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Dubai Real Estate Overview Market January 2010 Dubai

Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

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Page 1: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

Dubai Real Estate Market OverviewMarket

January 2010

Dubai

Page 2: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

2

Market Highlights

While 2009 saw the biggest pricing adjustment in the residential market, the tables are likely to be turned in 2010 with the office market witnessing the significant decline in performance, while pricing levels in the residential sector are expected to show selective stability. Citywide vacancies in the office sector have increased to around 33%, but vacancies in good quality buildings in single ownership in the CBD area remain below 10%.While demand for office space is forecast to be stronger in 2010 than in 2009, demand will not match the high level of new supply and citywide vacancies are therefore expected to increase during 2010Average prices and rentals in the residential market both appear to have stabilized over recent months. While performance may continue to decline in some areas in 2010, this is likely to be driven by local factors (particularly the addition of new supply), with other areas experiencing little further decline in rents and prices in 2010.The retail market has seen less adjustment in rentals than either the office or residential sectors, with average rents declining by around 29% in 2009. While future supply levels have been cut back, the retail market is expected to move further in the tenants favor during 2010.

Page 3: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

Dubai Office Market Overview

Page 4: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

4

Key TakeawaysTotal Office stock as at the end of 2009 is approximately 43.6 million sqftIn Q4 2008, an additional 60 million sqft of office supply was expected to enter the market between 2009 and 2011This figure has been revised downwards by 33% to approximately 40 million sqft due to project delays and cancellations

Supply

Total tenant demand at the end of 2009 amounted to 2.7 million sqft of office spaceExisting tenants looking to dispose of surplus space with total of 295,000 sqft of tenant disposable space available

Demand

City-wide vacancy rates are hovering around 33% and are expected to increase over the next year as new supply continues to be releasedCBD Vacancy in Q4 2009 is much lower at around 10%Office rents: Y-o-Y decrease of -44% and Q-o-Q decrease of -15% to around AED 220 psfOffice capital values: Y-o-Y decrease of -50% and Q-o-Q decrease of -5% to around AED 1,320 psf

Performance

While falling rents have encouraged more businesses to implement strategies for their future growth, new demand in 2010 will fall short of additional supply causing vacancies to increase across the market

Outlook

Page 5: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

5

Locations of Major Commercial Districts

6. Jumeirah Lake Towers

7. Jebel Ali 6

7

5. TECOM

5

4. Business Bay

43 2

1

3. DIFC

2. Bur Dubai & Deira

1. Sheikh Zayed Road

Page 6: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

6

44 4466 75

22

96

0

10

20

30

40

50

60

70

80

90

2009 2010 2011 2012

Tota

l Sto

ck (m

illion

sqft)

Completed Stock Future Supply

Office Supply – Current and Future Stock

Total Office stock as at the end of 2009 is approximately 43.6 million sqft spread across various projects in DubaiIn Q4 2008, an additional 60 million sqft of office supply was expected to enter the market between 2009 and 2011This figure has been revised downwards by 33% to approximately 40 million sqft due to project delays and cancellationsCity-wide vacancy rates are hovering around 33% and are expected to increase over the next year as new supply continues to be released

Page 7: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

7

Historic Rental Performance

Rents peaked at Q4 2008 and bottomed out in 2009 to around AED 200-250 per sqftDeclined by an average of 44% betweenQ4 2008 and Q4 2009Rents fell by 15% between Q3 2009 and Q4 2009 showing a slowdown in rental decline

400380

315

260

220

0

50

100

150

200

250

300

350

400

450

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

Prim

e Ren

ts (A

ED /

Sqft)

Page 8: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

8

Historic Rental Performance (cont’)

Rents dropped by an average of 44% between Q4 2008 and Q4 2009, but only 18% between Q4 2007 and Q4 2009Rents fell by 15% between Q3 2009 and Q4 2009 showing a slowdown in rental declineSupply and demand balance suggests no rental growth in short to medium term

07/09 Change08/09 ChangeEnd 200920082007

-25%-50%100-200250-350150-250TECOM

-25%-50%100-200250-350150-250Deira / Bur Dubai

n/an/a75-100n/an/aJLT

-21%-38%200-300350-450280-350Burj Dubai Downtown

0%-30%300-400450-550300-400DIFC

-18%-50%200-250400-500200-350SZR

Average Rents (AED / sqft / pa)District

Prime

Prime

Prime

Page 9: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

9

Rental GrowthSlowing

RentsFalling

Rental GrowthAccelerating

RentsBottoming Out

Regional Office Rental Clock – January 2010

Dubai

Riyadh

Jeddah

Abu Dhabi

Doha

Cairo

Page 10: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

10

08/09 Change200920082007

-60%7201,8001,200Jumeirah Lake Towers

-57%2,1505,0003,500Burj Dubai Downtown

-65%9502,7001,500Business Bay

-52%2,2004,6003,200DIFC

Average Values (AED / sqft / pa)District

Market Performance – Capital Values

Capital Values peaked at Q3 2008 and bottomed out in 2009Declined by around 50% between 2008 and 2009 to approximately AED 1,320 / sqftFew transactions have taken place in the past 3 monthsQuarterly decline slowed to 5% between Q3 2009 and Q4 2009

Prime

Prime

Page 11: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

11

Includes all grades, i.e. Grade A, B and C43.6 million sq.ftCurrent Office Stock

Supply estimates revised down by 33% since Q4 200837 million sq.ftFuture Supply (2010-2012)

33%Current Vacancy Level

AED 250 sq.ftAverage Grade A Rental

Limited transactional evidence. Asking prices down by 50% from peak AED 1,500 – 2,500 / sq.ftAverage Grade A Sale Price

CommentLevelIndicator

Office Market Summary

Page 12: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

Dubai Residential Market Overview

Page 13: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

13

Key TakeawaysNearly USD 15 billion worth of residential projects have either been cancelled or put on hold in 2009Total supply estimates were reduced by 60% since Q2 200817,000 units were completed in 2009 compared to 22,400 units expected at the beginning of 2009An additional 24,000 units are expected to be completed in 2010

Supply

Total number of transactions have increased by 14% in the last six monthsTotal value of transactions have stabilized as no negative growth was witnessed in the last six monthsAlthough the number of transactions has increased by 19% since Q4 2008, total value of transactions has declined by -10% indicating overall price declines

Sales Transactional

Data

Prices seem to be stabilizing and even increasing in select areas of DubaiAverage price per square foot in Q4 2009 was around AED 882, down 2% from the average price of AED 901 in Q3 2009Apartment rents: Y-o-Y decrease of -39% and Q-o-Q increase of 3%Villa rents: Y-o-Y decrease of -46% and Q-o-Q decrease of -1%

Performance

Despite stabilization in both pricing levels and transactional volume, Dubai’s residential market will experience a situation of over-supply and prices are not expected to recover fully before 2011 at the earliestLending is a key factor in market recovery. Despite media reports of improved financing conditions, the value of mortgages as a % of total sales value has dropped significantly from 74% in Q1 2009 to 38% in Q4 2009

Outlook

Page 14: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

14

Current & Future Residential Supply

Approximately 17,000 units were completed in 2009, bringing the total residential stock to around 273,000JLL supply estimates for 2009 in Q1 2009 were 22,400 units (only 76% of this has been delivered)24,000 units are expected to be completed in 2010, followed by 25,000 units in 2011, bringing the total residential stock to 322,000 as at the end of 2011Project cancellations and construction delays decreased future supply estimates by around 60% since Q2 2008Apartments will comprise of 77% of total residential stock by the end of 2011

273,000 273,000

297,000

24,000

25,000

240,000

250,000

260,000

270,000

280,000

290,000

300,000

310,000

320,000

330,000

2009 2010 2011

Completed Stock Future Supply

Total Supply Breakup

Apt77%

Villa23%

Page 15: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

15

Sales Transactional Data – Pointing towards a Recovery?

The value of sales transactions over the last six months seems to have stabilized as no negative growth was witnessedThe number of sales transactions has been steadily increasing over the last one yearAlthough the number of transactions has increased by 19% since Q4 2008, total value of transactions has declined by -10% indicating overall price declines

-10%Value of Transactions

19%Number of Transactions

Q4 2008 – Q4 2009 Change

Number of Transactions

-51%

4%14%

0

500

1,000

1,500

2,000

2,500

Q2 2008 Q4 2008 Q2 2009 Q4 2009-60%

-40%

-20%

0%

20%

Number of Transactions Change

Value of Transactions

-51%

-10%0%

0.00.51.01.52.02.53.03.5

Q2 2008 Q4 2008 Q2 2009 Q4 2009

AED

Billio

n

-60%-50%-40%-30%-20%-10%0%10%

Value of Transactions Change

Page 16: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

16

Residential Sales Performance – A Mixed Bag

Overall sales performance in Q4 2009 revealed a mix bag with some residential areas faring better than othersPrices seem to be stabilizing and even increasing in select areas of Dubai. While the overall market is continuing to undergo a price correction, the rate of decline has slowedAverage price per square foot in Q4 2009 was around AED 882, down 2% from the average price of AED 901 in Q3 2009

-10%

-6%

12%

2% 3%-1%

-8%

1%

-4% -4%

0

200

400

600

800

1,000

1,200

1,400

Burj DubaiDowntown

Palm Jumeirah The Greens JBR Dubai Marina(excl. JBR)

ArabianRanches

JLT DiscoveryGardens

Motor City InternationalCity

-15%

-10%

-5%

0%

5%

10%

15%

Q3 2009 Q4 2009 Change

Page 17: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

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Asking vs Achieved Prices

Y-o-Y change between Q4 2008 and Q4 2009 of -38% for asking prices and -33% for achieved pricesAsking prices increased by an average of 7% between Q3 2009 and Q4 2009 to around AED 990 psfAchieved prices remained the same at around AED 900 psf since Q3 2009

700

900

1,100

1,300

1,500

1,700

1,900

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Price

(AED

psf)

Average Asking Price Average Achieved Prices

Page 18: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

18

Apartment Rental Performance

Apartment rents increased marginally in Q4 2009Y-o-Y decrease of -39% from Q4 2008 to Q4 2009Q-o-Q increase of 3% from Q3 2009 to Q4 2009

First Signs of Rent Increases?

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Q1 2009 Q2 2009 Q3 2009 Q4 2009

Annu

al Re

nt (A

ED)

Burj Dubai Downtown Dubai Marina International City Average

-22%

-19% -5% 3%

* Rents reflect typical 2 bedroom apartments

Page 19: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

19

Villa Rental Performance

Villa rents seem to have stabilized in Q4 2009 as there was no significant change from the previous quarterY-o-Y decrease of -46% from Q4 2008 to Q4 2009Q-o-Q decrease of -1% from Q3 2009 to Q4 2009

Price Stabilization?

* Rents reflect typical 3 bedroom villa

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Q1 2009 Q2 2009 Q3 2009 Q4 2009

Annu

al Re

nt (A

ED)

Palm Jumeirah Arabian Ranches The Springs Average

-1%-12%-21%

-21%

Page 20: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

Dubai Retail Market Overview

Page 21: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

21

Key TakeawaysAs of Q4 2009, total mall retail supply across Dubai of approximately 24 million sqft (GLA)The retail supply pipeline has started to significantly tail off with delays being expected on several of the currently planned projectsSuper regional and regional malls currently account for 71% of total mall based retail space

Supply

Retail sales are estimated to have declined by between 15-20% in 2009Although overall occupancy is expected to be on the lower end, it is important to note that occupancy rates in super regional and regional malls will remain well above 90% as opposed to older shopping centers, resulting in the emergence of a two-tier market

Demand

Average Estimated Rental Value (ERV) declined by around 29% to approximately AED 264 per sqft from Q4 2008 to Q4 2009Average ERV’s declined by 13% to from Q3 2009 to Q4 2009Regional and super regional malls achieve rents around 30-40% higher than other types of centers

Performance

The market dynamics will continue to shift in favor of tenants as rents soften and vacancies increase in some centersWe expect to see an increase in shorter leases, break clauses and rent free periods as the market shifts in favour of the tenants

Outlook

Page 22: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

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Retail Mall Supply

As of Q4 2009, total mall retail supply across Dubai was approximately 24 million sqft (GLA)This figure has changed little over Q3 2009 as there were no major completions over the quarterTotal mall stock is expected to reach over 27 million sqft at the end of 2010 with the major mall to open this year being the Mirdiff City Center (1.9 million sqft)Total mall stock as at the end of 2012 Is expected to reach 32 million sqft (GLA)

24,000,000 24,000,000 27,000,000 28,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

2009 2010 2011 2012

Completed Stock Future Supply

3,000,000 1,000,0003,000,000

Page 23: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

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Current Supply Breakup

Super regional and regional malls currently account for 71% of total mall based retail space and are likely to continue to dominate the Dubai retail scene over the next few yearsAlthough super regional malls account for majority of total retail space in terms of GLA, they only account for 26% of the total number of shopping centres in Dubai

Breakdown of GLA by Type (Q4 2009):

Boutique7%Power Centre /

Factory Outlet4%

Super Regional26%

Regional11%

Neighbourhood20%

Community26%

Convenience4%

Other2%

Boutique2%Power Centre /

Factory Outlet11%

Super Regional71%

Regional7%

Neighbourhood2%

Community6%

Convenience1%

Breakdown of Shopping Centres by Type (Q4 2009):

Page 24: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

24

0

100

200

300

400

500

600

Q1 2009 Q2 2009 Q3 2009 Q4 2009

Aver

age R

ent (A

ED/S

q.Ft.)

Convenience Neighbourhood Community Regional Super Regional Boutique Average

-6%

-13%-12%

Q-o-QChange

Rental Performance – Estimated Rental Value (ERV)

Average Estimated Rental Value (ERV) declined by around 29% to approximately AED 264 per sqft from Q4 2008 to Q4 2009Average ERV’s declined by 13% to from Q3 2009 to Q4 2009Regional and super regional malls have rents that are usually around 30-40% higher than the average rentsThe shift in power from landlords to tenants will result in increasing incentives for tenantsThis will negatively affect rental incomes, but may benefit owners by allowing them to retain tenants that would otherwise close stores in the face of falling footfall and turnover

Page 25: Dubai Real Estate Market Overviewvae-psf.de/.../pdf/...Real-Estate-Market-Overview.pdf · Dubai Real Estate Market Overview January 2010 Dubai. 2 Market Highlights While 2009 saw

Thank You

COPYRIGHT © JONES LANG LASALLE IP, INC. 2010This 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 prior written 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 is made, 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 accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.

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Nida MianMarket Intelligence Analyst+971 4 426 [email protected]

Craig PlumbHead of Research+971 4 426 [email protected]

Blair HagkullManaging Director+971 4 426 [email protected]

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