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
15
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 â&#x20AC;&#x2DC;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 childrenâ&#x20AC;&#x2122;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 Dhabiâ&#x20AC;&#x2122;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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UAE PROPERTY MARKET REPORT
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UAE PROPERTY MARKET REPORT
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UAE PROPERTY MARKET REPORT
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 Maxwellâ&#x20AC;&#x2122;s building consultancy team and related government entities. Residential sales prices and rents are derived from Property Monitor, the regionâ&#x20AC;&#x2122;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.
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UAE PROPERTY MARKET REPORT
STRATEGIC CONSULTING AND RESEARCH Cavendish Maxwellâ&#x20AC;&#x2122;s Strategic Consulting and Research team has some of the regionâ&#x20AC;&#x2122;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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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.