Real Estate Colliers 2010 MENARealEstateReviewQ1


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Colliers International has been providing the ull

breadth o real estate consultancy services on a

global scale or over 20 years. Today the company

has over 290 oces in more than 60 countries

spread over six continents covering every major real

estate market.

Colliers International has been supporting client

decision-making in MENA real estate marketssince 1996, and has provided strategic advisory,

market research, asset management, agency,

property valuation and capital investment

services throughout the region.

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Abu Dhabi Oce Occupancy Survey 4

Dubai Oce Occupancy Survey 5

Abu Dhabi Real Estate Market Overview 6

Dubai Real Estate Market Overview 10

Doha Real Estate Market Overview 14

Riyadh Real Estate Market Overview 18

Jeddah Real Estate Market Overview 22

Eastern Province Real Estate Market Overview 26

Amman Real Estate Market Overview 30

Cairo Real Estate Market Overview 34

Tripoli Real Estate Market Overview 38

Damascus Real Estate Market Overview 42

Available Market Studies & Contacts 46

collIers InTernaTIonal2

mena real esTaTe overvIew FIrsT QuarTer 2010


3/48collIers InTernaTIonal


Colliers International, with an established presence in the AbuDhabi market o over 14 years, has looked closely at the potential

changes aecting the oce leasing sector and how these changeswould impact the Abu Dhabi market.

In two parts Colliers looked at rst the changing nature o theoccupational market and then at potential impact o possible legalchanges on the supply and demand dynamic.

Occupiers Present and Future

With a large volume o space due to enter the market Colliersconducted a survey o 15 existing oce buildings in Abu Dhabi toestablish current and orthcoming occupancy proles.

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Colliers then looked at both current requirements in the market placeand existing tenants currently occupying oce space. It was herethat the changes to occupiers prole are apparent. 50% o tenantssurveyed indicated requirements or space o less than 300 m2. 30%o the tenants are seeking oce space between 301 m2 and 500 m2,while only 20% are looking or oce space exceeding 500 m2.

Potential New Demand

There has been discussion and rumour within the Abu Dhabi marketo the Municipality looking to end the long standing practice oallowing residential villas to be used or commercial oce premises.

What was a practical response to a clear undersupply, Colliersexamined this possible domestic source o demand and what impactit may have in minimizing uture oversupply in Abu Dhabi.

Colliers research has established that there are approximately 600villas currently registered with commercial uses.

commercial villas

O the total amount approximately 83% are used as oces, whilethe remainder comprised uses such as nurseries, schools, pharmacies,medical centres, ashion and beauty centres etc.

Colliers estimates that a potential domestic demand o up to125,000 m2 o oce space could be generated rom the commercialvilla sector. The likely impact on the market is subject to a numbero key underlying assumptions, oremost o which are;

Abu Dhabi Municipality is indeed considering removingcommercial uses on residential villas.

Should the change o use (back to residential only) come intoeect by the end o 2010 - tenants in the commercial villas willbe given until end o 2011 (a 1 year period) to vacate.

Given this scenario, Colliers anticipates this additional demandaccounting to 125,000 m2 will be then absorbed into the existingsupply in 2012, thereby minimizing oversupply o commercial spacein the Emirate.

commercial villas

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In conclusion, whilst it will be good news or purpose built oces

the eect will not be a cure all to the market place, orthcomingoversupply and landlords will need to remain competitive in theirterms to attract tenants. Further, developers and landlords need tostart planning or sub division o foor space to match supply withmarket demands.


4/48collIers InTernaTIonal

Oce occupancy rates are a key indicator oa citys economic vitality. This is certainly thecase in Abu Dhabi, where commercial ocespace enjoyed 100% occupancy in a historicallyundersupplied market. However, ollowingthe global economic downturn and alling realestate prices, Colliers instigated a market watchlast year, ocusing on a sample o oce buildingsin the emirate the intention being to monitorthe perormance o these buildings in the light

o global conditions. The initial survey was

conducted in Q4 2009 and was tracked again in

Q1 2010.

The average occupancy currently stands at

99%, dropping a marginal 1% rom a ully

occupied market in Q4 2009. The results rom

the occupancy survey show Khalia, Liwa and

Salam Street consistently achieving 100%

occupancy while Hamdan Street consistently

achieved 99% occupancy during Q4 2009 and

Q1 2010. The high occupancy rates in these


100%

90%

80%

70%

60%

50%

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ab dbi of o s Q1 2010

average occupancy survey q1 2010

areas refect an undersupplied market. Najda

Street witnessed a 5% drop in occupancy rates

rom 100% occupancy in Q4 2009. Oce space

surveyed in Najda Street includes primary

grade oce space, which contrary to market

conditions, ailed to witness a decline in rental

rates between Q4 2009 and Q1 2010. The drop

in occupancy levels in this area is likely to be

attributed to existing tenants either downsizing

their current operations or relocating to less

expensive commercial space available in the

Emirate.

The overall results exempliy the present

undersupplied market or oce space in Abu

Dhabi. Despite high occupancy levels across the

market, and a current supply o approximately

1.6 million m2 o NLA, the oce market is

expected to reach equilibrium during 2010

with an oversupply by the end o the year, due

to a lower demand rate than a orthcoming

supply rate. The outlined oversupplied market

condition, however, is only possible provided

construction timelines are met.

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Q 2009 Q1 2010

Average rental rate, covering the surveyed areascurrently stands at US$ 465 per m2 per annum,a 5% drop rom Q4 2009. Declining rentalrates in Abu Dhabi are due to, among otherreasons, the Emirates price sensitivity towardsalling prices in neighboring Dubai. The largestdecrease in rental rates was registered in Salaam

Street, which dropped by 19%, rom Q4 2009 toQ1 2010 and is currently standing at US$ 460per m2 per annum. Najda Street was the only

area ailing to witness a decline in rental rates.

Khalia Street and Hamdaan Street witnessed a

4% and 9% decline in annual rents respectively.

Annual rents in Hamdan Street remained the

highest at US$ 570 per m2 per annum. While

primary grade oce space witnessed a decline o

9% between Q4 2009 and Q1 2010, secondarygrade oce space dropped a marginal 2% during

the same period.

Despite the limited availably o commercial

oce space in the capital, changes in the global

economic climate and alling real estate prices in

Dubai are orcing landlords to lower their asking

prices in Abu Dhabi, in order to retain existing

tenants. With an expected orthcoming supply

o approximately 435,000 m2

o NLA scheduledto be released this year, rental rates in the capital

are anticipated to decline urther.

average rental rates

Q 2009 Q1 2010

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5/48collIers InTernaTIonal 5


A market watch instigated by Colliers in 2009,

ocused on recently delivered oce space

in Dubai with the intention to monitor theeect and perormance in the light o global

conditions. The initial survey conducted in Q1

2009, was reviewed in Q3 2009 and again in Q1

2010.

Colliers ollowed occupancy rates, t-out levels

and rental rate trends or specic buildings in

new commercial districts, such as Jumeirah

Lake Towers (JLT), Dubai Silicon Oasis (DSO),Dubai Investment Park (DIP), Jebel Ali, Dubai

Outsource Zone (DOZ), Al Barsha, TECOM A

and C, and Dubai International Finance Centre

(DIFC). The survey limited new oce space in

TECOM and DIFC to commercial buildings

delivered by private developers.

The average occupancy rate, in new commercial

districts reached 32% in Q1 2009, 23% in Q3

2009, ollowed by 42% in Q1 2010.

The survey or new oce space showed the

highest average occupancy rate consistently

achieved in TECOM A, which currently stands

at 40%. Other ree zone areas such as JLT, DSO

and TECOM C saw Y-O-Y increases o 10%,

7% and 1% respectively. Downtown Jebel Ali

(DTJA) witnessed the highest YOY increase rom

15% in Q1 2009 to 73% in Q1 2010. TECOMC continues to witness comparatively lower

occupancy rates, which among other reasons

is likely due to a majority o buildings under

construction in the area discouraging potential

tenants occupying vacant space. Average

occupancy levels in older, more established

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dbi of o s Q1 2010

new commercial districts: average occupancy

commercial districts such as Bur Dubai, Deira,SZR and Downtown Dubai dropped rom highso 97% in Q1 2009 to 90% in Q1 2010. Deiraand Bur Dubai witnessed the highest occupancyrates o 93% and 91% respectively. DowntownDubai witnessed a 5% decline in occupancyrates between Q3 2009 and Q1 2010, whileincreasing a marginal 1% Y-O-Y. Occupancylevels in Sheikh Zayed Road witnessed a 3%drop rom Q1 2009 to Q1 2010, but increased2% rom Q3 2009 to Q1 2010.

Colliers International observed an overall

10% YOY increase in occupancy levels acrossnew commercial districts, while occupancylevels in the older, more established districtsdropped by 7% during the same period. Themovement o commercial tenants is believed tobe a direct result o the lower rental rates andother incentives, such as rent-ree t-out periodsoered by landlords in the newer commercialdistricts, in order to magnetize tenants romolder, established oce space in an alreadyoversupplied oce market.

Average occupancy levels across Dubai, coveringboth new and established commercial ocespace, reached 71% in Q1 2010. The overalloccupancy rate was calculated by collatingoccupancy rates o each commercial districtin Dubai with its corresponding NLA, andcalculating the weighted average in accordanceto each districts contribution to the total NLAo oce supply available in Dubai.

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Average rental rate in new commercial

districts currently stands at US$ 265 per m2 per

annum. The largest decrease in rental rates wasregistered in DSO, dropping 61% between Q1

2009 and Q1 2010, and 42% between Q3 2009

and Q1 2010. TECOM A held strongest amidst

declining rentals, dropping 28% between Q1

2009 and Q1 2010. Average rental rates in JLT

witnessed a YOY drop o 59% and ell a marginal

8% rom Q3 2009 to Q1 2010.

Current average rental rate in more established

commercial districts stands at US$ 407 per

m2 per annum, 35% higher than rental rates

new commercial districts: average rental rates

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Q1 2009 Q 2009 Q1 2010

in newer areas. The largest decrease in rental

rates was registered in Bur Dubai, dropping by

55% between Q1 2009 and Q1 2010. Deira and

Downtown Dubai dropped by 52% and 47%

respectively. SZR held strongest amidst declining

rentals, dropping 32% between Q1 2009 and Q1

2010, primarily due to its close proximity to the

Dubai International Finance Centre (DIFC).

The already oversupplied oce market, which

currently constitutes o 3.7 million m2 o NLA, is

expected to increase by 46% by the end o 2010.

The Dubai oce sector is currently oversupplied

by 1.3 million m o NLA. This requires an

increase in the workorce by 125,800 white collarworkers to obtain market equilibrium. Provided

demand remains unchanged and supply timelines

are met, rental rates and occupancy levels in

Dubai are anticipated to decline urther.

JlT dso T c T a

Q1 2009 Q 2009 Q1 2010


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High occupancy rate, currentlystanding at 99%, reects thelevel o unsatisfed demandor ofce accommodation

abu dhabi cumulative office supply

Average asking rental rate has decreasedby 38% between Q1 2009 and Q1 2010

Average sales price, specifcally ofcespace on Al Reem Island, has decreasedby 14% between Q1 2009 and Q1 2010

Despite 186,000m2 NLA o ofcesupply currently scaled back due to eitherdevelopment cancellation or constructiondelays, the market may still anticipatethe beginning o an oversupplied ofcemarket by late 2010 / early 2011

averaGe renT: us$ 570

premIum renT: us$ 650

averaGe sales prIce: us$ ,90

averaGe yIeld: 11%

vacancy raTe: 1%

performance indicators


aBu dhaBI oFFIce FIrsT QuarTer 2010

Oce space in Abu Dhabi is ragmented

rom both a location and tenant prole

perspective. The majority o Abu Dhabis

marginal primary grade oce space

is dispersed between buildings on theCorniche, Salam Street, Hamdan and

Khalia Street, and a number o buildings in

the Tourist Club Area, including the East

and West Towers o the Abu Dhabi Mall.

Secondary and tertiary grade oce space

is located within the adjoining districts

o Khalidiyah and Tourist Club Areas on

either side o Al Markaziyah. This includes

dedicated buildings with moderate quality

nishing and limited dedicated parking

acilities, mixed-use buildings with ocecomponents in high density districts o the

city, and residential villas converted into

oce space in the low density districts.

Despite numerous cancellations and delays,

additional planned oce stock scheduled

to enter the market this year constitutes o

approximately 434,000m NLA, leading to

a cumulative supply o approximately 2.0

million m NLA by the end o 2010.

Post the global economic downturn, the

oce sector in Abu Dhabi has registeredsignicant decreases in rental rates,

sales prices and absorption rates, despite

limited supply o vacant oce space. The

compounded average growth rate (CAGR)

o 40% achieved or rental rates between

2004 and 2008 was ollowed by a Y-O-

Y decrease o 11% in 2009, with current

average rental rates at US$ 505 per m2.

Average asking sales price is currently US$

4,490 per m2, representing a Y-O-Y decrease

o 13%. This is despite the high occupancyrate o 99% across the market. The primary

reason or this decline in prices can be

attributed to the large decreases in rental

rates and sales prices in Dubai and higher

price sensitivity in Abu Dhabi. There is

also the threat o an oversupply o oce

space looming and the market is adjusting

or this.

Colliers has qualied the provision o a total

o 1.2 million m2 NLA o oce space to be

delivered between 2010 and 2013, leading

to cumulative oce supply o 2.8 million

m2 in 2013. The largest orthcoming oce

stock is scheduled to enter the market in

2010, amounting to approximately 434,000

m NLA, a Y-O-Y increase o 27%. For the

purposes o the orthcoming supply study,

Colliers has only included developments

that have broken ground and veriedall completion estimates with concerned

developers. Forthcoming oce supply over

the next three years will be concentrated

within the existing city. According to the

Abu Dhabi Plan 2030, the Urban Planning

Council envisages the consolidation o oce

space into two main areas, the nancial

services oriented Al Suwwah Island, and

the Capital District, the complementary

counterpart to Al Suwwah, providing

medical centers, higher education acilities

and government buildings.

The currently undersupplied oce market is

expected to reach market equilibrium during

2010, and an oversupply by end o 2010,

provided scheduled timelines are met. Due

to a lower demand rate than a orthcoming

supply rate, a continuous oversupplied

oce market throughout end o 2010 to

2013 is anticipated. Consequently, the

average occupancy rate is likely to ollow

the same downward trend reaching levels o90% within the next three years. Due to the

expected outcome, the oversupplied market

is likely to translate into decreasing rental

rates, as supply outstrips demand.

,000,000

2,500,000

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2007 20120112009

average rentals q1 2010

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7/48

As o end o 2010 Abu Dhabi

residential sector will consist o

approximately 198,000 units,

an increase by 7% over 2009

abu dhabi cumulative residential supply

As o end o 2009, an estimated total o

185,000 residential units exist within the city

o Abu Dhabi. A supply survey, conducted byColliers International, shows that 48% o the

existing stock is high-end residential units

while the remaining comprises o middle-

income housing. Residential locations

with a greater proportion o high income

apartments include Corniche, Khalia

Street, Electra Street, sections o Khalidiya

and Hamdan Street, and Salam Street

close to the Sheraton Corniche. Middle

income housing units are mainly located

on Deance, Khalidiyah, Najda Street,

Airport Road, Muroor Street and Al Falah

Street. The middle-income category has

been undersupplied or many years and the

demand or aordable housing has increased

signicantly since mortgage lending was

curtailed in the UAE. Currently there are

two reehold aordable housing projects;

Al Ree and Hydra Village, developed by

Manazel and Hydra Properties respectively.

Following the global economic downturn

and a decreasing demand or residentialunits in Abu Dhabi, caused by the low

rental rates in Dubai, aggregated market

rent demonstrated a decline o 19% between

Q1 2009 and Q1 2010, while dropping 38%

rom 2008. Residential sales prices in Abu

Dhabi have decreased by 42% rom the peak

in Q4 2008 to a current rate o US$ 3,675

per m2. Current occupancy rates continue

to remain close to 100% whilst rental yields

have allen rom 9% in 2009 to 8.5% in Q1

2010. Asking prices have turned into an

inaccurate measurement tool o price levels

in the market, with buyers and researchers

reporting a possible discount o about 15%

o asking prices.

Colliers expect the supply o residential

units to increase to approximately 209,000

by 2013 with primary tier developers suchas Aldar, Sorouh, Tamouh and Reem

Investments controlling the majority o

orthcoming supply. The largest stock

o residential units is expected to be

delivered in 2010, amounting to 46% o

total orthcoming supply between 2010

and 2013. As a considerable amount o

additional supply enters the market in the

medium term it is likely that there will be

a shit in lease terms in avour o tenants as

landlords become increasingly competitive.Initial estimations regarding orthcoming

supply, in reehold developments, between

2009 and 2013 were expected to amount to

29,370 units, however the amount has been

scaled back by 52% due to development

delays and projects put on hold due to the

nancial downturn.

Based on Colliers projections, an estimated

251,000 units will be required in Abu

Dhabi by the end o 2013. As mentioned, a

cumulative supply o 209,000 units is to be

expected, indicating a possible undersupply

o 42,000 units. This will maniest itsel

in a sotening o rental values or existing

developments that have enjoyed sustained

value appreciations due to a market

undersupply rather than a superior product

oering. However, due to a signicant

undersupplied market, an economic

recovery in Abu Dhabi will most probably

lead to an increase in rental rates and

sales prices, provided the number o newly

established companies increase, resulting in

a higher infow o expatriates, and thus an

increasing population.



averaGe sales prIce: us$ ,675 averaGe yIeld: 8.5%

vacancy raTe: %


Similar to the ofce sector, developments

oered or reehold ownership will start

to enter the market this year, assuming

no urther development delays

Despite an undersupplied residential

sector in Abu Dhabi, average

rental rate has decreased by 9%

between Q1 2009 and Q1 2010

Average sales price or Al Reem

Island decreased by 14% between

Q1 2009 and Q1 2010

aBu dhaBI resIdenTIal FIrsT QuarTer 2010

collIers InTernaTIonal 7

250.000

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Despite large discounts, retailersare still recording a drop in sale

As o end o 2010 Abu Dhabisretail sector will consist oapproximately 739,500 m o GLA,an increase by 85% over 2009

Line store retail rents or establishedand successul shopping malls

remain high at US$ 864 per m2

pa, while units in newer shoppingmalls are oered at US$ 580per m, a decrease o 32%

year Gla

1985 - 1999 58,5

2000 8,129

2001 187,195

2006 5,57

2007 115,960

2009 2,600

ToTal 98,811

shopping mall supply growth

abu dhabi cumulative shopping mall supply

Shopping being a major leisure activity inthe UAE, is also one o the most popular

attractions or tourists visiting the country.

Historically, Abu Dhabis retail oering

was limited to high-street acing outlets

and a number o secondary acilities spread

across the city, with Gross Leasable Areas

(GLA) ranging between 1,500m2 and

8,000m. Over the past seven years, Abu

Dhabi has seen a marked change to its retail

landscape, moving rom a market with no

major retail malls to one with considerable,

and successul, primary grade retail space.

The current supply o shopping mall space

in the city reached over 398,800 m GLA,

with a 95% occupancy rate across market,

and ull occupancy in new generation

shopping malls incorporating leisure

amenities.

Whilst global market conditions at present

are expected to impact negatively on

spending power and consumer condence,

the extent o the retailer cash-fow crunchis expected to be less marked than in

neighbouring Dubai, primarily due to a

retail market driven by UAE National

spending power rather than tourism

infows and expatriate spending, making

it less susceptible to the current economic

downturn and ckle consumer behaviour.

The rapid success enjoyed by retail malls

in Abu Dhabi is refected in the relatively

high rental levels commanded by recently

completed malls. Annual rents or large

anchor tenants average US$ 176 per m,

whilst average rates or line stores are

almost US$ 845 per m per annum. Despite

the high rental rates, line rentals in Abu

Dhabi are around 53% lower than o thosepaid by line outlets in Dubai.

The leasable area in the Emirate o Abu

Dhabi is set to increase rom over 398,800

m at the beginning o 2010 to 1.4 million

m by 2012, representing a 253% increase

and a projected 0.9 m o GLA per capita.

Danet Abu Dhabi Mall, 4,820 m GLA,

scheduled or completion in 2011 and

Yas Mall, 296,000 m GLA, scheduled or

completion in 2012 are the two largest

orthcoming malls. Current retail GLA

per capita in the city is just 0.5 m2, while

retail GLA per capita in the neighbouring

emirate, Dubai, exceeds 1m2. Based on

these gures, it is likely that latent retail

demand remains in Abu Dhabi.

Analysis conducted by Colliers International

suggests that retail spending per m2 will begin

to decline signicantly in 2010, mainly due

to the 70% increase in retail space. Provided

scheduled construction targets are met andkeeping the total income o Abu Dhabi

residents as a constant throughout the

next three years, retailers can expect lower

revenue per m2 o retail space. However,

keeping in-line with standards set by

the International Council o Shopping

Centres (ICSC) and government population

estimates outlined in the Abu Dhabi 2030

plan, Abu Dhabis retail market remains

undersupplied. Despite immediate concerns

o low ootall levels in smaller shopping

centres and current economic conditions,

we remain bullish on the Abu Dhabi retail

market over the long term.


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aBu dhaBI reTaIl FIrsT QuarTer 2010

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9/48

Abu Dhabis focus on business

visitors might reduce the anticipated

long-term effect of the crisis

Abu Dhabi Tourism Authority

(ADTA) indicates, that o

the 13,000 hotel rooms they

plan to license by 2012,

approximately 58% will be inthe 5-star category, highlighting

considerable oversupply risks in

this segment over the longer term

The majority o hotels, until recently, are

located at the northern end o the island, as well

as the Western Corniche, Eastern Commercial

District (Salam Street), and Eastern Corniche

(Tourist Club Area). The Eastern Commercial

District and Eastern Corniche areas currently

have the highest concentration o hotels. This

is primarily due to their proximity to the main

commercial areas o the city. Abu Dhabi is

also served by approximately 3,300 serviced

apartments, in many cases orming part o a

4-star or 5-star hotel.

Demand or hotel accommodation in the

city is driven predominantly by corporate

tourism, accounting or 85% o overall

hospitality market demand. According to

the most recent gures released by ADTA,

approximately 1.5 million guests stayed

in hotels throughout the emirate in 2009,

a 2% rise rom 2008. Given the present

market conditions, however, Middle East

hospitality is acing two major challenges.

Firstly, the global economic downturn hasled to a decline in bookings rom Europe and

other regions to the Middle East. Secondly,

being pegged to the appreciating dollar has

become more expensive or travellers rom

the UK, leading to a choice o alternative

holiday destinations.

Colliers survey o hotels in Abu Dhabi

suggests that occupancy levels increased

steadily rom 2003 to 2005. Despite an

average occupancy rate o 80% between

2006 and 2009, average occupancy rate

across all hotel categories dropped to 75%

by the end o 2009. Average occupancy

levels experienced by 5-star hotels were

slightly higher at 78%. RevPAR or 2009

reached US$ 215, accounting or a 1.7%

Y-O-Y decrease, while ARR increased by

4.7% during the same period. Despite the

decrease in occupancy rate, an increase in

average room rate ensured the capital citys

RevPAR 74% higher than the regional

average. However in Q1 2010, hotel revenues

have more than halved with RevPAR

dropping to US$ 142 compared to US$ 300

durig the same period last year. Occupancy

rates in Q1 2010 also declined signicantly

to 56% compared to 81% achieved duringthe corresponding period in 2009.

The major growth areas or hotel developments

in the immediate term are the Airport Road and

Bain el Jesrain (Between the Bridges). Over the

longer term, the ocus o hotel development will

be on leisure acilities on the Al Yas, Saadiyat

and Lulu Islands, in line with the ADTAs

objective o increasing the overall leisure

market share to 40% by 2015. Based on our 2009

Hotel Survey, coupled with the qualication o

hospitality components within orthcoming

master-planned developments, we expect hotel

supply to increase by 133% between 2009 and

2013 rom approximately 10,700 in 2009 to

24,900 in 2013. The largest increase in hotel

room supply is expected between 2011 and

2012, amounting to 43% o orthcoming supply.

Given the act that most o the citys existing

hotels are unctionally ull at present, there is

potential or the market to absorb a airly large

number o additional rooms while remaining

protable. Nevertheless, a supply increase o

this scale is highly likely to have a considerable

dampening eect on both occupancy rates and

ARRs in the medium term.

abu dhabi cumulative hotel room supply

marKeT occupancy: 75%

5-t occupancy: 78%

arr: us$ 286

revpar: us$ 215

performance indicators (y/e 2009)

Abu Dhabis top 3 source markets

or international hotel guests

are the UK, USA and India

aBu dhaBI hospITalITy FIrsT QuarTer 2010


0,000

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hospitality sector: occupancy trend

90%

80%

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10%

02000 01 200902 0 0 05 06 07 08

201


10/48collIers InTernaTIonal10

A decreasing demand or ofcespace, leading to a decline inoccupancy levels, have changedthe demand-supply dynamicsin avour o the tenant.

The supply o oce space in Dubai rose toapproximately 3.6 million m2 by the end o

2009, an increase o 20% over the previous year.

Demand remained weak and showed no signs

o recovery, as companies continue to downsize

and implement cost cutting measures. Overall

oce occupacy rates in Dubai average 71%.

Occupancy rates in old Dubai (Deira, Bur Dubai

and Sheilh Zayed Road) average 90% while

occupancy rate in new oce district is 42%.

Because o the oversupply, owners o newly

completed buildings must attract tenants and

are doing so by oering rent ree t-out periods,fexible rental structures and avourable lease

terms. This greater availability o space in new

buildings coupled with low rental rates appears

to be driving a trend whereby tenants are

relocating rom established buildings to newly

completed buildings. Whilst there is thereore a

movement o tenants, it is between established

buildings and newly completed buildings, and

nothing that will ultimately improve average

occupancy levels in the city.

Dubai remains the principal centre o

business in the region and houses the regional

headquarters o most o the multinational

corporations operating in the Middle East and

North Arica. For companies that are planning

to expand into the region, Dubai remains an

attractive choice or the establishment o

a regional oce, supported by its advanced

inrastructure and, particularly now, its greater

aordability.

Dubais new central business district, comprising

the Sheikh Zayed Road, Dubai International

Financial Centre (DIFC) and Downtown Dubai

precincts, is currently achieving the highest

occupancy levels in the city. Following the

inauguration o Burj Khalia, occupancy levels

in Downtown Dubai have increased, having

suered a decrease in Q3 2009. Its locationand overall quality o the developments

together with the supporting residential and

retail amenities are all actors contributing to

the attractiveness and sustainability o the new

CBD.

Dubai oce sales prices have continued to

decline, decreasing by 27% over the last 12

months. No price increases were recorded in

any o the oce projects in Dubai during this

period. Beore the global nancial crisis hit

Dubai demand or both oce and residential

properties had been driven mainly by speculative

transactions. This increased prices with little,

i any underlying appreciation in value. When

the global credit crisis and economic downturn

hit Dubai markets in Q3 2008, speculative

demand dried up. This resulted in a sharp and

severe correction o market prices.

Since then, corporate downsizing and business

closures, coupled with new buildings being

released onto the market have urther reduced

demand or and increased supply o oce

space. These have driven oce prices andrentals down even urther and are expected to

continue into the immediate uture.

Despite the various announcements about

project cancellations and delays, the supply

o oce space currently under construction

in Dubai is expected to increase by more than

double by 2012. With no anticipated increase

in demand, this huge increase in supply will

urther exacerbate the existing oversupplied

position in the market. It is accordingly

expected that both rental rates and selling prices

will continue to decline or the oreseeable

uture. Recovery o the economy should lead

to corporate expansion and stimulate demand

or oce space.

dubai cumulative office supply

averaGe renT: us$ 15 2

premIum renT: us$ 860 2

sales prIce: us$ ,870 2

averaGe yIeld: 8.5%

vacancy raTe: 10%*(tbi biig) & 58% ( t biig)

* Ti t i t t fbiig, i t ig g t 1%


duBaI oFFIce FIrsT QuarTer 2010

akig rt ai rt

Average sales pricesdecreased by 27% betweenQ1 2009 and Q1 2010

Despite project cancellations anddelays, ofce supply is expectedto double in the next two years.

7,000,000

6,000,000

5,000,000

,000,000

,000,000

2,000,000

1,000,000

0

2nla

2011201020092008

Average asking rental rate hasdecreased by 28% betweenQ3 2009 and Q1 2010

2012


1,200,00

1,000,00

800,00

600,00

00,00

200,00

0

us$2

JlT

dsosZr

doZ

Bjdbi

dIp

dTJa

aB

Tc

Ta

dIFc

BiBy


11/48

At the end of the third quarter of 2009,residential sales prices started to increase.

The total supply o residential space in Dubai

exceeded 330,000 units at the end o 2009

and despite project cancelations and delays,

is expected to increase by more than 12% to371,000 units by the end o 2010, Occupancy

levels currently stand at 80% which means the

market is oversupplied by around 65,000 units

with a urther 37,000 due to enter the market by

the end o this year.

Prior to the downturn at the end o 2008, the

residential property market, just like the oce

market, had to the largest extent been driven

by speculator demand. Other actors that

underpinned demand were the buoyant economy

and rapidly growing population. The creditcrisis and downturn in the economy however

eliminated speculative demand, whilst at the

same time orcing companies to downsize their

operations. This led to large scale redundancies

and thousands o expatriate workers returning to

their countries o origin. Demand or residential

property slumped and led to the precipitous

declines in rental rates as well as selling prices.

The impact o this is still elt in the current

market where rental rates and selling prices have

continued to decline.

Rental rates declined by 25% in the period

between Q2 2009 and Q1 2010, but over the past

two quarters certain select developments have

indicated that rentals have started to stabilise

and in certain instances have staged a marginal

recovery. A ull recovery o the residential rental

market will however depend upon an increase in

population, which can only occur on the back

o a recovered economy creating employment

opportunities to draw expatriate workers back

into the country.

Residential property prices in Dubai dropped

by almost 50% during the rst hal o 2009,

refecting the erosion o demand through the non-

availability o mortgage nance and the economic

downturn. It was not, however, a gradual or even

decline. Prices dropped very sharply during Q1

2009 but the rate o decline eased during Q22009. In Q3 2009 prices appeared to bottom

out and the Colliers House Price Index (HPI)

indicated 7% growth over average prices or Q2

2009. This trend continued during Q4 2009 as

the HPI registered urther growth o almost 1%

over Q3.

What became clear rom the HPI results or Q3

and Q4 2009 was that prospective purchasers

were being very selective in the properties they

bought. The properties that enjoyed avour with

the market were properties in large communitydevelopments where the developers are known

entities with proven track records. These

developments would also generally oer additional

value in the orm o amenities such as sport and

leisure acilities, convenience retail, proximity to

schools, landscaped gardens and public spaces.

Signicantly, because these developments

enjoyed greater demand, nancial institutions

were also more inclined to provide unding or

properties in these developments. The prospect

o purchasers being able to get loan nance inthose developments urther stimulated demand.

At the other end o the spectrum are developments

that dont oer the additional value or the

comort o a branded, known developer. Such

developments generally enjoy less avour in the

market. The result is that, because o reduced

demand, banks are very reluctant to lend on

such developments which urther stifes demand.

Inevitably, prices in such developments have

continued to decline.

It must thereore be concluded that whilst certain

areas o the market have shown growth over the

past six to nine month period, there remains

downward potential in respect o others.

dubai cumulative residential supply



averaGe sales prIce: us$ 2,909

averaGe yIeld: 7.8%

vacancy raTe: 20%


The oversupply in the market hascaused rental rates to decline by 25%between Q2 2009 and Q1 2010

The rate o decline in rental rateshas slowed down in Q1 2010.

duBaI resIdenTIal FIrsT QuarTer 2010


Construction of more than 80,000

residential units scheduled forcompletion between 2009 and2012, have been put on hold.

50,000

00,000

50,000

00,000250,000

200,000

150,000

100,000

50,000

0

nbuit

2008 2009 2010 2012 2012011

average apartment rental rate q1 2010

00

50

00

250

200

150

100

50

0

sti 1Br 2Br Br

Q2 2008 Q 2009 Q1 2010

us$2


12/48

Shopping mall space isset to increase by 9%between 2009 and 2010,increasing the total supplyto 2.4 million m2 GLA

The majority of shoppingmalls still continue to maintainhigh occupancy levels

The eects o the global economic downturnthat impacted the retail industry in Dubaiwere primarily the ollowing:

A reduction in the number o tourist arrivalsduring the rst hal o 2009, although thiswas reversed during the second hal o theyear, when tourist numbers increased again,According to tourism authorities the totalnumber o tourists during 2009, recorded at6.9 million, equalled that o tourist arrivals in2008.

Consumer insecurity fowing romwidespread redundancies and job losses aswell as the recession in general. Anecdotalevidence suggests that spending patternsbecame more reserved and that a greaterpercentage o income was being saved incase the breadwinner lost his/her job.

Decline in population numbers asunemployed expatriates returned to theircountry o origin. Although no ocialstatistics are available in this regard,reports o major job losses, coupled with

increased residential and oce vacancies,and reduced oot trac in shopping mallssupport this contention.

Throughout the rst hal o 2009, retailersreported that there had been a declinein transaction volumes and basket sizes,downgrading by consumers rom moreexpensive brands to less expensive brandso the same item, a sharp decline in non-discretionary spend by consumers particularlyon luxury goods and, also a drop in touristsales because o ewer tourists with reduced

budgets. Trading densities (turnover persquare metre o shop space) declined andturnovers suered.

The second hal o 2009 however wascharacterised by improved consumer

condence evidenced by increased residentialproperty transaction volumes, and a return otourist arrivals to pre-downturn levels.

Whilst rentals payable under new leasesnegotiated during 2009 showed a decline oaround 18%, average rentals in ormal shoppingmall space have remained relatively stable.Current line shop rentals in shopping mallsare approximately US$ 1,310 per m with largespace occupiers (anchor tenants and departmentstores) at approximately US$ 210 per m.

Average occupancy levels in malls remainedhigh at 99% during 2009, and mall ownersadvise that there continues to be a healthyinterest in available mall space. Developerso new shopping malls have however noted aslow-down in the take-up (absorption) rate ospace in malls currently under construction,although this might be attributed as much toshortcomings in the developments themselvesas to prevailing economic conditions.

The total supply o shopping mall retail spacein Dubai stood at 2.2 million m at the end o

2009. Forthcoming supply due to enter themarket by the end o 2010 should increasethe total to 2.4 million m, an increase o 9%.A urther 400,000 m is schedule or releasebetween 2011 and 2013.

Using the International Council o ShoppingCentres (ICSC) supply yardstick o 1.1 mo mall space per member o population andDubai Government population projectionso around 1.7 million people at the end o2009, the Dubai population could absorbapproximately 1.9 million m o retail space.However, taking into account Dubaistransient tourist population o around 7.0million people per year, many o whom cometo Dubai with the express purpose o shopping,it will be air to conclude that Dubai is by nomeans oversupplied in terms o retail space.

dubai cumulative retail supply


duBaI reTaIl FIrsT QuarTer 2010

proJecT year GlaBay avenue 2010 18,000

sunseT mall 2010 10,68

mIrdIFF cITy cenTer 2010 180,000

*Ti tb t titt ti it tig

new shopping mall supply*

,500,000

,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

2Gla

2008


1,00

1,200

1,000

800

600

00

200

0

us$2

li st a st

Rental rates in shoppingmalls have remainedrelatively stable betweenQ3 2009 and Q1 2010

2012012201120102009


13/48

Revenue per available room(RevPAR) has declined asa result o an 8% drop inoccupancy as well as room rates

The number o hotel roomsis expected to increase by12% by end o 2010.

Despite the global downturn tourism infows

or 2009 remained unchanged compared to

2008. According to ocial gures, Dubaireceived 6.9 million tourists in 2009, which

is the same number o tourists that was

recorded in 2008. Whilst tourist infows rom

Europe and other Western countries showed

a decline, Dubai was able to attract tourists

rom new markets, mainly rom other GCC

countries and the MENA (Middle East and

North Arica) region.

Nonetheless, industry perormance indicators,

such as occupancy rates and RevPAR

(Revenue per Available Room), have shown a

decline. This could be attributed mainly to the

additional new room supply which entered the

market. To counteract the increase in supply,

hotels lowered room rates in an attempt to

increase occupancy rates. This however had a

negative impact on RevPAR.

In the 4 and 5-star hotel categories, occupancy

levels dropped to 69% compared to 77% in

2008, simply because o the availability o a

greater number o rooms or the same number

o tourists. In order to boost occupancy rates,

hotels started to oer reduced room rates.The average room rates (ARR) dropped by

24% to US$235, compared to US$309 in

2008. The decline in occupancy rates and

the ARR compressed the RevPAR, which

is the main indicator o hotel perormance.

The RevPAR declined by 31% to US$162,

compared to US$237 in 2008. However in

Q1 2010 indicators have shown a considerable

improvement in hotel perormance. Occupancy

rate increased to 79% and average room rate

reached US$ 252, which consequently led to

an increase in RevPAR to US$ 199.

The supply o hotel rooms increased by 3% in

2009 and is expected to increase by a urther

12% by the end o 2010. This will increase

the cumulative stock o 4 and 5-star hotel

rooms in Dubai to 31,586. The number o

beach hotels is also set to increase with theopening o three new hotels in Jumeirah

Beach Residence.

In terms o tourist attractions, the opening o

Burj Khalia, the tallest tower in the world,

with its supporting retail and leisure amenities

is expected to be a major drawcard or tourists.

Another great attraction is the Meydan

Racecourse, a state o the art horse racecourse,

which recently opened. Meydan will be the

venue or the Dubai World Cup, the most

expensive horse race in the world. Dubai

urthermore remains a major destination or

shoppers rom around the world. The MICE

and trade tourism market is also expected to

remain buoyant as Dubai is home to many

major exhibitions and conerences in the

region.

Apart rom the tourist attractions, prices o

goods in Dubai have not increased as is evident

rom the decline in the consumer price index.

Coupled with the decline in the cost o hotel

accommodation Dubai is set to be positioned

as a more aordable tourism destination.Greater aordability might increase the

average length o stay o tourists and increase

the average expenditure per tourists which

will benet retail sector and the economy as

whole.

However, the sector still aces many challenges.

The current global economic conditions

are expected to aect the global tourism

market or years to come as individuals are

cut spending and increase savings. Another

challenge acing the market is the expecteduture supply. Unless this supply is met with

increasing number o tourists and, thereore,

increased occupancy rates, the hotel market

in the city will become oversupplied.

dubai cumulative hotel room supply


arr: us$ 25

revpar: us$ 16

market performance (y/e 2009)

duBaI hospITalITy FIrsT QuarTer 2010


31% decrease in RevPAR in 2009,attributable to a 23% decline in

ARR and a 69% dropin occupancy level

Despite the global recession,tourist arrivals in 2009 hasremained the same as in2008, namely 6.9 million.

0,000

5,000

0,000

25,000

20,000

15,000

10,000

5,000

0

nbr

2008 2009 2010 2011

existing beach hotel . city hotel

0,000

25,000

20,000

15,000

10,000

5,000

02008

nbr

2009 2010 2011 2012

B ht cit ht


14/48collIers InTernaTIonal1

Existing supply amounts to 1.06

million m2 o NLA, o which

70% is located in West Bay

The majority o Dohas grade A oce space

is located in West Bay and along Grand

Hamad Avenue. The remaining oce stock

in Doha is generally o sub-standard quality

and in need o upgrading. Colliers estimates

the current total supply o A and B grade

oce space in Doha to be approximately 1.06

million m2 NLA, which includes secondary

space in locations such as the A, B, C and D

Ring Roads and Grand Hamad Avenue.

Demand or oce space in the West Bay

area has to a large extent been driven by the

relocation o many government departments

to the area. This created a need amongst large

corporations who deal with the government

on a requent basis to establish themselves in

West Bay as well. With so many government

departments and large corporations basing

themselves in West Bay, major banks and

nancial institutions also opened oces and

branches in West Bay to service the bankingrequirements o major clients.

The strong demand or oce space in West

Bay drove rentals to amongst the highest in

the city, at around US$ 595 per m per annum.

The global economic downturn in 2009

however caused average rental rates to decline

by approximately 20% to US$ 495 per m. In

the rest o the city, Grand Hamad Avenue and

the C Ring Road areas saw rental rates drop by

approximately 25%, whereas the A and B RingRoad areas, because rental rates were already

lower than those in other parts o the city, saw

a more modest decline o only 7%.

Over the same period oce space sales prices

dropped by around 15% YOY to approximately

US$ 4,670 per m. Although sales prices

and rental rates have dropped, a compressed

interest yield indicates that the oce market

is maturing. Furthermore, a decrease in sales

prices will entice potential investors to acquire

oce space at a reduced rate. Currently

the Doha oce market is witnessing a 90%

occupancy rate, which indicates that the

market is not oversupplied and that a healthyappetite or oce space exist as local business

continue to grow and international businesses

expand their operations in Qatar.

Projects currently underway and scheduled or

completion during 2010 should see additional

oce space o approximately 335,600 m being

released into the market. This represents a

32% increase over existing supply, taking

total oce space supply to approximately 1.4

million m by the end o 2010. This number is

orecast to increase to around 1.65 million m

by 2012, representing a total increase o 55%

over the preceding three year period.

Demand or oce space is currently 1.68

million m2. Despite the increase in supply by

end o 2010, the oce sector will continue

being undersupplied by approximately

284,000 m2 o NLA. Whilst the oce market

is currently still undersupplied, the additional

supply is likely to lead to a excess o supply

over demand, resulting in a more competitivemarket position with rental rates sotening

and landlords having to oer a variety o

incentives to attract tenants.

doha cumulative office supply

averaGe renT: us$ 500 2

premIum renT: us$ 595 2

averaGe sales prIce: us$ ,670 2

averaGe yIeld: 11%

vacancy raTe: 10%


doha oFFIce FIrsT QuarTer 2010

Average sales price has registered

a YOY decrease by 15%

Cumulative supply to reach1.65 million m2 o NLA by

2012, an increase by 55%

over existing supply

1,800,000

1,600,000

1,00,000

1,200,000

1,000,000

800,000

600,000

00,000

200,000

0

2nla

2011201020092008

Average annual rental rate

decreased by 20% between

Q1 2009 and Q1 2010

2012


800

700

600

500

00

00

200

100

0

us$2

a&B

rigr

drigr

crigr

G

ha

wtBy

2006 2007 2008 2009 Q1 2010


15/48

Existing residential supply comprisesapproximately o 102,500apartment and villa units

Historically , the city centre was the most soughtater location or housing in Doha. However, as

the city grew and spread away rom the centre,

areas around the C, D and E Ring Roads grew

in popularity. The West Bay CBD, in addition

to its commercial demand, has also become a

sought ater high-end residential area. These

changes in residential trends came about largely

because o the suburban quality o the outlying

areas as well as the reduced trac congestion on

improved road systems.

Dohas residential sector has been plagued overthe past three years by an acute housing shortage

due to increasing demand not being met with

adequate increases in supply. Although the

position has eased somewhat most o the new

supply is still under construction.

The current population o Doha stands at around

841,000 people and with an average household

size o 5.9 people, this translates into an overall

demand o 142,600 housing units. With existing

supply at around 102,600 units, the market is

signicantly undersupplied by around 40,000

residential units.

Demand or additional housing is not just

conned to the immediate Doha area but

includes the population o the Al Rayyan area,

which makes up greater Doha.

The type o housing needed to meet this additional

demand will vary depending on nationality,

income, and household size. For Qataris, villas

will orm the bulk o required accommodation,

whereas or expatriates the provision will mainlyconsist o amily housing and apartments ranging

rom low to high-end, depending on their skill

base and income bracket.

Despite the global economic downturn, rentalrates in Doha have continued an upward trend

reaching a level o US$ 415 per m2 per annum,

which translates into a 68% increase over Q1

2009. Three bedroom apartments are currently

achieving the highest rental rate at US$ 515 per

m2 per annum, while rental rates or one and two

bedroom apartments are below market average.

Premium rental rates are attained in the Pearl at

US$ 590 per m2 per annum, 42% above market

average. Unlike rental rates, the economic

downturn has however had an eect on sales

prices, which have declined by 9% over Q1

2009, and is currently US$ 4,130 per m2. Viva

Baharia is selling at a premium o US$ 6,320 per

m2. The large increase in average rental rate and

the decrease in average sales price led to average

investment yield to change rom 6% in Q1 2009

to 10% in Q1 2010.

Provided scheduled completion dates are met,

Doha residential supply is expected to increaseby 6% in 2010, leading to a total supply o

around 108,200 residential units. The supply

is orecasted to continue to increase and reach

a total o 117,600 units in 2012, an increase o

15% over the preceding three years.

The projected growth in supply o residential

accommodation between now and 2012 will not

satisy even current demand. This position is likely

to deteriorate urther as the population grows on

the back o projected economic growth in Qatar.The Doha residential market may thereore be

expected to remain in a strongly undersupplied

position or the oreseeable uture.

doha cumulative residential supply



averaGe sales prIce: us$ ,10

averaGe yIeld: 10%

vacancy raTe: 10%


Whilst sales prices decreased by9% YOY, rental rates increasedby 68% over the same period,leading to an increase in cap rates

doha resIdenTIal FIrsT QuarTer 2010


Provided completion dates aremet, supply is expected to grow by15% between 2009 and 2012

average sales price q1 2010

7,000

6,000

5,000

,000

,000

2,000

1,000

0

us$2

li ptabi

viBi

wtB

average annual apartment rent q1 2010

900

800

700

600

500

00

00200

100

0o

aita s wt

Blgpz

us$2

wtB

1 Br 2 Br Br

120,000

115,000

110,000

105,000

100,000

95,000

90,000

85,000

nbuit

2011201020092008 2012


16/48

Doha currently has approximately444,500 m of GLA comprisingshopping centres spread acrossthe capital city, which isexpected to double by 2012

Rental rates in shopping mallscurrently averages US$ 677per m2 pa, with premium rent

at US$ 785 per m2 pa beingachieved by Doha City Centre

Doha currently has a total supply o ormal

retail space o around 444,500 m GLA

(Gross Leasable Area). Historically the

market has been undersupplied and despite

extensions by a number o existing shopping

centres in recent times, demand continues to

exceed supply. This is supported by the high

absorption rates experienced by developments

such as the Villagio Mall and the Pearl.

The global economic downturn in 2009 had

a very limited eect on the Qatar economyand the country has continued to experience

strong economic growth. Per capita GDP,

which or some years has been the highest

in the world, grew rom US$ 80,000 to US$

86,000 between Q1 2009 and Q1 2010. This

translates into high discretionary disposable

incomes and a strong purchasing power or

Qatari residents.

Retail rental rates in Doha are currently

amongst the highest in the Gul region.

Average rental rates or line shops currentlystand at around US$ 677/m per annum, which

represents a 17% increase over Q1 2009.

The highest rental rates are currently being

achieved by the Doha City Centre, which is a

refection o the popularity and thereore the

commercial strength o the centre.

There are however a number o large retail

developments currently under construction

in Doha, such as the Barwa Commercial

Avenue, that have the potential o bringing

about a change in the current supply/demandundamentals in the market. Colliers research

indicates that around 175,000 m GLA is

expected to be delivered to the market in

2010 (provided scheduled completion dates

are met), which represents a 39% increase

in supply. By 2012 total supply is expected

to exceed 826,000 m GLA, which is a 94%

increase on existing supply.

As new supply is delivered, market conditions

are likely to become more competitive and

absorption rates along with rental rates

are expected to drop. With most o the

orthcoming supply aimed at the upper end o

the market the impact o the additional supplywill be greater in this sector.

As retail markets grow so does the demand or

new brands in the new developments. Better

marketing and management strategies will be

critical i the older centres are to continue

to oer competition to new developments.

Diversication is the most obvious way in

which retailers are seeking to minimize the

risk o potential over-supply. Management

teams rom Grade B developments are turning

towards markets traditionally under-cateredor and attempting to create a new breed o

mall aimed at Qatari nationals at the lower

and medium end o the market. The trend

towards diversication can also be seen in

the new development o shopping centres

in regions outside Doha. One o these new

projects, the Al Khor Mall by EMKE Group,

will cater to the Al Khor municipality and

other northern municipalities.

doha cumulative shopping mall supply


doha reTaIl FIrsT QuarTer 2010

sig m Gla nb uit

d cit ct 0,000 80

vigi 10,000 200

pt abi 90,000 50

lk sig m 58,000 120

existing supply snapshot

Barwa CommercialAvenue is expected toadd 100,000 m2 GLA tocurrent supply by 2012


900

800

700

600

500

00

00

200

100

0

us$2

cityctd

hyttpz

rypz

Tmsig

cx

lk

sigm

vIgi

aak

ctpit

1,000,000

900,000

800,000

700,000

600,000

500,000

00,000

00,000

200,000

100,000

0

2Gla

2009 201220112010


17/48

Over 2,100 hotel rooms to beadded to the market by end o2010, provided no delays occur

Hotel room supply expectedto increase by 64%,spread over fve years

Demand or hotel rooms in Doha is driven by

the key actors o economic and population

growth, and is underpinned by a range o

government-implemented initiatives aimed at

attracting investment and creating demand.

Building on an estimated infux o 962,000

tourists in 2006, the tourism authority in

Qatar has dened objectives which include

the development o the Meetings, Incentives,

Conerences and Exhibitions (MICE) market

in particular, given that 95% o current visits

to Qatar are believed to be at least partiallybusiness linked.

The Doha hospitality sector is changing

signicantly. Doha currently has approximately

9,000 hotel rooms in the 5-star and 4-star

categories. With almost 6,500 hotel rooms,

5-star hotels have a clear majority o existing

hotel rooms in the two mentioned categories.

Except or 2008, average room rate in Doha

has witnessed a continuous increase post 2004,

amounting to a CAGR o 18% between 2004

and 2009. ARR increased by 20% between2008 and 2009 and is currently at US$ 327.

Although ARR witnessed an intensiying

trend, occupancy rate has registered a more

volatile trend. Doha average occupancy rate

registered its highest decrease in 2009 over

2008, amounting to 30% and leading to

current rate at 50%. A clear indication to

the high decrease in occupancy rate, which

has put the occupancy at the lowest rate in 6

years, is the decrease in infow o tourists rom

approximately 960,000 in 2008 to 800,000

tourists in 2009 and the high increase inARR. Despite the increase in ARR, the

large decrease in occupancy rate led to 16%

decrease in RevPAR, which currently stands

at US$ 164.

The number o hotel rooms in Doha is

expected to increase to almost 13,000

rooms by 2012, representing an increase o

approximately 3,930 rooms, or an increase

o 43%. Additional supply is scheduled or

completion post 2012, amounting to 1,880

hotel rooms and 64% increase over the next

ve years. Total orthcoming supply by 2014 is

expected to reach approximately 5,600 rooms

o which 74% is within the 5-star category,

leading to a cumulative supply o over 14,800

hotel rooms by 2014. Note that orthcomingsupply included in the hospitality sector only

denotes 4 and 5-star hotels.

Qatar Tourism Authority had initially

orecasted 1.5 million visitors in 2010. Due

to decrease in number o tourists in 2009 by

160,000 visitors, the orecasted goal is unlikely

to be achieved. Planned orthcoming hotel

supply is thus based on an unsustainable goal,

which will most likely lead to an oversupply

in the hospitality sector in the short term.

The risk or oversupply is signicantly higherwithin the 5-star category due to the large

share o existing supply and the share o

orthcoming supply, which amounts to 74% o

orthcoming supply.

doha cumulative hotel room supply


arr: us$ 27

revpar: us$ 16

performance indicators (y/e 2009)

doha hospITalITy FIrsT QuarTer 2010


Despite 20% increase in ARR,revPAR declined by 16% due to30% decrease in occupancy rate

16,000

1,000

12,000

10,000

8,000

6,000

,000

2,000

0

nbr

2009 2011 201 201

trend hotel performance

50

00

250

200

150100

50

0

us$

200 2005 2006 2007 2008 2009

arr rpar

2010 2012

90%

80%

70%

60%

50%

0%

0%

20%

10%

0%

o rt


18/48

Ofce space grew by over369,000 m2 between Q12009 and Q1 2010.

Demand or ofce space largelystems rom the governmentsector during the past year

The citys ofce stock is expectedto grow by over 436,000 m2 o netleasable space by the end o 2010

riyadh cumulative office supply

Riyadhs oce market experienced

considerable growth with 369,000 m2 o

additional oce space delivered in the citys

core business artery during 2009 and into

Q1 2010; however, the majority o space

has been within grade B whilst demand is

primarily or grade A space.

Demand in the main business district has

stemmed rom the Government Sector

during the past year. Some non-CBD areas

and the East Ring Road have witnessed

the construction o Government owned

purpose built oces and public agencies. In

addition, semi government agencies have

also been the largest tenant, leasing deals

within the city with large lettings to among

others, the Human Rights Commission and

The National Water Company.

New low-rise oce buildings are being

constructed in the commercial districts o

Maather and Malaz to south o the CBD.However, the momentum o the citys

development continues to be to the north,

where a number o large new business parks

have started construction.

Demand and supply dynamics in Riyadhs

commercial market are set to change as an

increasing number o developments in the

pipeline adopt the oce district concept

currently observed in Western countries

and also Bahrain and Dubai. Notableexamples are King Abdullah Financial

District with 750,000 m2 GLA and the King

Saudi University Endowment Project with

290,900 m2 GLA. Once delivered, these

key projects are expected to compete with

existing supply located in the citys primary

CBD.

Many landlords, supported by the recent

government leasing pattern are seeking

to lease only to large companies looking

or multiple foors. With the shortage

o available grade A space smaller scale

tenants are acing diculties sourcing

appropriate accommodation within gradeA stock but are reticent about moving to

grade B oces.

On the back o increasing demand and

limited supply o Grade A oces, rental

rates remained stable at US$ 413 per m2

per annum excluding Kingdom Tower and

Al Faisaliah Centre. Meanwhile, rents o

grade B oce space sotened by an average

o 15% in Q1 o 2010 compared to the

previous year. Vacancy levels increased by7% reaching 24% while net stock absorption

ell by 2% compared to previous year.

Colliers oresees that this is only a short term

issue as the volume o new space entering the

market will orce landlords to change their

strategy in the light o new competition.

The citys oce stock is expected to grow

by over 424,000 m2 o net leasable space

by the end o 2010. We anticipate that

the oce leasing landscape will change

during the orthcoming 12 months rom a

landlords market to a tenants market with

an increase in incentives and a sotening o

rental rates.


rIyadh oFFIce FIrsT QuarTer 2010

averaGe neT renT: us$ 10

premIum neT renT: us$ 1

averaGe sales prIce: us$ 2,716

averaGe yIeld: 11.5%

vacancy raTe: 2%


,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

2Gla

2008 2009 2010 2011 2012 201


50

00

250

200

150

100

50

0

us$2

Kig

F

r

am

te

stee

t

adb

b

stee

t

oy

stee

t

eitig s 2 nla

a a T 10,000

a Bi ct 15,000

ri T 20,880

Tt T 25,000

a Fii ct 5,00

Kig ct 60,000

*Ti tb o not ontitut n xuti it of urrnt uppy


19/48

Mid-scale and individual developers

are currently the most active in

terms o construction activity

Increasing construction activities in

areas such as Al Yasmin and Al Rabih

riyadh forthcoming residential supply

Riyadhs residential market continues to

be marked by an undersupply especially

in aordable houses. The Escrow Law

has polarised eects on the residential

market: although it has induced end-

buyers condence, it also inhibited delivery

o supply with most master-planned

developments put on hold or delayed.

Mid-scale and individual developers are

currently the most active in terms oconstruction activity. These developers

ocus on mid-scale to high-scale residential

developments that are less than 100 units.

Low-end villas are at an average sales price

o over US$ 490 per m2 and have an average

built up area o 300 m2. Riyadhs median

monthly household income stood at US$

1,602 in 2009 which underscores that

aordability remains to be a major challenge.

With the cost o land remaining high as

a component o the villa developmentprocess, plot and end unit sizes have been

reduced in an attempt to bring down the cost

o completed units. Conversely apartment

sizes delivered in Q1 2010 have been larger

as they seek to bridge the gap by oering an

aordable and desirable alternative to villa

accommodation.

With market correction attributed to,

among others, the global economic slump,

rents and sales prices o residential units

dropped at an average o 8% and 22%respectively in 2009. However, increasing

demand on the back o limited supply looks

to support market recovery. The reehold

market witnessed a 12% YOY price increase

in Q1 2010 reaching an average sales price

o US$ 755 per m2. The rental market

observed a YOY increase o 6% reaching an

average rent o US$ 60 per m2 per annum.

Previously, construction o residential was

concentrated in North Riyadhthe citys

most developed area. However, increases

in land prices within these locations have

driven development urther north to AlYasmin, Al Rabih, and Al Nael Districts.

We anticipate city peripheral and suburban

schemes will continue to attract developers

and occupiers alike as they take advantage

o lower land purchase entry costs.

There is an increasing number o residential

units currently in the pipeline that adopt

the semi-gated community and master

planned development concepts Blncyah

and Dar Al Arkans Al Qasr Project being

the most visible.

The long overdue mortgage law is still under

consideration and its implementation is

anticipated the market by encouraging both

developers and purchasers alike.



averaGe sales prIce: us$ 70

averaGe yIeld: 7.5%


rIyadh resIdenTIal FIrsT QuarTer 2010


2000

1800

1600

100

1200

1000

800

600

00

200

0

nbuit

J

average sales price q1 2010

Riyadh residential market requires an estimated

30,000 units per annum to address demand


80

70

60

50

0

0

20

10

0

us$

2

vi att

a Q mz Qtb Bj r

790

780

770

760

750

70

70720

710

700

us$2

vI att

Although new regulations are aimed to ease loan

measures and are expected to stimulate demand,

effects are yet to be tested in the market


20/48

The retail sector registered itsslowest growth GLA growthin 2009, amounting to 10%over the previous year

Hard voids grew by 2.5%while sot voids declined by1% over the previous year

Riyadhs retail supply is expected

to increase by 19% reachingover 2.3 million m2 o grosslettable area by 2013

Rentals have remained stableor grade B malls while rents ograde A malls increased by 7%

riyadh cumulative shopping mall supply

Following a sustained period o economicstability over the past 5 years, Riyadhs

retail market experienced considerable

growth, with GLA supply growing by 40%

in 2006 while the number o international

retailers increased on the back o high

levels o consumer spending. However,

growth o supply was minimal in the past

year compared to recent historical trends

with an additional 10% o foor space

delivered.

The citys current leading malls areRiyadh Gallery, Hayat Mall and Granada

Mall all with an estimated average daily

ootall o 31,000. These malls have

dierentiated themselves rom other

existing supply by securing strong anchor

stores and by providing a greater variety

o entertainment activities that appeal to

dierent age ranges. Retail ootall o these

malls grew by 2% in Q1 2010 compared

to the previous year while market-wide

ootall declined by 1.9% highlighting theirdierentiation within the market. Overall

the increase in ootall can be attributed

to the longer summer vacation which last

year also coincided with Ramadan.

Over the past year, Riyadhs retail market

has proven resilient to the on-set o the

global economic downturn; rentals have

remained stable while the number o retail

voids experiencing minimal decline.

Hard voids-units that are empty butavailable or occupation, grew by 2.5%,

attributed partly to the entry o Panorama

Mall and other small scale retail supply

in early 2010. However, while sot voids

which were available and currentlytrading, declined by 1%. Average retail

occupancy in Q1 2010 stood at 89%. Net

lettable stock absorption in Q1 2010 has

experienced a 2.3% decline compared to

the previous year as some major retailers

discontinued their agreements with newly

delivered and orthcoming malls.

Big Box tenants in Riyadh have an average

area size o 18,000 m2 and an average

lease rate o US$ 133 per m2 per annum.

Due to their positive eect on ootalland the size they occupy, big box tenants

have benetted rom reduced service and

electricity charges, oered as incentives by

landlord. Line shops have an average unit

size o 120 m2 and were rented at an average

o US$ 640 per m2 per annum exclusive o

service and electricity charges.

As retail is one o the ew leisure activities in

Saudi Arabia where all members o a amily

can go, recent structures have exhibited a

tendency to develop the malls in Riyadh

as destination retail venues. Despite

improving entertainment provisions,

shopping malls in Riyadh are still not in

par with regional counterparts or even

some o the premier malls in Jeddah.

Riyadhs retail supply is expected to

increase by 19% reaching over 2,300,000

m2 o GLA by 2013. Forthcoming retail

development will be located in peripheral

areas and around the Ring Roads Retailspace will be opened up or new brands to

enter the Kingdom, but older malls require

repositioning and revamping in order to

stay competitive.


rIyadh reTaIl FIrsT QuarTer 2010

,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

2Gla

2008

exIsTInG supply Gla

Khayma mall 6,000

al oThaIm KhuraIs mall 15,000

KhuraIs plaZa 59,00

sahara mall 69,500

salaam mall 70,000

hayaT mall 126,00

rIyadh Gallery 10,000

*Ti tb o not ontitut n xuti it of urrnt uppy


700

600

500

00

00

200

100

0

us$2

anor s tor dpr tnt s tor l in sop

2009 2010 2011 2012 201


21/48

Rise in corporate activities andGovernment events resulted to a5% increase in occupancy levelsin Q1 2010 compared to thesame quarter in the previous yearreaching an average occupancy rateof 79% in the hotel segment.

Average occupancy rate forserviced apartments registereda YOY decrease by 2%.

The citys room supply is expected togrow by 870 in 2010 and a urther1,034 rooms are expected to enterthe market by end o 2011

Compared to the rest o Saudi Arabia,hotel construction in Riyadh has beenslow with the citys hotel supply growing at

a CAGR o 6.5% between 2005 and 2008

compared to Al Khobar and Dammams

13% YOY growth. Currently room supply

is over 8,300 which constitutes only

6.5% o the total hotels in Saudi Arabia.However, despite hotel room undersupply

especially in the 5-star segment, Riyadh

carries 20% o the Kingdoms premier

hotels. Much o the orthcoming supply

o premier hotels in the capital is withinmixed use developments refecting thecities current top oerings which are

similarly congured.

Initiatives rom the Government and the

private sector such as the Global Economic

Forum and the Globe Summit seek toreposition Riyadh and consolidate its role

as a major business and nancial hub as

well as a major events tourist destination.

Riyadhs 5-star and 4-star room supply

are concentrated in primary CBDs andadjoining roads with a concentration inthe Central Area constituting 57% o total

supply, 32% are located in northern areas

while the remaining are dispersed on other

major roads.

Corporate demand continues to drive the

citys hospitality sector. Occupancy levelsell by 4.5% in 2009 compared to previous

year due to cancellation or postponement

o major events planned in the previous

year and decline o corporate visitors dueto global economic downturn reaching

an average occupancy rate o 79% inthe hotel segment. Serviced apartments

continue as reasonable substitutes or long-

term visitors; however, occupancy levelsalso declined by 2% in 2009 compared to

previous year.

In a clear sign o corporate cost cutting

a number o international and regional

companies have limited or shortened

visits, resulting in a decline o 1.5 days in

length o stay rom an average o 2 days in

2009 compared to the previous years 3.5

days. Meanwhile VFR (visiting amily and

relatives) visitors have an average length

o stay at 5.5 days-the same as the previousyear.

The average room rate remained stable at

US$195 per night while RevPAR increased

by two percent reaching US$ 144 per

available room. F&B and MICE segments

contribution to the hotels accrued revenue

which also increased representing an

average o 35% o the hospitality sectors

total revenue in the past year.

The citys room supply is expected to grow

by 870 in 2010 and a urther 1,034 rooms

are expected to enter the market by the

end o 2011. About 10% o the uture

hotel supply is in the 5-star category and

30% in the 4-star category, in addition

there are currently 6 serviced apartments

under construction in the city.

We anticipate a slight drop in occupancy

rates once orthcoming supply is delivered;

however, Riyadhs hospitality sector is not

widely vulnerable to seasonality unlike

markets in Eastern Province, Makkah and

Madinah. We thereore expect demand or

hotel rooms to increase and or occupancy

levels to stabilise in the medium term.

riyadh cumulative hotel room supply


5-t occupancy: 79%

arr: us$ 195

revpar: us$ 1

market performance (y/e 2009)

rIyadh hospITalITy FIrsT QuarTer 2010


10,000

9,000

8,000

7,000

6,000

5,000

,000

,000

2,000

1,000

0

nbr

2008 2009 2010 2011 2012012

average occupancy rate

100%

90%

80%

70%

60%

50%

0%

0%

20%

10%

0%5-str hot -str hot sri aprtnt

average room rate

500

50

00

50

00

250

200

150

100

50

0

us$

5-st 5-stsit

-st -s t sit

siatt


22/48

Jeddahs ofce space grew byover 119,200 m2 betweenQ1 2009 to Q1 2010

Vacancy levels ell by 2% currentlyat an average o 5.5% market-wide

Net stock absorption grewmodestly by 1% in Q1 2010

jeddah cumulative office supply

Jeddahs oce space grew substantially by

over 119,200 m2 between Q1 2009 to Q1

2010. However, with a commercial market

marked by limited supply and increasing

demand, vacancy levels ell by 1% while

modest increase in rents was observed.

Unlike Riyadh, delivery o oce space in

Jeddah has been scattered with no dened

primary CBD. Existing supply is dominated

by Grade B comprising approximately 72%

o total net stock. Oce space demand stems

rom the trade, tourism, nance, real estate

and other business services especially those

acilitating imports and exports. Over the

proceeding twelve months there has been

a slight increase in the number o domestic

and regional companies seeking to establish

their presence in Jeddah translating to an

increased demand especially or Grade

A accommodation. Overall the quality

o oce premises within Jeddah is below

that o Riyadhs, leaving a shortall ininternational standard or regional standard

Grade A accommodation.

Unlike Riyadh, orthcoming supply in

Jeddah is scattered in various locations

within the City, Most o new supply is

owner-occupied with Grade A multi-tenant

space generally ound within mixed-use

developments.

Vacancy levels ell by 2% YOY and are

currently at an average o 5.5% market-wide. Tahlia district recorded the lowest

vacancy rate at 4% while vacancies in other

areas reached 7%. Movement o rentals has

been varied in dierent parts o the City.

Rentals declined by 3% in other parts o the

city while North, South and Central Jeddah

witnessed rental increase by an average o

4% YOY. Average oce rents currently

stand at US$ 110 per m2 per annum or

Grade B oces and US$ 336 per m2 per

annum or Grade A space.

Beore end o 2010, over 115,400 m2 o

oce net leasable area is expected to enter

the market-in various parts o the City-60% o which is o Grade A quality. A

number o oce developments that are

currently under construction such as The

Headquarters, Zahran Building, Lamar

Towers and Jeddah Gate will be oered on

ree-hold. These developments will test the

markets appetite on strata ownership, the

demand o which is currently challenging to

gauge

Documents

Real Estate Colliers 2010 MENARealEstateReviewQ1