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Dubai Real Estate Market Overview
Q1 2013
Dubai
Macroeconomic overview
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Indicator 2011 2012 (e) 2013 (f)
United Arab Emirates
Population (millions) 7.89 8.11 8.21
Real GDP Growth (Y-o-Y) 4.2% 4.2% 2.7%
Consumer Price Index (% change) 0.9% 0.7% 1.9%
Dubai
Population (millions) 2.0 2.1 2.2
Real GDP Growth (Y-o-Y) 3.4% 4.5% 4.0%
Inflation (% Change) 0.5% -1.7% n/a
Sources: IHS Global Insights (March 2013); Dubai Statistics Center 2012e: estimated f:forecasted
Market Highlights – Q1 2013
• The Dubai economy is expected to sustain its growth momentum. According to the Department of Economic Development, the Gross Domestic Product of Dubai will grow by more than 4% in 2013. Tourism, trade, transportation and logistics are all witnessing strong performance, while construction and real estate have started to show encouraging signs of recovery.
• The business outlook of Dubai is certainly looking brighter as macroeconomic fundamentals are stronger and investor confidence is rising. This positive outlook has been reflected in the Department of Economic Development’s Business Confidence Index (BCI), which reached 135.9 points in Q4-2012, up 11% compared to Q3-2012.
• The real estate investment market has been very active in the first quarter of 2013, with a number of residential transactions. There has also been increased interest for full buildings in Dubai from investors from the GCC and the Middle East. Continued uncertainties in the Eurozone, highlighted by the Cyprus banking crisis, could lead to a transfer of capital into the Dubai real estate market as it is perceived as politically stable and attractive to offshore investors.
• Rents for prime office space have started to recover in Q1 2013, with the “flight to quality” remaining a main trend in the market. Demand remains driven by larger companies seeking portfolio optimisation and upgrades of their premises, rather than new entrants to the market.
• The residential market has maintained the strong performance of 2012, with villas and apartments showing similar increases in sale and rental prices in Q1. Well established locations continue to attract strong demand, while projects in newly developed areas are still lagging behind and will need more time before picking up.
• The retail market continues to be dominated by the best performing super-regional malls (eg: Dubai Mall, Mall of the Emirates). Secondary and old malls continue to witness subdued demand and falling occupancy rates & rents, resulting in a wider differential between primary and secondary malls.
• The hotel sector maintained its strong performance, supported by a growing number of tourist arrivals in Dubai. Occupancy rates have been rising to 88% while Average Daily Rates (ADRs) reached USD 276. This positive trend is expected to continue throughout 2013.
• The industrial market remains dominated by the traditional onshore areas located in dense residential and commercial areas. However, the trend is moving more towards newer areas which offer well developed infrastructure, good connectivity, proximity to major infrastructure projects, in addition to better quality products.
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For the first time since mid 2008, all sectors of the Dubai real estate market are currently positioned in the recovery stage of their market cycle. However, the positive performance remains largely concentrated in the best quality projects in prime locations, with secondary locations and poor quality projects continuing to experience high vacancy rates and stable or even falling rental values.
Talking Points – Q1 2013
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• Following discussions with the banking sector, the UAE Central Bank is now proposing somewhat higher limits on loan to value ratios for mortgages of 75% for expatriates and 80% for Emiratis for first-home loans, and 60% for expatriates and 65% for nationals for second and third-home loans. These new guidelines are expected to be made official soon.
• With investor confidence on the rise, a number of large scale projects have been announced recently. The most ambitious of these is the Mohammad Bin Rashid City (MBRC), including the world’s biggest shopping mall, around 100 hotels, a public park and a Universal Studios theme park, which is supposed to be developed over a decade.
• Another major recent announcement is the Bluewaters project, an AED 6 billion mixed use development by Meraas. This new development will be located off the JBR coastline and will include an AED 1 billion Dubai Eye wheel, in addition to retail, residential, hospitality and entertainment components. Construction is scheduled to start in April 2013.
property investments, followed by British citizens (AED 5 billion), Pakistanis (AED 4 billion) and Iranians (AED 3 billion). Americans, Canadians, Italians, French, Italians and other nationalities pumped AED 16 billion into the Dubai property market in 2012.
• The Dubai Land Department featured on a World Bank list of the top 10 agencies worldwide for swift and accurate property registration.
• The Dubai International Financial Centre (DIFC) is aiming to double the number of its companies over the next five years and is targeting institutions from China, South Asia and Africa. The number of registered companies within the DIFC reached 912 in 2012, up 7% compared to 2011, while the number of employees increased by 16% to 14,000.
• Dubai International Airport saw more than 5.5 million passengers in January 2013, a record for a single month, with 4.8 million in February. Dubai is now the world’s second busiest airport for international passenger traffic, overtaking Paris’ Charles de Gaulle, and just behind London’s Heathrow.
• DAMAC Properties recently launched a AED1 billion master development in Downtown. The four-tower project, developed in collaboration with Paramount Hotel & Resorts, will include 540 hotel rooms and over 1,400 serviced apartments and is expected to be completed by the end of 2015.
• Nakheel have also announced plans to start construction of the Nakheel Mall on Palm Jumeirah, with more than 100,000 sqm of retail space.
• The Dubai Mall hosted 65 million visitors in 2012, 20% up from 2011, establishing itself as one of the most visited shopping and leisure destinations worldwide. The Dubai Mall also achieved a 24% growth in retail sales in 2012 and is expanding its retail space, taking its total area to over 1.2 million sq m.
• Data from the Dubai Land Department shows GCC nationals invested AED 17.7 billion in Dubai’s real estate in 2012. UAE nationals were the single biggest group of investors (with AED 13 billion spent). Indians came second with AED 9 billion of
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Dubai prime rental clock
*Hotel clock reflects the movement of RevPAR.
Note: The property clock illustrates where Jones Lang LaSalle estimate each prime market is within its individual rental cycle as at end of relevant quarter.Source: Jones Lang LaSalle
Q1 2012 Q1 2013
Dubai office market overview
Office supply• The total office stock within areas monitored by JLL stood at
approximately 7 million sq m at the end of Q1 2013. • The first quarter of the year saw an additional 145,000 sq m of office
space entering the market. New completions include the Conrad Tower on SZR, two buildings in Logistics City, part of Dubai World Central, Grosvenor Business Tower and Iranian Business Tower in Business Bay and the S.I.T project in Silicon Oasis.
• According to developers, there remains around 1.0 million sq m of office supply that could enter the market before the end of the year. However, some of the proposed space might be postponed beyond 2013. The majority of new office supply will be located in Business Bay, followed by DIFC, Dubai World Central, JLT, SZR and Dubai Investment Park.
• With confidence returning to the market, some previously stalled projects are re-starting, such as the Central Park project in DIFC and the Dubai World Trade Centre District.
Source: Jones Lang LaSalle, Q1 2013
• The potentially significant new office supply in Business Bay over the next two years could be reduced as some projects in the area are being converted from office to residential use.
• The share of office stock located in freezones increased with respect to previous years, supported by less stringent restrictions on occupancy. As of Q1 2013, around 47% of office space was located in free zones with the remaining 53% in onshore areas.
• Single ownership buildings constitute the majority of the existing office stock (60%) while the remaining (40%) is strata space. Strata buildings in locations such as TECOM C, JLT and Business Bay remain less popular and continue to display higher vacancy rates. There was however an increase in demand for strata space for sale from smaller local companies noted in Q1 2013.
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Breakdown of Expected Completions by Sub Market (2013-2016)
Source: Jones Lang LaSalle, Q1 2013
Dubai Office Stock (2010 – 2015)
CBD
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JLTJBC 4
Business Bay Grosvenor
Business Tower, Iranian Business
Tower
SZRConrad Tower
Downtown Dubai Standard Chartered
Bank Building
Business Bay The Burlington,
Bay Gate
DIFCBuildings by Daman
Silicon OasisS.I.T Tower
Major office completions - 2012/2013
Under Construction
Completed
Office demand
• With market confidence and optimism improving, demand for office space is picking up.
• Activity remains focused on prime buildings in the top locations, while demand for dated and poor quality space continues to be weak. The market continues to see a “flight to quality” as occupiers are relocating from the old areas to New Dubai.
• With demand increasing, more space has been committed. A good example is Boulevard Plaza by Emaar in Downtown, although around 30% of the space in this project remains physically vacant, much of this has been committed and is no longer available within the market.
• Jones Lang LaSalle is aware of approximately 190,000 sq m of current potential demand for office space. Professional Services firms account for 38% of total active tenant demand, followed by energy (12%), and
telecoms (11%). Most demand continues to result from existing tenants with few new entrants to the market.
• Demand continues to be driven by portfolio optimisation, especially among global occupiers. However, the emphasis is now shifting from reducing the floor space to a more efficient use of the space available.
• Global corporates aim to achieve an occupational density of 7 or 8 sq m per person. This is often not achievable in Dubai, as the design and floor plate of most buildings in Dubai do not allow for efficient space utilisation. In general, ratios of 9 or 10 sq m per person are the best that can be achieved in the Dubai market.
• A number of cash-rich global corporates are today increasingly looking to allocate investment on new fit outs and refurbishments.
Source: Jones Lang LaSalle, Q1 2013
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Examples of recent deals
Industry Area Acquired (sq m)
Location Comment
Energy 5,575 Business Bay Relocation / expansion
Services 5,575 DIFC Relocation
Consumer 2,000 JLT Expansion from TECOM
Chemicals 1,700 The Galleries, Jebel Ali
Expansion from JAFZA
Distribution of Current Tenant Demand
Rental performance
• Increased leasing activity is now being reflected in the growth of rental levels within the Dubai office market. The rise in asking prices, noticeable during the last six months, has now been translated into an increase in the dealing rents. Average headline dealing rents in quality office buildings in selected areas have seen a rise of 10% Q-o-Q.
• The top open-market rent in the CBD (prime rent*) remained unchanged at AED 2,370 per sq m in the DIFC but improved by 4% Q-o-Q to AED 1,690 per sq m elsewhere in the CBD.
• The improvement in average dealing rents during Q1 2013, reflects the recovery of demand and therefore rentals in some new but previously largely unoccupied buildings.
• Prime locations such as TECOM A&B, SZR and Burj Downtown have all seen increase in their rental values. Business Bay has also witnessed an increase in popularity recently as more of the area’s infrastructure has been completed.
• Landlords have become firmer on rents in the most prime locations but remain flexible elsewhere, offering rent-free periods to attract tenants to fill unoccupied buildings.
• As the “flight to quality” continues, older areas continue to suffer from lower occupancy rates while the newer buildings in areas such as Business Bay, Downtown and even Jebel Ali, are filling up.
• Vacancy rates within the CBD remained flat at 31% in Q1 as the take up was in line with the new supply entering the market. However, vacancy rates are expected to decline in the coming quarters driven by stronger demand.
• While the office market appears on a recovery path, it is important to note that growth remains concentrated within prime buildings and is not being experienced in secondary and lower quality office space.
* See Definition & Methodology for definition of Prime rents.Source: Jones Lang LaSalle, Q1 2013
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Note: The average office rents are based on a basket of quality office buildings across Dubai
Index of Average Office Rents
Dubai Prime Office Rents (Q1 2012 – Q1 2013)
Indicator Level Comment / Outlook
Current Office Stock 7.0 million sq m Includes all grades. Limited supply (less than 1 million sq m) of single ownership space in the CBD.
Future Supply (2013 – 2015) 1.5 million sq m Assuming that all pipeline supply tracked by Jones Lang LaSalle will
complete.
CBD Single Ownership Vacancy 31%
CBD vacancy levels remained flat at 31%. Some areas outside the CBD continue to experience much higher vacancies.
Prime CBD Rental (excl. DIFC)Prime City-wide Rental (excl. CBD)
AED 1,690 / sq m
AED 1,670 / sq m
Prime rents started to pick up in Q1 2013 as confidence and optimism are returning to the market. Demand remains driven by consolidation and upgrades rather than new entrants.
Prime Capital Value AED 15,500 / sq mPrime Capital Value refers to the market price for the best office space (excluding DIFC). Prime Capital Values increased in Q1 2013, reflecting the increase in prime rents.
Office market summary
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Dubai residential market overview
Residential supply
• As of Q1 2013, the total residential stock in areas monitored by JLL stood at around 357,000 units.
• Around 2,200 residential units, mostly apartments, have been handed over in Q1-2013. The most notable deliveries include Spirit Tower in Sports City, Lakeside Tower in JLT, Bay Central in Dubai Marina as well as the Al Furjan Villas by Nakheel.
• The largest proportion of residential stock added to the market since 2009 is located in International City (14%), followed by Dubai Marina (13%), Discovery Gardens (9%) and JLT (6%).
• A total of 28,000 dwellings are expected to be completed in 2013. Among the anticipated deliveries are are the 29 Boulevard towers in Downtown, Balqis Residencies on The Palm, the Centrium Project in
IPMZ as well as Silicon Gate in Dubai Silicon Oasis.• Around 40,000 residential units are scheduled to enter the market
over the next two years, which will represent a 11% increase on the current stock. While demand has started to pick up and a number of previously stalled projects are now resuming, we do not expect all the announced space to be delivered within this timeframe.
• Most of the upcoming residential supply will be located outside of Central Dubai in areas to the South and East of the city. The largest proportion of future stock from 2013 to 2015 will be delivered in the submarkets of Dubailand (7,900 units); Business Bay (3,800 units); and Dubai Sports City (3,800 units).
Source: Jones Lang LaSalle, Q1 2013 Source: Jones Lang LaSalle, Q1 2013
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Breakdown of Expected Future CompletionsDubai Residential Stock (2010 – 2015)
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Silicon OasisSilicon Gate 1,
City Oasis
Dubai Sports CityThe Spirit, Zenith Tower A1, Elite 2
Jumeirah Park Nakheel Villas
Dubai Marina Bay Central, Elite
Residence
Dubai Sports CityCanal Residence West, The Bridge
Dubai MarinaInfinity Tower, Marsa Tower
Downtown Dubai29 Boulevard,
Standpoint
Palm JumeirahBalqis Residences,
Royal Amwaj
Major residential completions - 2012/2013
Under Construction
Completed
Residential performance• The positive performance of the overall residential market observed
in 2012 has continued into the first quarter of 2013.
• The REIDIN general Residential Sale Index improved by 18% Y-o-Y. with the apartment and villa sectors showing similar gains in Q1 2013. The villa sale price index and the apartment sale price index increased by 17% and 18% Y-o-Y respectively. They both remain however below their peak values in Q3 2008 with villas 8% less than its peak and the apartment index 22% less than in Q3 2008.
• The rental market maintained its positive trend in Q1 2013 with the REIDIN Rental Indices recording an improvement of 10% Y-o-Y. Both the villa and apartment rent indices went up by 10% Y-o-Y. While the
villa rental index has achieved its peak value in February 2013, the apartment rental index remains 26% lower than in January 2009 (when the index commenced). Rentals have increased in the most sort after areas such as Burj Downtown, Dubai Marina and Palm Jumeirah, while remaining stable in secondary and less completed locations.
• While well established residential communities in Central Dubai are expected to see further price and rental growth over the rest of 2013, less completed projects in more remote areas will need more time before seeing increased demand and performance.
Note: REIDIN.com RPPIs use monthly sample of offered/asked listing price data and land registry price data (transaction data). Dubai sales/ rent index series are calculated monthlyand cover 7 city-wide, 8 main districts and 4 major communities/ projects.Source: REIDIN, Q1 2013
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Dubai Residential Property Sale Indices Dubai Residential Property Sale Indices
Residential market summary
Indicator Level Comment/Outlook
Current Residential Stock 357,000 Around 2,200 units were added to Dubai’s residential stock inventory in Q1 2013.
Future Supply (2013 – 2015) 42,000Assuming that all supply tracked by Jones Lang LaSalle will complete. In reality, some of the proposed projects may be delayed beyond their scheduled date.
Apartment Rent Asking rents went up by 10% Y-o-Y and are expected to increase further during 2013.
Apartment Sale Price Asking apartment sale prices went up by 18% in prime buildings within established locations year-on-year.
Villa RentVilla rents have increased by 10% Y-o-Y in prime established locations and this trend is likely to continue. Asking rents in less established prime locations expected to remain stable.
Villa Sale PriceAsking prices for villas have increased by 17% year-on-year and are expected to continue their upward trend during 2013 in well established prime areas.
Note: Direction arrows are based on the performance of the REIDIN monthly index.
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Dubai retail market overview
Retail mall supply
• The total stock of mall based retail space in Dubai at the end of Q1 2013 remains unchanged at around 2.8 million sq m. as no new projects were delivered in the first quarter of the year.
• The major completion for Q2 2013 is Phase I of The Avenue by Meraas, adding 13,000 sq m of retail space. Other projects underway include the 35,000 sq m phase 2 of Al Ghurair Center due later in 2013, as well as the 158,000 sq m extension to Dragon Mart and The Beach by Meraas, a 5,000 sq m boutique mall on JBR with 40 F&B units, retail shops and entertainment area scheduled for 2014.
• The main proposed retail centers for 2015 include the 112,000 sq m Dubai Pearl Shopping Mall and the 67,000 sq m Agora Mall in Jumeirah.
• The Nakheel Mall and the Pointe Mall, both located on The Palm Jumeirah, have been re-launched in Q1 2013 and construction is expected to start very soon.
• Other large-scale shopping centres remain announced but not yet under construction. These include the 200,000 sq m Phase II of the Avenue, the 400,000 sq m Phoenix Mall in International City, BawadiMall in Dubailand, and the Phase II of Dubai Outlet Mall. Other projects that have commenced construction remain on hold (eg: Mall of Arabia.)
• Many existing retail centres have recently launched expansion and redevelopment plans. These include Dubai Mall (93,000 sq m), IbnBattuta Mall, Al Ghurair Center and Deira City Centre.
• Large Super Regional Centres continue to dominate the Dubai market and constitute 66% of mall based retail space. Despite the entry of a number of community centres in the coming years, the share of Super Regional malls is expected to keep on growing and is projected to account for 78% of the total retail GLA by the end of 2015.
Source: Jones Lang LaSalle, Q1 2013Source: Jones Lang LaSalle, Q1 2013
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Dubai Retail Stock (2010 – 2015)Breakdown of Under-Construction Retail Space by Type of Mall
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Downtown Dubai Dubai Mall - Phase 2
Al WaslThe Avenue
Al BarshaOutlet Village
JBRThe Beach
International CityDragon Mart -
Phase 2
TECOMDubai Pearl Mall
DeiraAl Ghurair Centre -
Phase 2
Expected major retail projects
Under Construction
Rental Performance – Estimated Rental Value (ERV)
• The top open market net rent for a notional standard shop in prime super regional centres has remained unchanged in Q1 2013. The premium Super Regional malls such as Dubai Mall and Mall of the Emirates continue to dominate the market in terms of footfall, sales volumes, rental values and occupancy rates. Secondary and older malls continue to witness subdued demand, resulting in their rents and occupancy rates either remaining flat or dropping marginally.
• The Dubai retail market continues to be supported by a number of factors, including population growth, an increase in the number of residents, as well as the strong inflow of tourists to Dubai.
• Despite the strong retail supply pipeline, many of the upcoming malls are expected to perform well. Most forthcoming projects have been
planned to cater to a specific demand. The Beach project on JBR, for example, is targeting the growing population living in Dubai Marina, while the newly announced Nakheel Mall will meet the demand from residents of Palm Jumeirah.
• As the resident population is growing, retail sales in community malls are increasing year-on-year. Demand for household goods such as home furniture, electronics, as well as groceries and services (e.g. doctors) has been seen rising.
• The best quality retail centres continue to display strong performance.However, secondary malls remain less popular and continue to struggle to attract demand, resulting in a widening the gap between primary and secondary malls.
Note: Chart shows mid-point ERV for an in-line store in a basket of Primary and Secondary Super Regional shopping malls. The rent quoted reflects a notional “standard” line store unit of 100 sq m.Source: Jones Lang LaSalle, Q1 2013
AED / sq m Q1 2013Primary Secondary
Super Regional 4,300-5,700 1,000-2,200Regional 1,350-2,155 970-1,900Community 1,300-2,700 1,100-1,350Neighbourhood 2,450-2,700 800-1,100Convenience 1,500-1,900 1,300-1,400
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Note: Based on a basket of malls of different size. (See definitions for further details)
Breakdown of Under-Construction Retail Space by Type of Mall
Retail Sector Summary
Indicator Level Comment / Outlook
Current Retail Space (GLA) 2,815,000 sq m No major retail completions in Q1 2013.
Future Supply (2013 – 2015) 390,000 sq m
The main retail completion in Q2 is likely to be Phase I of the Avenue by Meraas. Other large-scale retail projects to be delivered thereafter include The Beach Mall, the extension to Ghurair Center, The Dragon Mart expansion, the Dubai Pearl Shopping Mall and the Nakheel Mall on Palm Jumeirah
Retail Rents in Primary Malls
Retail Rents in Secondary Malls
AED 5,000/ sq m
AED 1,595/ sq m
Rents of prime units in better performing centers have remained flat in Q1 2013. Secondary and older malls continue to see their rental levels declining.
Average Regional Mall Vacancy 13%
Citywide retail vacancy has dropped to 13% supported by the strong occupancy levels in the better performing super regional and regional centres, despite higher vacancy levels in tier-two malls.
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Dubai hotel market overview
Hotel supply
• The first quarter of 2013 witnessed the addition of approximately 500 branded rooms in the Dubai hospitality market. The openings included Ocean View Hotel on JBR and the extension of the Ritz Carlton also on JBR.
• According to Dubai Tourism and Commerce Marketing (DTCM), approximately 3,500 hotel rooms were added to the Dubai hospitality supply in 2012, representing a growth of 6.5% Y-o-Y.
• Some projects scheduled to be completed by end of 2012 have been delayed into 2013, with around 4,700 additional rooms now scheduled this year.
• Major expected openings during 2013 include the Conrad on Sheikh Zayed Road, Sofitel The Palm, Novotel Al Barsha, Oberoi Business Bay and Anantara Royal Amwaj on Palm Jumeirah.
• The hotel industry has been growing strongly in the last few years, supported by a booming tourism industry and increasing number of international airport passengers. The increase in Emirates Airlines’ capacity, coupled with the announcement of various tourism and leisure projects, will also contribute in attracting further tourism demand, which will be instrumental in absorbing the robust hotel supply pipeline planned for the next 5 – 7 years.
Source: Jones Lang LaSalle, Q1 2013
Dubai Hotel Supply (2012 – 2015)
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Sofitel Palm Jumeirah 543 Rooms
JW Marriott Marquis (First Phase) 804 Rooms
Ocean View342 Rooms
Conrad 559 Rooms
Novotel (Al Barsha) 466 Rooms
Expected major hotels completions – 2012/2013
Under Construction
Completed
Hotel performance
Source: STR Global
Hotel Performance (YT February 2010 - 2013)• Dubai received over 10 million tourists for the first time during 2012, reflecting a 9% increase over 2011. The positive upward trend in tourist arrivals has continued into 2013 and is reflected in the improved hotel performances across the city.
• Airport arrivals registered a 13% increase in 2012, supporting the demand for hotel accommodation. Dubai airport is currently the worlds second busiest (after London Heathrow) for international visitors, and continues to experience rapid passenger growth.
• Occupancy rates as at YT February 2013 have increased by 2 percentage points over the same period in 2012, reaching 88% on a city-wide basis.
• Average Daily Rates have witnessed a 5% improvement compared to the same period in 2012, reaching USD 276 in YT February 2013.
• As a result, RevPAR levels showed an impressive 9% growth over the same period in 2012, reaching USD 243 in YT February 2013.
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Hotel market summary
Indicator Level Comment / Outlook
Current Hotel Supply 57,850 roomsFirst quarter of 2013 witnessed the addition of nearly 500 hotel rooms.Notable openings included the Ocean View Hotel on JBR and the RitzCarlton extension on Jumeirah Beach.
Future Supply (2013 - 2015) 11,200 rooms
Major openings scheduled for 2013 include the Conrad Sheikh ZayedRoad, Novotel Al Barsha, Oberoi Business Bay, Sofitel Palm Jumeirahand Anantara Royal Amwaj amongst others.
2013 YTD Occupancy 88% Increase in YTD levels of occupancy with resurgence witnessed across all sub-markets.
2013 YTD ADR USD 276
Average room rates continued to improve during Q1 2013. As a result of resurgence in occupancy and increased ADRs; RevPAR levels have experienced a notable (9%) increase on a city-wide basis.
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Dubai industrial market overview
Industrial supply & demand
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• The industrial market in Dubai has been showing strong performance, supported mainly by the growth of the transport and logistics sectors.
• Jones Lang LaSalle estimates the industrial stock in Dubai to stand at approximately 66 million sq m of built space, representing around 20% of the total industrial land, with JAFZA North believed to have the largest stock in Dubai.
• Dubai Industrial City (DIC) is the largest industrial project to-date and is spread across 52 million sq m (560 million sq ft) of land.
• Most of the current enquiries involve the expansion or consolidation of companies already located in Dubai. However, as global economic conditions improve this trend is expected to change with increased interest from new entrants.
• Occupier demand falls into two categories: most smaller tenants prefer to rent or buy existing facilities, while large global corporates prefer to acquire land plots on which to develop their own facilities, as they can not find high quality speculatively built premises.
• The industrial sector in Dubai benefits from being less exposed to oversupply than other segments and is therefore projected to be one of the best performing sectors in the short-to-medium term
• As the volume of freight through both Jebel Ali port and the new Al Maktoum International airport at Dubai World Centre continues to increase, there is likely to be continued demand for warehousing and logistics space in the major industrial locations to the south of Dubai.
Dubai’s Main Industrial AreasTraditional/Onshore areas Freezone Areas New Onshore Areas
Examples: Al Quoz, Ras Al Khor; Al Qusais; UmmRamool; Al Khabaisi
Examples: JAFZA, DAFZA;parts of Dubai World Central
Examples: Dubai Industrial City, Dubai Investment Park
Oldest areas, Well established and close to commercial areas within the city. Fully occupied and with stock of inferior quality
Operate under a free zone status. High quality products. Sophisticated and advanced infrastructureGood connectivity
Dubai’s newest industrial areas. Offer large space available for global occupiers.
Recent Industrial TransactionsCompany Industry Location Area DateDHL Logistics Meydan 17,200 sq m To open in Q3
2014CWT-SML Logistics DWC 12,500 sq m March 2013NMC Healthcare
Pharmaceuticals DIP n/a October 2012
Nestle FMCG DWC 175,000 sq m land plot
July 2012
R&M Telecom DAFZA n/a July 2012
Source: Jones Lang LaSalle, Q1 2013
Industrial supply & demand
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• The market remains dominated by the traditional onshore areas that have organically grown with the city over time and are now located in dense residential and commercial areas.
• However, the trend is moving more towards the newer areas, which offer well developed infrastructure, good connectivity, proximity to major infrastructure projects, in addition to better quality products. The freezone areas are capitalizing on their proximity to major ports and airports while the non-free zone areas such as Dubai Investment Park (DIP) or Dubai Industrial City (DIC) are seeing increased demand.
• The growth of the industrial sector in Dubai is illustrated by the following figures:• Jebel Ali sea port is opening its third terminal that will increase its
capacity to 19 million TEU’s* a year, by 2014.• DAFZA reported a 26% increase in revenue in 2012, in addition to a
37% growth in the number of construction and engineering companies and a 25% increase in the number of registered UK companies. DAFZA hosts 1,600 companies.
• Abu Dhabi Islamic Bank (ADIB) announced it will provide AED 500 million for the expansion of DAFZA’s facilities.
• Dubai Industrial City witnessed a strong year in 2012, with a reported growth of over 80% in the number of registered companies and an 82% warehouse occupancy rate. DIC now hosts 471 companies, up from 259 in 2011.
• JAFZA has seen an increase of 26% in the number of companies in occupation in 2012, bringing the total number of companies in JAFZA to over 6,900.
Area Land Area (sq m)
Number of Companies
(2012)
Growth during 2012
DAFZA 2,000,000 1,600 37% growth in registered companies
JAFZA JAFZA North:45,000,000
JAFZA South: 35,000,000
6,918 26% growth in registered companies
Dubai Industrial City
52,000,000 471 82% growth in registered companies
Dubai Investment Park
16,500,000 2,162 n/a
Approximate figuresSource: Jones Lang LaSalle, Q1 2013* TEU: Twenty-Foot Equivalent Unit
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Main industrial areas
DIC
DWC
DIP TechnoparkJAFZA NorthJebel Ali Industrial JAFZA Extension Umm Ramool
Al Qouz DAFZARas Al Khor Al Qusais
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Industrial performance
• Rental rates in completed industrial units in Dubai currently vary significantly from one area to another, with no real standardization of logistics facilities.
• The average rent across onshore areas is around AED 350 per sq m. The older areas command average rents of 320-550 per sq m, due to their proximity to local markets, despite the poor quality of their stock and the relatively underdeveloped infrastructure systems. Completed units in newer but more peripheral locations (such as DIC and DIP) offer somewhat lower average rents.
• The free zone areas of Jebel Ali and Dubai Airport command a higher average of between AED 350 – 800 per sq m for completed warehousing units
• Currently quality does not seem to be driving price. Price remains determined by critical mass, clustering and location as companies prefer being positioned close to the CBD.
• Demand is likely to shift over time towards those areas offering better quality products, well developed infrastructure and access to ports and/or airports. Al Maktoum International Airport will start transforming into an integrated logistics platform over time, increasing the attraction of industrial areas to the south of Dubai.
• The industrial market has been much less cyclical than other sectors over recent years and continues to be dominated by long term commitments to single tenants.
Area Unit Lease AED / sq m / p.a
Lease term
Older Onshore Areas 320-550 Annual
Newer Onshore areas (excl.Freezone areas)
180-350 3-5-10 years (DIC)1 year (DIP)
Freezone areas 350-800(DAFZA rates 600-800)
1- 2 years
Area Land Lease AED / sq m / p.a
Older Onshore Areas 50-80
Newer Onshore areas (excl.Free Zone areas)
30-50
Free Zone areas 20-80 (JAFZA)40-100 (DAFZA)
Warehouse rents
Land lease sales
Definitions and methodology
Office:• The supply data is based on our quarterly survey of 20 sub
markets, starting from 2009.
• Completed building refers to a building that is handed over for immediate occupation.
• Central Business District includes DIFC, DTCD, Sheikh ZayedRoad, Burj Khalifa Downtown. Free Zone areas include JumeirahLake Towers, DIFC, TECOM, Dubai Silicon Oasis, DWC, Dubai Outsource Zone and IMPZ.
• Prime Office Rent represents the top open-market rent (open market refers to a new leasing – not to a sitting tenant) that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date. Data relates to headline rents, exclusive of incentives.
• Prime Capital Value represents the top open-market capital value that could be expected for a notional office building of the highest quality and specification in the best location on the survey date.
• Prime capital values are a calculation, derived from prime rents and yields: Capital Value = (Prime Annual Rent / Prime Yield From) * 100
Residential:• The supply and stock data is based on our quarterly survey of 37
sub markets, starting from 2009. This data excludes labour accommodation and local Emirati housing supply.
• Completed building refers to a building that is handed over for immediate occupation.
• Residential performance data is based on the REIDIN monthly index. REIDIN.com Dubai Residential Property Price Indices (RPPIs) use monthly sample of offered/asked listing price data and land registry price data (transaction data). Index series are set at 100 starting at the beginning of each data set.
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Definitions and methodology
Retail:• Classification of Retail Centres is based upon the ULI definition and
based on their GLA:• Super Regional Malls have a GLA of above 90,000 sq m• Regional Malls have a GLA of 30,000-90,000 sq m• Community Malls have a GLA of 10,000-30,000 sq m• Neighbourhood Malls have a GLA of 3,000-10,000 sq m• Convenience Malls have a GLA of less than 3,000 sq m
• Primary Malls are the good performing malls with high levels of turnover. Secondary Malls are the average performing malls with lower levels of turnover.
• Prime Rent Shopping Centre represents the top open market net rent that could be expected for a notional standard in line unit shop of 100 sq.\ m situated in a specified shopping centre as at the survey date.
Hotels:• Hotel room supply is based on existing supply figures provided by
DTCM as well as future hotel development data tracked by Jones Lang LaSalle Hotels. Room supply includes all graded supply and excludes serviced apartments.
• STR performance data is based on monthly survey conducted by STR Global on a sample of more than 32,000 rooms across Dubai.
Industrial:• Industrial Stock is calculated on the basis of applying a site
coverage to the total developed industrial land.
• Industrial rental values are based on average asking rents across 14 major industrial areas in Dubai.
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Robin PughHead of [email protected]
Gabriel MatarDirector, MEAHotels & Hospitality [email protected]
Andrew WilliamsonAssociate, [email protected]
Michael HeitmannNational Director, Industrial [email protected]
Craig PlumbHead of [email protected]
Cynthia NassehSenior Research [email protected]
www.jll–mena.com
COPYRIGHT © JONES LANG LASALLE IP, INC. 2013This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the priorwritten consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation ismade, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not acceptany liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.
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