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Q1 2O2O

UAE PROPERTY MARKET REPORT

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 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 the real estate data intelligence platform, Property Monitor.


Q1 2O2O

UAE PROPERTY MARKET REPORT

FOREWORD The trajectory of the first quarter of the year has been unlike any other, quickly going from business-as-usual to social distancing measures and restrictions in a bid to contain the spread of a highly contagious virus. At the same time, the focus on diversification is greater than ever, with hydrocarbon prices once again under pressure, fuelled by weak demand. At this crucial time, support from authorities has been extended to help businesses across sectors survive and minimise monetary and manpower loss. As the situation continues to evolve, the impact on various sections of the economy, including real estate, is yet to be fully ascertained. Against this backdrop, in our Q1 2020 report we take a look at the performance of the UAE real estate market with a focus on the measures introduced to mitigate the economic impact of the COVID-19 contagion. The analysis provides a comprehensive overview of the residential, office, retail, hospitality and industrial sectors in Dubai, Abu Dhabi and the Northern Emirates with the aim to be a valuable tool in our clients’ decision-making process.

CONTENTS 6

Residential Market Overview

26

Commercial Market Overview

30

Hospitality Market Overview

32

Industrial Market Overview

34

A Word From Our Chief Economist


KEY POLICY CHANGES

LEHMAN BROTHERS COLLAPSE

OIL PRICES COLLAPSE TO $32/BARREL

UAE REAL ESTATE BOOM

OIL PRICES PEAK TO $145/BARREL

NEW M PE

EXPO 2020 ANNOUNCEMENT

EARLY SIGNS OF TROUBLE

BOND ISSUANCE BY THE UAE CENTRAL BANK

REBOUND GROWTH FOR THE GENERAL MARKET - OIL PRICES

CENTRAL BANK MORTAGE CAP

Property Monitor Dynamic Price Index Value

170 NAKHEEL AND DWC ANNOUNCE PLANS FOR DEBT RESTRUCTURING

160

150

ABU DHABI’S $10 BILLION LOAN TO DUBAI

140

130

120

110

100 2008

2009

2010

2011

2012

2013

2014

The Monitor Dynamic Price Price Index (DPI) tracks of trends propertyof prices throughout 42 key communities in Dubai 42 andkey is in TheProperty Property Monitor Dynamic Index (DPI)trends tracks residential property prices throughout


MARKET EAK

OIL PRICE DEREGULATION

AGE LIMIT REMOVED FOR LAST MORTGAGE REPAYMENT

ABU DHABI UPDATES FREEHOLD OWNERSHIP LAW

OPEC LIMITS CRUDE OUTPUT

EARLY SETTLEMENT FEE FOR MORTGAGES REMOVED GOLDEN CARD, A PERMANENT RESIDENCY SYSTEM ANNOUNCED

OIL PRICES COLLAPSE TO $47/BARREL

INTEREST RATE CUT

RUSSIAN CURRENCY CRISIS

AFFORDABLE HOUSING ARRIVES

BREXIT VOTE

20% CAP FOR BANKS’ PROPERTY LENDINGREMOVED

REAL ESTATE INVESTMENT OPPORTUNITIES INITIATIVE LAUNCHED

HIGHER COMMITTEE FOR REAL ESTATE PLANNING FORMED

INTEREST RATES CUT TWICE

DLD AND RERA SPLIT RESPONSIBILITIES

NEW JOINT OWNERSHIP LAW ANNOUNCED

WORLD HEALTH ORGANISATION DECLARES COVID-19 A GLOBAL PANDEMIC AND COUNTRIES CLOSE THEIR BORDERS TO CONTAIN THE SPREAD

INTEREST RATES CUT TWICE

2015

2016

2017

2018

2019

ndexed to a basein period of and January 2008. to a base period of January 2008. communities Dubai is indexed

Q2

Q3

Q4 2020

Q1


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI APARTMENT PRICE PERFORMANCE According to Property Monitor, median apartment prices declined 12% over the 12-month period from Q1 2019 to Q1 2020.

Whilst communities such as Dubai Silicon Oasis, Palm Jumeirah and Liwan registered declines of over 20% during the year, others have registered significant gains. Prices at Mohammed Bin Rashid City and Dubai South (Dubai World Central) have gained over 15% between Q1 2019 and Q1 2020. Similar to past years, there is higher availability of affordable options in the property market. New concepts and formerly expensive options which are now within reach due to softening prices are increasingly becoming available and enticing tenants to become homebuyers. The sector’s growth is also promoting the proliferation of the fit-out, home design and renovations industries. New and emerging areas such as Dubai Hills Estate, Dubai Creek Harbour and Al Jaddaf are seeming even more attractive now as prices are under pressure especially considering the superior quality of infrastructure in these new areas. A possible shot in the arm to the buyer segment will likely come from the recent stimulus by the UAE Central Bank which increases the loan-to-value (LTV) ratio applicable to mortgages for first-time buyers by 5% for off-plan and secondary market transactions. With the recent interest rate cuts, loans are also cheaper than before. -1%

Dubai South (Dubai World Central) Al Furjan

-14%

Dubai Sports City

6%

-8%

Dubai Silicon Oasis

4%

-21%

International City

4%

-10%

Jumeirah Golf Estates

3%

-7%

Discovery Gardens

-3%

-12%

Business Bay -4%

-15%

-4% -5%

Barsha Heights (Tecom)

-5%

-23%

-5%

The Hills City Walk

-6%

-17%

Dubai Marina

-3%

-17% -10%

-23%

Downtown Burj Khalifa Jumeirah Village Circle

3%

-1%

Jumeirah Beach Residence

Liwan

4%

-3.%

Culture Village

Palm Jumeirah

16%

-4%

-8%

-17%

-9%

-20%

-10% -10%

Damac Hills (Akoya By Damac) Mohammed Bin Rashid City

23%

15%

-24

-21

-18

-15

-12

-9

-6

-3

0

3

6

9

12

15

18

21

% change Source: Property Monitor Median prices calculated based on 6-month moving averages.

6

Quarterly Q4 2019 - Q1 2020

Yearly Q1 2019 - Q1 2020

24


UAE PROPERTY MARKET REPORT

Business Bay AED 1,061/sq ft

Culture Village AED 1,356/sq ft

City Walk AED 1,554/sq ft

Downtown Burj Khalifa AED 1,336/sq ft

Palm Jumeirah

International City

AED 1,322/sq ft

AED 600/sq ft

Mohammed Bin Rashid City Jumeirah Beach Residence

AED 1,515/sq ft

AED 1,138/sq ft

Dubai Silicon Oasis AED 599/sq ft

The Hills

Liwan

AED 1,143/sq ft

AED 519/sq ft

Barsha Heights (TECOM) AED 1,024/sq ft

Jumeirah Village Circle AED 636/sq ft

Dubai Marina AED 1,014/sq ft

Discovery Gardens

Dubai Sports City

AED 620/sq ft

AED 812/sq ft

Al Furjan AED 749/sq ft

Jumeirah Golf Estates AED 895/sq ft

Damac Hills (Akoya by Damac) AED 953/sq ft

Dubai South (Dubai World Central) AED 833/sq ft

7

RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI VILLA/TOWNHOUSE PRICE PERFORMANCE According to Property Monitor, median villa/townhouse prices declined 4% over the 12-month period from Q1 2019 to Q1 2020, outperforming apartment prices during the same period. During the year, the range of declines in the villa communities in Dubai has been fairly wide. While Al Furjan recorded a drop of 32%, others including Jumeirah Golf Estates, Damac Hills (Akoya By Damac) and Arabian Ranches 2 saw declines in the range of 2-5%.

Al Furjan

-8%

-32% -12%

Arabian Ranches 2

-5%

Damac Hills (Akoya By Damac)

-2%

Dubai Silicon Oasis

-7%

-17%

Jumeirah Golf Estates

-2%

Jumeirah Islands

0%

0%

-25%

Jumeirah Village Circle

-3%

-16%

Mohammed Bin Rashid City

-3%

-13% -24%

Palm Jumeirah

0%

The Villa

-15% 1%

-18%

Town Square

-1%

-7%

-33

-30

-27

-24

-21

-18

-15

-12

-9

-6

-3

0

% change

Quarterly Q4 2019 - Q1 2020

Source: Property Monitor Median prices calculated based on 6-month moving averages.

8

Yearly Q1 2019 - Q1 2020

3


UAE PROPERTY MARKET REPORT

Palm Jumeirah AED 1,696/sq ft

Mohammed Bin Rashid City AED 805/sq ft

Dubai Silicon Oasis Jumeirah Islands

AED 635/sq ft

AED 855/sq ft

The Villa Jumeirah Village Circle

AED 642/sq ft

AED 442/sq ft

Arabian Ranches 2 AED 998/sq ft

Damac Hills (Akoya by Damac) AED 937/sq ft

Al Furjan Villas

Jumeirah Golf Estates

AED 640/sq ft

AED 1,044/sq ft

Town Square AED 630/sq ft

9

RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI RENT PERFORMANCE

According to Property Monitor, median apartment rents declined 14% whilst villa/townhouse rents were lower by 10% over the 12-month period from Q1 2019 to Q1 2020. In a major development earlier this year, a new property leasing law came into effect in the Dubai International Financial Centre (DIFC) providing enhanced protection for landlords and tenants in the financial district. Some of the features of the law include an upper limit on security deposits to 10% of the annual rent of a residential lease, and the requirement of a written notice by the landlord to the tenant of a proposed rent increase at least 90 days prior to the expiry of a lease.

-15

Barsha Heights

Given the current global health alert with COVID-19, the emerging residential co-living concept may see heightened interest. As companies worldwide have applied measures including installing hygiene dispensers, conducting awareness campaigns and applying work-from-home policies, co-living options would provide its largely young and professional audience the ideal setting of working remotely within a community, without having to rent office space or commute to a job. Within Dubai, Emaar Properties offers this concept through Collective, Collective 2.0, and Socio projects at Dubai Hills Estate. Other projects under development include UNA by Nshama at Town Square and KOA’s Canvas off Mohammad Bin Zayed Road.

AED 38,815 AED 56,935 AED 72,679

-8 Palm Jumeirah AED 61,755 AED 92,975 AED 134,801

To withstand the current situation, some landlords are providing relief to tenants by way of rent waivers as a temporary measure. -14

Annual rent by bedroom

-13

* Data as of March 2020

JLT AED 38,782

Dubai Marina

APARTMENT

VILLA/TOWNHOUSE

AED 86,639

AED 69,520

Studio

3 BR

1 BR

4 BR

2 BR

5 BR

12-month % change

12-month % change

AED 106,079

Median rental prices calculated based on 6-month moving averages.

1

NUMBER OF RENTAL CHEQUES FOR APARTMENTS AND VILLAS/TOWNHOUSES

10

AED 58,281

AED 53,036

0.1% 7 cheques

0.1% 8 cheques

4.2% 6 cheques

0.1% 10 cheques

0.2% 5 cheques

1.6% 12 cheques

31.5% 4 cheques

36.4% 1 cheque

5.9% 3 cheques

19.9% 2 cheques

Al Furjan Villas AED 126,021 AED 128,119 AED 167,670

-10 Al Furjan AED 40,991 AED 53,725 AED 75,522


UAE PROPERTY MARKET REPORT

-12 -13 Business Bay AED 45,738

-18 Downtown Burj Khalifa AED 51,621

Culture Village

AED 78,506

AED 58,137

AED 151,872

AED 64,210

AED 71,598 AED 122,066

AED 87,928

-11 -10 DIFC City Walk

AED 54,339

AED 113,715

AED 84,841

AED 151,509

AED 118,119

-7 Al Khail Heights AED 28,616

Mohammed Bin Rashid City

AED 34,701

s (Tecom)

-13

AED 151,613 AED 193,124

AED 67,402

Dubai Silicon Oasis AED 26,732 AED 38,154 AED 57,163 JVC

-14 Dubai Silicon Oasis

AED 121,676

AED 137,676

AED 134,715

-10 -17

-15

AED 152,037

Liwan AED 36,705

Arjan

JVC

AED 27,500

AED 32,105

AED 38,953

AED 50,142

AED 58,497

AED 71,035

-9 The Villa AED 93,746 AED 150,509

-21 -14

Dubai Sports City

AED 162,976

AED 33,109

Arabian Ranches 2

AED 39,139

AED 135,802 AED 168,257

AED 57,086

AED 195,675

-9 Dubai Sports City AED 115,954 AED 145,517 AED 223,975

-10 Mudon AED 109,666 AED 145,076

1

-5 Jumeirah Golf Estates AED 224,233 AED 232,421

Town Square AED 31,932 AED 46,136

AED 254,606

AED 49,707

-17 Damac Hills (Akoya By Damac)

-28 Dubai South (Dubai World Central)

AED 114,888 AED 177,821

AED 24,111

AED 182,076

AED 31,726 AED 49,378

Source: Property Monitor

11

RESIDENTIAL RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI 2020 UPCOMING SUPPLY

According to Property Monitor, over 6,200 apartments and over 800 villas/townhouses were handed over in Dubai during Q1 2020. Following the establishment of the Higher Committee for Real Estate Planning in November 2019, which aims to match property supply to demand in Dubai, several developers have slowed down project launches and have chosen to instead focus on completing existing projects. Among the new project launches during Q1 2020 was Danube Properties’ AED 400 million Olivz project in Al Warsan First. The development will house 741 apartments along with retail and recreational facilities and is scheduled for completion in early 2022. The other launch was Sobha Realty’s Creek Vistas Reservé Tower in Sobha Hartland. The luxury tower, scheduled for a March 2023 handover, will offer 330 apartments spread across 33 floors. For Q2 and the remainder of 2020, delivery of new units is expected to be impacted as many construction companies, contractors and suppliers temporarily suspended activities from March as a precautionary measure against the further spread of COVID-19. Fewer new launches and potential delays in handovers of existing projects may constrict supply overall, providing support to prices and rents in the upcoming quarters.

APARTMENTS

78%

VILLAS/TOWNHOUSES

22%

SUPPLY SCHEDULED TO BE COMPLETED BY Q2 2020 101-500 501-1,000 1,001-2,000 2,001-2,500 >2,501

Source: Cavendish Maxwell

12


UAE PROPERTY MARKET REPORT

Al Mamzar Al Nahda Deira Waterfront

Muhaisnah

Al Qusais

Dubai Maritime City Al Raffa

Rigga Al Buteen

Al Mankhool Al Kefaf Mirdif Hills Al Jaddaf Dubai Creek Harbour Downtown Dubai

Nadd Al Hamar

Ras Al Khor Business Bay Mohammed Bin Rashid City

Al Warqa

Meydan One Meydan Avenue Al Warsan International City Dubai International Academy City

Al Sufouh

Palm Jumeirah

Dubai Silicon Oasis

Sidra Community Al Barsha Dubailand

Dubai Marina Jumeirah Lake Tower

Jumeirah Village Circle Dubai Sports City Damac Hills

Al Furjan

Town Square Akoya Oxygen

Dubai South

13

RESIDENTIAL

Q1 2O2O


Q1 2O2O

DUBAI TRANSACTION OVERVIEW

The total transfers in Q1 2020 were 8,700 for both villas/ townhouses and apartments compared to 12,444 in Q4 2019.

Whilst transactions have declined on a quarterly basis, the full impact will only be seen over the next few weeks or months once normal activity resumes. Off-plan transfers continued to lead in Q1 2020, accounting for approximately 58% of total transfers. Mohammad Bin Rashid City, Downtown Burj Khalifa and Jumeirah Village Circle were the most sought-after locations for off-plan apartment transfers in Q1 2020. For villas/townhouses, the total volume of off-plan transactions increased from 775 to 911 transactions between Q1 2019 and Q1 2020.

14

UAE PROPERTY MARKET REPORT


208

198

160

76

75

Dubai South (Dubai World Central)

Villanova

The Valley

Serena

0 50

348

150

100

50 0

OFF-PLAN

250

0

333 211 177 177 162 Arjan

100

112

107

71

63

50

Arabian Ranches

150

Jumeirah Beach Residence

200

Mudon

250

Jumeirah Village Circle

300

Akoya Oxygen

350

International City

450

Emirates Living

400

Number of transactions

500

Dubai Marina

Number of transactions

OFF-PLAN

Dubai Hills Estate

200

Number of transactions

398

Dubai Creek Harbour

Downtown Burj Khalifa

417

Business Bay

466

Jumeirah Village Circle

488

Mohammed Bin Rashid City

0

Arabian Ranches 3

Number of transactions

Q1 2O2O

TOP 5 LOCATIONS FOR APARTMENT TRANSFERS IN Q1 2020 SECONDARY MARKET

350

300

250

200

150

100 50

TOP 5 LOCATIONS FOR VILLA TRANSFERS IN Q1 2020

SECONDARY MARKET

120

110

100

90

80

70

60

50

40

30

20

10

Source: Property Monitor

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RESIDENTIAL

UAE PROPERTY MARKET REPORT


Q1 2O2O

ABU DHABI PRICE PERFORMANCE

Average sales prices declined in Abu Dhabi’s major residential zones by 13.2% for apartments from Q1 2019 to Q1 2020. Villa/ townhouse prices registered a slightly lower decline of 9.5% over the same period.

16

UAE PROPERTY MARKET REPORT


UAE PROPERTY MARKET REPORT

As prices increasingly fall within budget for many, the long-term UAE residency visa scheme and the opening up of 15 zones to foreign buyers, both of which were announced last year, are expected to be a tailwind for the sector going forward. Keeping with the broader UAE Sustainable Development Goals (SDG) agenda, UAE’s Ministry of Infrastructure Development and Sheikh Zayed Housing Programme are working to combine smart technology and sustainable standards in infrastructure and housing projects. Over the last two decades, the programme has developed applications of sustainability in housing, enabling responsible electricity and water consumption. Most recently Dr. Abdullah Balheif al-Nuaimi, Minister of Infrastructure Development and Chairman of the Sheikh Zayed Housing Programme, launched the first-of-its-kind geospatial infrastructure platform which uses large geospatial data when making strategic decisions. Undertaking further public realm improvement in the capital, the Abu Dhabi City Municipality has completed the first phase of planting palm and fruit trees along the Khalifa Bin Shakhbout Street. Meanwhile, Phase 2 which extends from Al Falah Street to Shakhboot Bin Sultan Street was also undertaken in Q1 2020.

APARTMENT PRICE PERFORMANCE

1,285

-2.5%

-12.4%

Al Raha Beach Al Reem Island

-1.9%

-10.2%

1,121

-3.7%

-19%

Al Ghadeer Al Reef Downtown

881

-2.3%

-12.1%

728

-2.5%

-12.2%

-22% -20% -18% -16% -14% -12% -10% -8%

-6%

-4%

653

-2%

0

200

400

600

Yearly Q1 2019 - Q1 2020

Quarterly Q4 2019 - Q1 2020

AED/sq ft

Percentage change

Saadiyat Beach Residences

800

1000

1200

1400

1600

Average price per sq ft

Al Raha Gardens

-3%

-12.9%

Al Reef Villas

Saadiyat Beach Villas

-4.8%

-3.2%

Quarterly Q4 2019 - Q1 2020

600

-1.9%

-10.9%

-14% -12% -10% -8%

742

AED/sq ft

Percentage change

VILLA/TOWNHOUSE PRICE PERFORMANCE

-6%

-4%

-2%

1,320

0

200

400

Yearly Q1 2019 - Q1 2020

600

800

1000

1200

1400

1600

Average price per sq ft

Source: Property Monitor

17

RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

ABU DHABI RENT PERFORMANCE

Rents in Abu Dhabi registered declines in Q1 2020 for both apartments and villas/townhouses, however, rents for the latter sharply outperformed those for apartments. The average decline was 15.7% for apartments in the 12-month period from Q1 2019 to Q1 2020 compared to 5.6% for villas/townhouses. Leading developer Aldar Properties has taken several measures as part of an AED 100 million plan to support its customers, tenants and partners through the COVID-19 situation. The developer will ensure timely payments to suppliers and contractors, offer monthly payment plans to tenants in need, enhance distance learning capabilities and is also introducing a virtual personal shopper programme to help its residents. These measures, along with the stimulus initiatives launched by the Abu Dhabi Executive Council and the UAE Central Bank are aimed at cushioning the economic impact of the pandemic.

APARTMENT RENT PERFORMANCE

-0.9%

80,000

-4.3%

Al Reem Island

58,500 44,000

-17.7%

50,000 36,750 26,000

-4.1%

Al Ghadeer

-14.3%

70,000 51,000 35,500

-4.8% -20.7%

-22%

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0

50,000

Studio

Yearly Q1 2019 - Q1 2020

Quarterly Q4 2019 - Q1 2020

103,000

70,000 55,000

-12.5%

Rent (AED/annum)

Percentage change

82,500

-13%

Al Raha Beach

Al Reef Downtown

133,000

-5.9%

Saadiyat Beach Residences

100,000

1 BR

150,000

200,000

2 BR

Percentage change

-2.2%

-3.3%

-10%

Quarterly Q4 2019 - Q1 2020

18

350,000 305,000 290,000

-4.9% -11.2%

-12%

Source: Property Monitor

127,000 120,000 97,000

-2.6%

Al Reef Villas Saadiyat Beach Villas

180,000 150,000 124,000

-2.2%

Al Raha Gardens

-8%

-6%

-4%

-2%

Yearly Q1 2019 - Q1 2020

0

100,000

3 BR

200,000

4 BR

300,000

400,000

5 BR

Rent (AED/annum)

VILLA/TOWNHOUSE RENT PERFORMANCE


UAE PROPERTY MARKET REPORT

ABU DHABI 2020 UPCOMING SUPPLY

According to Property Monitor, apartments will continue to dominate upcoming supply in Q2 2020 making up over 80% of deliveries. Among the communities, Khalifa City is expected to receive the highest number of apartment deliveries in the upcoming quarter whilst Al Ain and Wahat Al Zaweya will have increased villa/townhouse handovers.

VILLAS/TOWNHOUSES

APARTMENTS

14%

86% Source: Property Monitor

Supply scheduled to be completed in Q2 2020 APARTMENTS

VILLAS/TOWNHOUSES

>1,000

100-500

100-500

<100

<100

Wahat Al Zaweya Al Zahiyah Al Danah Saadiyat Island Saadiyat Island Al Hisn Al Raha Beach Development Khalidiyah

Al Reem Island

Khor Al Raha (Samaliyah Island)

Rawdhat

Khalifa City

Shamka South

Al ‘Azeeziyyah

Khalifa City

19

RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

NORTHERN EMIRATES RESIDENTIAL MARKET OVERVIEW

As of Q1 2020, the market stabilised slightly, but continued to register low rents and rates. On a quarterly basis, single digit declines in rents continued into 2020.

Whilst some activities have been restricted on a nationwide level to control the ongoing health situation, individual emirates have implemented their own set of restrictions as they have deemed necessary.

AVERAGE APARTMENT RENTAL RATES Q1 2020 45,000

20,000 18,000

22,000 21,000

21,000 20,000

28,000 28,000 14,000 14,000

15,000

16,000 15,000

20,000

15,000 14,000

25,000

15,000 14,000

30,000 17,000 16,000

Rent (AED/annum)

35,000

25,000 24,000

40,000

10,000 5,000 0 Studio

Sharjah

Source: Cavendish Maxwell

20

Ajman

1 BR

Ras Al Khaimah (excluding premium locations)

Fujairah

Umm Al Quwain


2 BR 42,000 42,000

40,000 36,000

33,000 33,000

37,000 35,000

30,000 28,000

23,000 23,000

32,000 30,000

27,000 26,000

30,000 28,000

34,000 32,000

Q1 2O2O

3 BR

Average Apartment Rental Rates Q4 2019

21

RESIDENTIAL

UAE PROPERTY MARKET REPORT


Q1 2O2O

UAE PROPERTY MARKET REPORT

SHARJAH RESIDENTIAL MARKET OVERVIEW

Soft prices, new launches and increasingly affordable options have helped Sharjah record a busy period of transactions. According to the Sharjah Real Estate Registration Department, 61,357 transactions were recorded in 2019, rising 13.4% from a year ago.

Whilst some within Sharjah continued their flight to Dubai in light of more affordable options available closer to work, others are choosing to upgrade to newer communities away from the city centre. Open spaces within gated communities, newer and superior construction and less traffic and pollution are key attractions of these emerging residential hubs. Tilal City, developed by Tilal Properties, a joint venture between Sharjah Asset Management and Eskan Real Estate Development, permits UAE residents to buy properties on a 100-year leasehold basis, based on Sharjah’s property market laws. Sharjah Sustainable City, Muwailah Community and Arada’s ‘The Boulevard’ residential community within its Aljada megaproject are some other new launches that have hit the market in recent months, unlike neighbouring Dubai where launches have slowed. Activity is also healthy in Sharjah’s secondary market, where investors who may have previously bought properties or bought into projects at initial stages are now able to find buyers who are willing to pay a premium. In a move to protect investors and promote property ownership at its Al Zahia development, Sharjah Holding, a partnership between Majid Al Futtaim Properties and Sharjah Asset Management, launched a limited-period Value Protection Programme that guaranteed that investments are protected against any future swings in price. With the approval of the record budget for 2020 at AED 29.1 billion, Sharjah’s government has announced that a large portion of spending will be allocated to enhancing the emirate’s infrastructure. Approximately 33% of the general budget will be allocated to infrastructure development, growing 10% from the 2019 spending plan.

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

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

Note: Abu Shagara trades at a premium to Rolla Source: Cavendish Maxwell

22


UAE PROPERTY MARKET REPORT

Al Azra Rolla Wasit Suburb Abu Shagara

Al Majaz

Al Khan

Al Rahmaniya

Al Taawun Al Nahda

Hoshi

Al Jurainah

Al Suyoh

Al Tai

AVERAGE RENTAL RATES (AED/ANNUM) Q1 2020 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

22,000

36,000

48,000

58,000

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

24,000

32,000

38,000

PRIME VILLAS 4 BR

5 BR

6 BR

80,000 - 90,000

100,000 - 120,000

130,000 - 140,000

4 BR

5 BR

6 BR

75,000 - 85,000

85,000 - 100,000

100,000 - 115,000

SECONDARY VILLAS

Note: Abu Shagara trades at a premium to Rolla Source: Cavendish Maxwell

23

RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

AJMAN Al Jurf

RESIDENTIAL MARKET OVERVIEW Al Bustan

On a quarterly basis, average apartment rents in Ajman largely remained stable continuing the trend from previous quarters.

Al Rashidiya Al Rawda

Al Naemiya

AVERAGE RENTAL RATES (AED/ANNUM) Q4 2019 Ajman has largely benefited from increased interest in its affordable properties which are now available at attractive price points compared to previous years and even more so than those available in neighbouring Sharjah. Overall, areas of Ajman Downtown, Al Naeimiya and Al Rashidiya have performed well. After Dubai, Ajman Municipality has become the second entity in the Middle East to mandate the use of building information modelling (BIM) software across all projects in the emirate by the end of 2020. Apart from avoiding rework and duplication of efforts, the practice improves productivity and efficiency across the supply chain. This is one of the latest efforts by Ajman Municipality to bring about overall improvement in the emirate for businesses and the larger community. Last year, with the aim to reduce traffic congestion in the emirate, the municipality commenced construction of the AED 150 million Al Rashidiya Bridge. Stretching over three km, the bridge will provide access to Sheikh Khalifa Street.

PRIME APARTMENTS Studio 17,000

1 BR 24,000

SECONDARY APARTMENTS Studio 1 BR 14,000 18,000

2 BR 31,000

3 BR 40,000

2 BR 26,000

3 BR 35,000

AVERAGE RENTAL RATES (AED/ANNUM) Q1 2020 PRIME APARTMENTS Studio 1 BR 17,000

24,000

2 BR

3 BR

31,000

40,000

2 BR 25,000

3 BR 32,000

SECONDARY APARTMENTS Studio 14,000

1 BR 18,000

Source: Cavendish Maxwell

UMM AL QUWAIN RESIDENTIAL MARKET OVERVIEW

As of Q1 2020, the annual rent for apartments in Umm Al Quwain ranged from AED 12,000 per annum for studios to AED 28,000 per annum for three-bedroom apartments, based on property location, condition and specification.

As part of identifying the UAE’s housing needs up to 2040, Dr. Abdullah bin Mohammed Belhaif Al Nuaimi, UAE’s minister of infrastructure development and chairman of the board of directors of the Sheikh Zayed Housing Programme discussed with HH Sheikh Saud bin Rashid Al Mu’alla, Supreme Council Member and Ruler of Umm Al Qaiwain plans for the emirate to construct 3,900 housing units over the next 20 years. SZHP has already received 700 accumulated housing requests in Umm Al Quwain.

24


UAE PROPERTY MARKET REPORT

RAS AL KHAIMAH RESIDENTIAL MARKET OVERVIEW AVERAGE RENTAL RATES (AED/ANNUM) Q4 2019

On a quarterly basis, average apartment rents across various bedroom configurations showed declines close to 5%.

In 2020, Abu Dhabi listed developer RAK Properties planned to hand over under construction buildings and launch construction of two new projects with an investment of AED 200 million. Apart from residential projects, the developer is also working to complete two hospitality projects - Intercontinental Hotel and Resort and the Anantara Mina Al Arab Hotel and Resort.

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

AVERAGE RENTAL RATES (AED/ANNUM) Q1 2020 PRIME APARTMENTS

Al Marjan Island Al Hamra Village

Studio

1 BR

2 BR

3 BR

20,000

28,000

43,000

57,000

2 BR

3 BR

24,000

28,000

Mina Al Arab Al Seer Al Uraibi

SECONDARY APARTMENTS Studio

1 BR

14,000

20,000

Source: Cavendish Maxwell

FUJAIRAH RESIDENTIAL MARKET OVERVIEW

As of Q1 2020, the annual rent for apartments in Fujairah ranged from AED 15,000 - 20,000 per annum for studios to AED 32,000 - 38,000 per annum for three-bedroom apartments, based on property location, condition and specification. In February this year, construction was completed on the AED 1.9 billion Mohamed bin Zayed City housing project in Fujairah. The complex, which was built over four years, is spread across 2.2 sq km and accommodates 1,100 residential villas, aimed at providing housing to 7,000 citizens. The project includes 20 public parks with schools, mosques, shops, a cultural centre and a majlis set to open in due course.

25

RESIDENTIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI OFFICE MARKET OVERVIEW The professional services sector made up the majority of enquiries during Q1 2020, compared to a 10% share in the previous quarter. In terms of unit size, enquiries for spaces up to 1,000 sq ft declined compared to Q4 whilst bigger spaces above 5,000 sq ft increased. In light of the extraordinary conditions brought on by the pandemic, Dubai Free Zones announced a raft of measures as part of an economic stimulus package. These include the postponement of rent payments for up to six months, cancellation of some fines and penalties, monthly installments for payments and refunding insurance and guarantees. Approximately 45,000 companies and 390,000 employees which are part of the free zones are expected to benefit from the measures, Taking cues from the free zones, some private landlords are also offering rent waivers of up to three months with headroom to extend this further if the situation demands. Apart from rent considerations, companies are also likely to benefit from the AED 100 billion stimulus package extended by the UAE Central Bank. As part of the measures, the amount of capital banks have to hold for their loans to small and medium enterprises (SMEs) has been reduced by 15-20%. Banks have been advised to use the funding made available to them to grant temporary relief to private sector corporate customers and retail clients for a period of up to six months. The pandemic will also invariably impact the commercial offering modelled on community and collaboration: co-working. Prior to the shutdown which has temporarily closed these spaces, increasing demand has led to some providers to offer spaces even on a daily or monthly rent basis at increasingly affordable rates. The first quarter also marked the entry of co-working major WeWork to the UAE, with an official launch in Abu Dhabi and an upcoming opening in Dubai. Co-working has given a boost to the commercial real estate market in the UAE, which has faced a prolonged period of uncertainty brought on by a slowing economy and businesses across sectors shedding jobs. In addition to co-working, other trends to watch out for once the situation passes is the evolution of commercial fit-outs to include sustainable practices, biophilia to increase human interaction with nature, multi-functional spaces and enhanced use of technology. Given that the current situation has triggered the largest work-from-home experiment globally and in the UAE, remote and flexible working will also be explored further, allowing companies to reduce their real estate footprint and therefore, their overheads.

DUBAI OFFICE RENT PERFORMANCE (AED RANGE PER SQ FT PER ANNUM) Dubai Media City, Internet City, Knowledge Village 83-93 160-190

Shell and Core (Min/Max) Fitted (Min/Max) (Rates quoted are inclusive of service charge

Dubai South (Dubai World Central) 39-49

59-69

10%

14%

Source: Cavendish Maxwell

26

53%

132-147 167-186 Dubai Design District

93-113 142-157 Downtown Dubai

Dubai Silicon Oasis 39-59 70-90

Dubai Investment Park 49-69

DUBAI OFFICE ENQUIRIES BY SECTOR - Q1 2020

10%

44-74 83-103 Business Bay

93-113 78-93 Dubai Marina

20-59

8%

57 109 Dubai Healthcare City

49-74 74-93 Barsha Heights

JAFZA 39-132 162-172

49-78 78-93 Deira

59-69 39-49 Dubai World Trade Centre

JLT 25-83 78-93

but excluding chiller/utilities)

5%

DIFC 147-167 235-255

Sheikh Zayed Road 59-93 113-132

Professional Services Technologies Construction-related Financial Services Health, Beauty, Pharma Other

DUBAI OFFICE ENQUIRIES BY SIZE (SQ FT) - Q1 2020 8%

8%

0-1,000

15%

1,001 - 5,000 5,001 - 10,000 >10,000 69%


UAE PROPERTY MARKET REPORT

DUBAI RETAIL MARKET OVERVIEW Along with travel and hospitality, retail is perhaps one of the other major sectors likely to witness an impact from the restrictions on regular life. Malls in the UAE have been attempting to innovate, offering experiences to shoppers rather than simple retail stores. With temporary closure of entertainment centres, cinemas, indoor parks and food courts, malls can now expect revenue to trickle in from groceries, pharmacies, food delivery and online sales from certain stores. Retail giants have acknowledged these challenges, with several players offering waivers in some form to tenants. Nakheel Malls has announced an AED 230 million economic relief package to clients. As part of the measures, retail and hospitality tenants across Nakheel’s malls will be granted free rental periods once the malls reopen. The company will waive administration charges across services for three months and also lower district cooling charges by 10% for the same period for commercial and residential customers. Al Futtaim group has also offered some relief to its malls’ tenants who are experiencing a slowdown. It has created a fund worth AED 100 million which will cover three months’ rent for eligible tenants across its malls. Meanwhile, Dubai-Holding-Meraas announced an AED 1 billion package for commercial tenants at developments including City Walk, Bluewaters Island and La Mer, among others. Whilst physical retail has come to a standstill, its online counterpart is experiencing a surge in activity. With physical stores and restaurants shut down and people urged to stay home, retail players have ramped up online operations to essentially bring stores to customers’ homes. Most recently, Emaar Malls announced a partnership under which a virtual store of The Dubai Mall which will be listed on noon.com. Naturally, this spike in online retail has created corresponding demand for logistics services, especially delivery riders. In an attempt to reduce the pressure on online delivery services, the Roads and Transport Authority (RTA) will help these platforms deliver items using Dubai Taxi Corporation vehicles and franchised taxis. Whilst it is undoubtedly a challenging time, Dubai and the UAE have demonstrated agility and resilience in the past and in the current situation. With unparalleled offerings available and more being developed, the sector and wider economy is expected to bounce back rapidly once the recovery process begins.

RETAIL RENTAL RATES Q1 2020 (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

27

COMMERCIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

ABU DHABI OFFICE MARKET OVERVIEW In the first quarter of 2020, rents in Abu Dhabi had generally stabilised compared to Q4 2019. However, the trend might be disrupted in the near term as the impact of COVID-19 extends across sectors. The UAE directed the public and private sector to implement remote working policies for employees in March and asked non-essential businesses to shut physical operations and offer only online services. As a result, office space demand for the current and upcoming quarters faces significant uncertainty. With the aim to cushion the economic impact of the disruptions, Abu Dhabi launched a new set of initiatives under “Ghadan 21”. These include stimulus measures for small and medium enterprises (SMEs), exemptions on real estate fees, water and electricity subsidies for citizens and for commercial and industrial activities, and easy access to loans for local companies, among others. Before the current situation disrupted travel plans and events calendars across the emirates and the world, Abu Dhabi National Exhibitions Company (ADNEC) was set for a busy season in Q1. However, many events are expected to be rescheduled to the latter part of the year and beyond contingent on the improvement of the situation globally.

OFFICE RENT PERFORMANCE (AED/SQ FT) Abu Dhabi MainIand

Al Reem Island Shell and Core

Fitted Low High 75 95

Shell and Core

Fitted Low High

Grade A

-

Grade A

-

100

130

Grade B

-

60

70

Grade B

50

60

75

Grade C

35

40

50

Grade C

30

35

65

Mussafah

Al Maryah Island Shell and Core Grade A

-

Shell and Core

Fitted Low High

Fitted Low High

Grade B

40

50

65

175

Grade C

-

25

40

150

Source: Cavendish Maxwell

RETAIL MARKET OVERVIEW Whilst the measures to contain the COVID-19 outbreak have impacted the retail and entertainment sectors, future plans to further the appeal of Abu Dhabi as an entertainment destination are in place. Furniture retail giant IKEA will open its second store in Abu Dhabi City, spread over 23,000 sq ft in Al Wahda Mall later this year. In February, Abu Dhabi Ports inaugurated Marsa Mina, the latest waterfront lifestyle destination at Zayed Port. The open-air quayside leisure destination provides a range of pop-up retail concepts, casual dining options and entertainment facilities. Keeping with the wider theme of sustainability, retail and dining outlets have been designed with recycled containers. With a view to relieve retailers of some of the pressure from the current situation, certain retail developers in Abu Dhabi have waived rents for retail tenants for a limited time period. Retailers are also expected to benefit from the government’s 15-point economic stimulus package and the UAE Central Bank’s AED 100 billion stimulus package aimed at supporting businesses in this unprecedented time.

28


UAE PROPERTY MARKET REPORT

NORTHERN EMIRATES OFFICE MARKET OVERVIEW Compared to the previous quarter, office rates remained largely unchanged in Q1 2020. With work-from-home measures mostly coming into play in March, the impact is likely to be seen in the upcoming quarters. In line with efforts of Dubai and Abu Dhabi, the Northern Emirates too are taking measures at their individual levels to mitigate the impact for various stakeholders and support smaller businesses with resources. His Highness Sheikh Ahmed bin Humaid Al Nuaimi, Chairman of Ajman Free Zone announced a package of economic incentives including exemptions of fines, suspension of fees and coverage of e-channel smart service warranty for new companies. The measures would benefit 8,000 companies, including those within the free zone, China Mall, and its affiliates. The Sharjah Entrepreneurship Centre (Sheraa) has introduced initiatives for all entrepreneurs and its community of founders including free webinars, a Slack channel for small businesses, and free access to resources on managing start-ups through the crisis. In Ras Al Khaimah, real estate developer and investment firm, Al Hamra will extend an economic relief package to its mall tenants, freehold owners, residents and customers. The measures include rental waivers for up to three months, lowering cooling consumption charges, fee deferrals, payment delay penalty waivers and extension for payment due dates.

SHARJAH OFFICE RENTAL RATES (AED/SQ FT) Abu Shagara/Al Qasemiah

Al Taawun Road

Shell and Core

Fitted

Shell and Core

Fitted

25 - 30

40 - 50

25 - 35

40 - 60

Corniche Area (Al Khan, Al Majaz)

Industrial Area

Shell and Core

Fitted

Shell and Core

25 - 35

40 - 60

25 - 30

Fitted 40 - 50 Source: Cavendish Maxwell

RETAIL MARKET OVERVIEW Before the restrictions for malls and shopping centres were put in place in March, the 24-store centre of Al Musali stores was inaugurated in Sharjah, coinciding with the Sharjah Spring 2020 offerings. The centre is owned by Sharjah Holding Company, a joint venture between Sharjah Asset Management and Majid Al Futtaim Real Estate. Sharjah Asset Management, the investment arm of Sharjah Government, has announced that all tenants in Haraj and Jubil markets will not have to pay rent for three months. Over the next couple of years, Sharjah is expected to further expand its retail capacity, boosted by the Aljada development. Developed by Arada, the first phase of the master-planned destination covering over 2.2 sq km was launched in February 2020. Madar at Aljada is a new entertainment complex features multiple F&B outlets, an events hall, an amphitheatre, a skate park and a children’s adventure zone. In the same month, Ras Al Khaimah also launched a 620 sq m skate park within Saqr Park featuring obstacles including a bowl, pyramids, ledges, banks and round rails. This adds to the list of attractions after Ras Al Khaimah Tourism Development Authority launched the Jais Adventure Peak featuring more ziplines, a viewing deck, an adventure centre and a Sky Maze.

29

COMMERCIAL

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI HOSPITALITY MARKET OVERVIEW As anticipated, as the health situation intensified and led to the cancellation of events and travel curbs, the Dubai hotel market saw declines in occupancy, average daily rate (ADR) and revenue per available room (RevPAR) in Q1 2020. The sector has already been under pressure from new hotel supply. According to STR Global, occupancy rates in Q1 fell 20.5% from a year ago to 66% whilst ADR declined 11.4% to AED 586 and RevPAR slipped 29.6% to AED 386.71. To mitigate the impact, many hotels were offering staycation deals and discounts on services to entice local travellers. On the other end of the spectrum, prominent hotel chains including Emaar Hospitality, Meydan Hotels and Hospitality and Marriott International have announced the temporary closure of some of their properties in order to focus on others. Among the new launches during the quarter were the Crowne Plaza Dubai Marina, the flagship hotel of InterContinental Hotels Group (IHG). The five-star hotel comprising 273 keys maintains a keen focus on technology and aims to become a hub for business travellers. The ME Dubai also opened its doors in March in The Opus by Omniyat building, designed by the late Dame Zaha Hadid. The hotel features 74 keys and 19 suites, three food and beverage outlets and a spa. Guests also benefit from the other facilities available at the Opus, including 15 restaurants and bars.

OCCUPANCY % AND REVPAR (AED) 90% 80%

650 600

70%

66%

60%

550 500

662

586

2019

2020

ADR

50%

600 Rate (AED)

83%

Occupancy

Rate (AED)

700

90%

83%

80%

500 400

66%

200

70% 60%

300 549

387

2019

2020

OCC %

Rev PAR

50%

Occupancy

OCCUPANCY % AND ADR

OCC %

Data for Jan-Mar 2020

Source: STR Global

ABU DHABI HOSPITALITY MARKET OVERVIEW At least until the end of February. Abu Dhabi’s decline in key hospitality performance indicators trailed Dubai as events were still underway in the emirate. With entry restricted into the UAE, the decline is now largely expected to be in line with other markets.

OCCUPANCY % AND REVPAR (AED) 500

550

80%

450

80%

500

75%

400

75%

450 400 350

68%

530

429

2019

2020 ADR

Data for Jan-Mar 2020

30

OCC %

70% 65% 60%

Rate (AED)

85%

82%

Occupancy

Rate (AED)

600

85%

82%

350

68%

300 250

70% 65%

431

283

2019

2020

Rev PAR

Occupancy

OCCUPANCY % AND ADR

60%

OCC % Source: STR Global


UAE PROPERTY MARKET REPORT

NORTHERN EMIRATES HOSPITALITY MARKET OVERVIEW According to STR Global, Ras Al Khaimah recorded a 14% decline in occupancy in Q1 2020 versus a year ago compared to 7% for Fujairah. However, in terms of ADR during the same period, Ras Al Khaimah registered a 8% decline versus -9.7% for Fujairah.

OCCUPANCY % AND REVPAR (AED) 450 400

600

72%

350

550

70%

300

68%

500

68%

450

66%

400

63%

62%

350 300

559

250

359

515

2019

324

64%

Rate (AED)

74%

73%

Occupancy

Rate (AED)

650

Ras Al-Khaimah ADR

72% 70%

68%

68%

200

66%

150 100

60%

50

58%

0

406

243

321

2019

64% 62%

204

2020

Ras Al-Khaimah OCC

Fujairah+ OCC

63%

62%

Ras Al-Khaimah RevPAR

Fujairah+ ADR

Ras Al-Khaimah OCC

74%

250

62%

2020

76% 73%

Occupancy

OCCUPANCY % AND ADR

60% 58%

Fujairah+ RevPAR Fujairah+ OCC

Source: STR Global

Data for Jan-Mar 2020

UAE UPCOMING SUPPLY

1%

7%

In terms of upcoming supply, whilst many hotels are in various stages of construction and scheduled for completion this year, the actual materialisation rate will likely be much lower than in previous years. Also, with new dates proposed for the Expo 2020 with a possible starting delay of up to a year, many hotel completions may move to 2021. Within 2020, two Dubai hotels that are likely to begin operations during the year are Marriot The Palm with 608 keys and Paramount Tower Hotel and Residences with 521 keys.

Economy Class

Midscale Class

20%

12% Upper Midscale Class

35%

Luxury Class

UPCOMING SUPPLY SPLIT BY CLASS

26% Upper Upscale Class

Upscale Class

UPCOMING SUPPLY SPLIT BY EMIRATE DUBAI

Upcoming supply

ABU DHABI

Upcoming supply

Luxury Class

21%

Upper Upscale Class

89%

Upper Upscale Class

22%

Upscale Class

11%

Upscale Class

38%

Upper Midscale Class

10%

SHARJAH

Midscale Class

8%

Upscale Class

35%

Economy Class

1%

Upper Midscale Class

65%

AJMAN Upper Upscale Class

Upcoming supply

Upcoming supply

100%

UMM AL QUWAIN Upcoming supply Upper Upscale Class

RAK

100% Upcoming supply

Luxury Class

23%

Upper Upscale Class

40%

Upscale Class

18%

Upper Midscale Class

19%

FUJAIRAH Luxury Class

Upcoming supply

100%

Source: STR Global

31

HOSPITALITY

Q1 2O2O


Q1 2O2O

UAE PROPERTY MARKET REPORT

DUBAI INDUSTRIAL MARKET OVERVIEW Whilst most other segments of the economy are currently grappling with slowing business in the wake of the pandemic, the e-commerce space is experiencing a boom, with consumers fulfilling all their shopping needs from groceries to fitness equipment through online channels. The surge in demand, coupled with a potentially permanent change in shopping behaviour even post the COVID-19 situation to favour online retail will likely spur demand for warehouses, fulfilment centres and other logistics facilities. In Q1 itself, warehouse enquiries at freezones comprised 25% of the pie versus 0% in the previous quarter whilst logistics and distribution enquiries climbed to take a 29% share versus 17% earlier. Meanwhile, general trading, which led enquiries in the previous quarters, declined in Q1 2020 for freezone and onshore. In terms of the other industrial developments this quarter, Jaguar Land Rover (JLR) has broken ground on its new Parts Distribution Centre in Jebel Ali, set to replace its older centre operational since 2014. Scheduled to open in Q1 2021, the centre will span 19,000 sq m of storage capacity, with the option to expand to 30,000 sq m. Dubai’s “Industrial Strategy 2030” is well underway with public and private companies announcing their achievements in realising the vision. One of the UAE’s largest manufacturing businesses, Ducab Group recently revealed a 5% rise in overall profitability in 2019, the latest of its achievements over the past decades to grow in line with UAE’s wider efforts in industrial manufacturing. Companies involved in various sectors from pharmaceuticals to food security are expected to leverage smart manufacturing techniques to help the sector contribute 25% to the country’s overall GDP by 2025. Smart manufacturing and the Internet of Things (IoT) are essentially driving the fourth industrial revolution, a key platform for the UAE to cement its position as a global hub and increasing contribution to the world economy through innovation and technology. A key driver to achieve this goal is the UAE industrial sector where assets such as factories, warehouses and light industrial units (LIUs) etc, are to be tailored to new trends’ specifications and meet investors requirements in terms of eaves height, loading bays, availability of power and internet.

WAREHOUSE RENTS IN DUBAI 40

Rent (AED/sq ft)

40

30

30

30

30 20

20

20

20

20

15-20

10

10 0

18 35

15 25 JAFZA

Dubai Investment Park

17 27

15 27

22 33

NIP Techno Park

Dubai Industrial Park

Dubai South (DWC)

22 45 Al Quoz

0

Source: Cavendish Maxwell

Minimum

*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

5%

4% 10%

21%

31%

25%

FREEZONE WAREHOUSE ENQUIRIES BY SECTOR Q1 2020

7%

4% Source: Cavendish Maxwell

32

2% 2% 29%

4% 7%

ONSHORE WAREHOUSE ENQUIRIES BY SECTOR Q1 2020

16%

3% 7%

8% 16%

Maximum

Sub Lease Fee in %

General Trading Manufacturing Logistic and Distribution (L & D) Engineering F&B Oil and Gas Construction Services Warehouses Learning and Development


UAE PROPERTY MARKET REPORT

ABU DHABI INDUSTRIAL MARKET OVERVIEW Abu Dhabi’s industrial sector has benefited from several government initiatives to stimulate the sector. Most recently, Khalifa Industrial Zone, a subsidiary of Abu Dhabi Ports lowered its land lease tariff on new contracts by 25%. Meanwhile, purpose-built economic zones operator, ZonesCorp reported encouraging investments during Q1. The operator attracted over AED 350 million in investments serving a variety of sectors including oilfield services, plastic and automotive. ZonesCorp’s facilities accommodate over 880 industrial establishments operating in multiple sectors. On the infrastructure front, Abu Dhabi General Services Company (Musanada) completed projects worth AED 254 million in the Al Shawamekh area of the emirate. Musanada delivered sectors 7 and 12 of the project, constructing internal roads and building infrastructure for residential plots spanning 2.2 million sq m. In the immediate term, fluctuations in the prices of oil following the collapse of the OPEC+ agreement on curbing oil production is likely to bring uncertainty in demand for industrial spaces as the oil and gas industry is one of the main drivers of demand of such spaces in Abu Dhabi. At the same time, the increased activity in the e-commerce sector following restrictions on physical activities recently is likely to drive demand for industrial and logistics spaces such as warehouses and fulfilment centres.

NORTHERN EMIRATES INDUSTRIAL MARKET OVERVIEW The biggest development of the quarter, and perhaps the year, was the new well of natural gas and condensate discovered onshore in Sharjah by Sharjah National Oil Corporation and Italian oil company Eni. The latest find, which is the biggest in over 30 years, will be instrumental in meeting Sharjah and the UAE’s growing energy needs and achieving self-sufficiency in power generation. Sharjah’s industrial sector is already the largest in the country with 21 industrial zones which together account for 45% of the UAE’s industrial output. To further enhance its competitiveness and add to its contribution to the UAE’s overall industrial output, Sharjah Chamber of Commerce and Industry, along with partners, has announced the launch of an infrastructure development project for the 10th industrial zone in Sharjah. The project will involve reconstructing the whole area of 2.16 million sq m and will be built in 18 months by Sharjah Contracting and Khatib & Alami. Meanwhile, the Port of Fujairah, a key global oil storage centre and the second-largest ship bunkering hub in the world revealed plans to expand and enhance its oil handling infrastructure with a potential investment of AED 752.6 million. Its current oil handling capacity stands at 700 million barrels per annum. The expansion is part of the Port of Fujairah’s plans for the related sectors and the wider economy.

NORTHERN EMIRATES WAREHOUSE MARKET Average Lease Rate (AED per sq ft) Q1 2020 Ajman

Sharjah

RAK

15 - 25

15 - 30

15 - 25

Source: Cavendish Maxwell

33

INDUSTRIAL

Q1 2O2O


Q1 2O2O

A WORD FROM OUR

CHIEF ECONOMIST It is almost certain that macro-economic conditions worldwide have never changed so swiftly as over the past month. Entire economies have been shut down and borders closed. The UAE has also had to contend with a rapid and unexpected decline of the oil price, now very volatile but oscillating around levels significantly lower than the USD 70 per barrel which the International Monetary Fund conservatively estimated for fiscal break-even in the UAE.

JULIAN ROCHE CHIEF ECONOMIST

This is a time when effective governance really counts: countries’ responses have varied widely, with widespread recognition that GCC countries have done extremely well in terms of health policies1. Government monetary and fiscal policy has also been

timely, targeted and executed in tandem. The UAE Central Bank has moved twice so far to reduce interest rates by a total of 125 basis points. There is little further room for manoeuvre in monetary policy. More importantly, a package of fiscal measures has been enacted2 amounting to an unprecedented AED 256 billion, 20% of GDP. The Central Bank has halved banks’ required reserve requirements, down from 14% to 7%. As well as waiving payment service fees, the Central Bank has made available a zero-interest rate collateralised loan facility of AED 50 billion, and has also freed up for use AED 50 billion of funds from banks’ capital buffers. Banks’ SME loan provisioning has been reduced by 15-25% and they have been asked both to limit their fees and defer loan repayments where necessary until the end of the year. Two measures designed to have a stabilising effect on the real estate market have been the increase of loan-to-value ratio for first-time home buyers by 5%, raising the limit on banks’ exposure to the real estate sector from 20% to 30% of risk-weighted assets. In addition, rebates on commercial lease payments in the tourism and hospitality sectors and active relief packages launched by developers such as Dubai Holdings and Nakheel have been coordinated to support commercial tenants. Rating agencies such as Moody’s have signalled their belief that taken together, these support schemes should prevent commercial property borrowers’ liquidity issues from escalating into the level of insolvency, but there is sufficient fiscal latitude to expand all of these schemes both in duration and magnitude, if required. On the other hand, the UAE Central Bank has also emphasised its commitment to the dirham peg to the USD, which continues to value UAE real estate highly in terms of a global basket of currencies. With borrowers and homeowners cushioned, the main effect for the real estate market now is that of dramatically reduced liquidity. Results for Q1 2020 therefore take on especial importance, in particular, as to the relative performance of specific locations. With infrastructure developments continuing over the coming year, investors must now take a keen interest in the attractiveness of individual districts that this report has highlighted in order to be properly prepared for when liquidity returns to the market.

1 Brookings Institute (2020) Brookings experts on the implications of COVID-19 for the Middle East and North Africa. Available at: https://www.brookings.edu/

opinions/brookings-experts-on-the-implications-of-covid-19-for-the-middle-east-and-north-africa/ Retrieved 17 April 2020 2Central

Bank of the UAE (2020) The Central Bank of the UAE announces a comprehensive AED 100 billion Targeted Economic Support Scheme to contain

the repercussions of the pandemic COVID-19. Available at: https://www.centralbank.ae/sites/default/files/2020-03/CBUAE%20announces%20a%20 comprehensive%20AED%20100%20billion%20Targeted%20Economic%20Support%20Scheme%20to%20contain%20the%20repercussions%20of%20the%20 pandemic%20COVID-19.pdf Retrieved 17 April 2020

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METHODOLOGY 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. Residential sales prices and rents are derived from Property Monitor, 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. Property Monitor arrives at the average residential sales price per sq ft by incorporating signed contracts, registered transactions, valuations and listings. The Property Monitor Dynamic Price Index family (DPI) are calculated using a moving average algorithm of median prices and the Dutot price index formula with cleansing of extreme values and outliers. The indices are subject to backward revision should any new datapoint or datasets become available. 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.

+971 4 453 9525 info@propertymonitor.ae

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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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Aditi Gouri Associate Partner Strategic Consulting and Research

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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.