ras Al Khaimah with the government launching various interactive competitions in 2019 to create innovative attractions. These include creating a unique resort and designing a new mountain attraction on Jebel Jais, which already boasts the Jebel Jais Flight: The World’s Longest Zipline, the Jebel Jais Via Ferrata and the Jebel Jais Viewing Deck Park. With the aim to enhance the visitors’ experience in Sharjah, the emirate has launched new standards to classify hotel establishments in the emirate as supply increased over the past few years. The new standards include parameters such as minimum expectations of the guest, quality of the hotel infrastructure and added value to the guest experience.
OCCUPANCY % AND REVPAR (AED) 450
72%
550
400
72%
350
70%
70%
500
68%
450
66%
66%
400
63%
350 300
605
250
388
511
2018
352
64%
Rate (AED)
Rate (AED)
600
74%
Occupancy
650
Ras Al-Khaimah ADR Ras Al-Khaimah OCC
74% 72%
72% 70%
300
68% 66%
200
66%
150 100
60%
50
58%
0
63%
424
256
367
2018
Ras Al-Khaimah OCC
Fujairah+ OCC
64% 62%
Ras Al-Khaimah RevPAR
Fujairah+ ADR
70%
250
62%
2019
76%
Occupancy
OCCUPANCY % AND ADR
222
2019
60% 58%
Fujairah+ RevPAR Fujairah+ OCC Source: STR Global
Data as of Nov 2019
UPCOMING SUPPLY SPLIT BY CLASS - Q1 2020
DUBAI
ABU DHABI
NORTHERN EMIRATES
Segment
Upcoming supply
Segment
Upcoming supply
Segment
Economy Class
6%
Upscale Class
100%
Upscale Class
Luxury Class
10%
Midscale Class
5%
Upper Midscale Class
15%
Upper Upscale Class
38%
Upscale Class
23%
Upcoming supply 100%
33
HOSPITALITY
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UAE MARKET REPORT A YEAR IN REVIEW
DUBAI INDUSTRIAL MARKET OVERVIEW Supply continued to outpace demand in the last quarter and 2019 overall, but market participants displayed higher levels of cooperation to close deals. An increasing number of transactions continued, despite vacancy levels rising. However, the rate at which supply enters the market appears to have slowed. The general trading sector remained the most active, accounting for over 40% of onshore enquiries and 37% of freezone enquiries followed by manufacturing. The last quarter of the year also saw retail giant Landmark Group open an AED 1 billion fully-automated distribution and warehousing centre in Jebel Ali Free Zone. Spread across 700,000 sq ft, the facility is largest of its kind in the GCC. The other launch was of EZDubai, a 9.9 million sq ft purposebuilt e-commerce zone within Dubai South’s Logistics District. The hub will provide leasable area for businesses intended to be centres for last mile logistics, e-fulfillment, repair and return, and supply. Looking ahead, government initiatives such as the “one free zone passport” scheme, which allows businesses to operate across free zones through a single licence, are expected to lower operational costs for businesses and promote mobility and flexibility, stimulating domestic and international investment.
Rent (AED/sq ft)
WAREHOUSE RENTS IN DUBAI 40
40
30
30
20
20
20 15-20
20
20
20
15-20
10
10
0 JAFZA
22 45
18 28
18 30
25 35
Al Quoz
NIP Techno Park
Dubai Industrial Park
Dubai South (DWC)
20 35
20 30
Dubai Investment Park
Source: Cavendish Maxwell
Minimum
Maximum
0
Sub Lease Fee in %
*Transacted prices not listing/asking prices. * Assumes logistics warehouse, min 8 m height, 2 loading bays without air conditioning * Sub-lease fee is paid on top of rent to the freeholder/government
FREEZONE WAREHOUSES ENQUIRIES BY SECTOR – Q4 2019 8%
ONSHORE WAREHOUSES ENQUIRIES BY SECTOR – Q4 2019
1%
3%
1%
2% 2%
10%
5% 5%
37%
1% 5%
2%
40%
2% 5%
10%
5%
17% 17%
Source: Cavendish Maxwell 34
5% 3%
13%
General Trading Manufacturing Logistic and Distribution (L & D) Engineering Commodities E-Commerce F&B Oil and Gas Construction Services Warehouses Learning and Development Cold store
UAE MARKET REPORT A YEAR IN REVIEW
ABU DHABI INDUSTRIAL MARKET OVERVIEW Through the year, several initiatives were launched by the government to stimulate activity in Abu Dhabiâ&#x20AC;&#x2122;s industrial sector. These included the lowering of electricity bills for companies and implementing a dual license policy allowing free zone companies to operate in the mainland. Recently, Khalifa Industrial Zone Abu Dhabi (KIZAD) waived charges for over 75% of its services whilst lowering fees for many of the remaining services. Abu Dhabi Ports, which operates the Zayed and Khalifa Ports and the associated KIZAD free zone, saw its container volumes jump over 82% in the first six months of 2019. It is now looking to boost capacity of Khalifa Port with plans underway for a AED 3.8 billion expansion by 2021. In a technological upgrade for KIZAD, a high-tech facility was launched in the freezone, with the view to provide a full suite of quality, conformity and testing services for a range of sectors. The oil and gas industry is one of the main drivers of demand for industrial spaces in the capital and the Industrial Internet of things is a key enabler of digital transformation projects. Driving the digital transformation agenda of the capital and the UAE, state owned oil company ADNOC has signed a 10-year contract with Honeywell to use its Forge analytics and asset management platform to improve reliability, uptime and preventative maintenance. It has also partnered with Group 42 (G42), an artificial intelligence (AI), cloud and supercomputing company to develop AI products for oil and gas industry.
NORTHERN EMIRATES INDUSTRIAL MARKET OVERVIEW Warehouse lease rates held steady in the Northern Emirates in the last quarter of the year. With rates ranging between AED 15 - 25 per sq ft in Ajman and Ras Al Khaimah, Sharjah continued to face stiff competition, where rates were in the range of AED 15 -30 per sq ft. In line with economic diversification efforts in other emirates, Fujairah is also progressing with a raft of measures in areas including downstream petrochemicals, urban development, tourism and infrastructure.
Source : Cavendish Maxwell 35
INDUSTRIAL
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A WORD FROM OUR CHIEF ECONOMIST Few governments receive such plaudits as the IMF gave in its November 2019 mission to the UAE1. If real estate markets were determined only and directly by the quality of macroeconomic management, then in a turbulent world the success of the UAE in developing a globally competitive and increasingly diversified economy, with quick visa turnaround times, 100% foreign ownership in many sectors and streamlined business regulations, for example the new insolvency rules, would all serve as a guarantee of continued real estate market value growth. As the IMF recognised, Expo 2020 will also surely provide a short-term boost to the UAE economy. It could even easily add another 1% to the 2-3% growth projected by the IMF, World Bank and UAE Central Bank. Liberalisation in Saudi Arabia, a dominant narrative of 2019, and the resultant development of the Saudi economy provide not just a competitor, but synergy. Rising incomes in the region benefit the Emirates as much, if not more, than domestic economies. Yet in the short term, the IMFâ&#x20AC;&#x2122;s 2.5% growth projection for 2020 sits comfortably above most forecasts for the real estate market, which will continue to be driven in the short term primarily by supply and land issues. The result has been wide differences in performance between localities and sub-sectors, and plenty of opportunities for experienced investors who have carried out extensive due diligence and succeeded in obtaining good returns, for example in the emerging warehouse sector. Investors are now also studying the implications of future changes in fiscal policy structure for valuations and real estate returns. Longer-term, it is wise for the UAE Government to recognise, as they undoubtedly do, that success in diversifying the economy and the success of the real estate market are inextricably entwined. For the long-term investors in the UAE economy we must look further afield than hitherto. Certainly, we should look to India, powering along still and providing a steady stream of investment into the UAE. Options vary as to what Indian growth will be in 2020, from the relatively pessimistic view of the Asian Development Bank at 5.1%2 to the more optimistic view of the OECD at 6.6% 3, with the majority of opinion clustered around the 6% mark. And equally certainly to China, growing at a reduced pace, but still almost 6% in 2020 according to the IMF4 and now a major player not just in infrastructure, but real estate, petrochemicals and other sectors. Both of these economies, however, will continue to generate surplus investment capital. And as a result of sustained economic growth in Asia, albeit at slower than the breakneck pace of a decade ago, the Dubai real estate sector is now within reach for an order of magnitude more of Indian and Chinese nationals than a decade ago 5. At the same time, regulations governing the acquisition of real estate by non-nationals throughout the UAE are being progressively eased, whilst taxes still remain lower than anywhere in Asia, Europe or America. The current challenge for the sector is how to adapt to this very different future UAE population and economy, and to do so within the timeframe of the current real estate cycle before opportunities are lost yet without losing accuracy in marketing focus or control over budgets. The challenge for policymakers in the region is to provide the necessary stability for them to do so.
JULIAN ROCHE CHIEF ECONOMIST
36
1
https://www.imf.org/en/News/Articles/2019/11/06/pr19398-united-arab-emirates-imf-staff-completes-2019-article-iv-mission
2
https://economictimes.indiatimes.com/news/economy/indicators/adb-trims-indias-gdp-growth-forecast-to-5-1-in-fy20/articleshow/72468252.cms
3
https://economictimes.indiatimes.com/news/economy/finance/indias-economy-to-grow-6-6-in-2020-24-oecd/articleshow/71864940.cms
4
https://www.imf.org/en/Publications/WEO/Issues/2019/07/18/WEOupdateJuly2019
5
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CN-IN
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UAE MARKET REPORT A YEAR IN REVIEW
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UAE PROPERTY MARKET REPORT - A YEAR IN REVIEW
METHODOLOGY Residential sales prices and rents are derived from Property Monitor (www.propertymonitor.ae), the region’s leading real estate intelligence platform and the only data source powered by RICS-accredited professionals; bringing unprecedented transparency and accuracy to local property markets. Through Property Monitor, market stakeholders can directly access real-time, transparent and accurate intelligence, unmatched anywhere else in the region. The platform empowers investors, property specialists and banking professionals with authoritative data, analytics and insights that closely correlate with market movements, empowering confident and informed property-related decisions. The average residential sales price per sq ft is taken from Property Monitor which incorporates signed contracts, registered transactions, valuations and listings verified by Cavendish Maxwell’s market-leading valuation department. The Property Monitor Residential Survey is a quarterly study of agent opinions designed to identify residential market sentiment. This research highlights how new enquiries, leasing activity and transactions, among other metrics, changed from quarter to quarter with agent predictions compared to actual real market performance. Supply projections for residential projects are based on the Cavendish Maxwell Supply Tracker, which tracks supply in real time, including regular tracking of construction projects, new launches and delays. This is achieved through site inspections as well as regular feedback from developers, contractors, Cavendish Maxwell’s building consultancy team and related government entities.
STRATEGIC CONSULTING AND RESEARCH Cavendish Maxwell’s Strategic Consulting and Research team has some of the region’s most highly qualified data analysts with a wealth of international real estate advisory experience. We work closely with a broad portfolio of banks, property developers, government entities and private clients, providing authoritative, industry-specific research and advice to maximise portfolio performance. Our strategic consulting and research expertise spans a variety of sectors including residential, office, hospitality, education and mixed-use developments, and our team draws on reliable proprietary data to allow for thorough and accurate analysis of trends and market fluctuations.
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BANKS
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UAE PROPERTY MARKET REPORT
KEY SERVICES Market research Development recommendations Highest and best use studies Advisory services Portfolio strategy Feasibility studies Property data Market entry strategies
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D U BA I
ABU DHABI
M U S CAT
2205 Marina Plaza Dubai Marina P.O. Box 118624 Dubai United Arab Emirates
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T: +971 4 453 9525
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Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.