Abu Riyadh Dh Real Estate Overview Q Riyadh

Transcription

1 Abu Riyadh Dh Real Estate Overview Q Riyadh

2 Market Milestones Q Economic News The tourism sector has seen continued growth with the Saudi Commission for Tourism and Antiquities (SCTA) estimating tourism contributed 7.2% to total GDP in Retail point of sales have grown rapidly in the first quarter of 2012, increasing by 38% Y-o-Y to April This reflects the continued impact of public sector bonuses awarded in Net income of listed companies has increased by 15% Y-o-Y. Transport, Hotels and Insurance sectors recorded the strongest growth. Real GDP is expected to grow by 5.1% in Oil revenues will boost the Kingdom s budgetary position in Inflation increased to 5.4% Y-o-Y higher than its average during Q Escalation in rents and food & beverages were the major contributors to this increase. Bank lending to the building and construction sector has increased by 26% on a Y-o-Y basis. Real Estate financing to end users is also growing rapidly, up by 31% Y-o-Y to April

3 Market Milestones Q Property & Project News Kingdom Holding Company is to begin work on a new mega residential city: Kingdom Oasis, located east of Riyadh on Dammam Highway. Construction continues on the King Abdullah Financial District (KAFD), the new financial centre for Riyadh. The King is scheduled to formally inaugurate the project towards the end of this year, after which the first tenants will be able to take occupation. Al Argan has unveiled the design and layout for a new 1,000 apartment complex as part of its Manazil Cordoba project. Dar Al Arkan has sold 1.8 million sq m of land in its Shams Ar- Riyadh project to the north of Riyadh to SABIC for a total value of SAR 742 million. This land will be used to construct housing for SABIC employees. According to the General Authority of Civil Aviation, work on the expansion of King Khalid International Airport (KKIA) is expected to begin in November this year. Capacity of KKIA is expected to triple within next three years. Riyadh authorities have launched a tender process to develop a new metro transit system in the capital which will be part of Riyadh Public Transport Plan that was announced on 17 th of May. Six different metro lines have been announced with a total length of 181 km. 3

4 Riyadh Prime Rental Clock Q Hotel* Rental Growth Slowing Rents Falling Rental Growth Accelerating Rents Bottoming Out Residential Office *Hotel clock reflects the movement of RevPAR. Retail Source: Jones Lang LaSalle Note: This diagram illustrates where Jones Lang LaSalle estimate each prime market is within its individual rental cycle as at end of relevant quarter. 4

5 Riyadh Office Market Overview King Abdullah Financial District

6 Total Stock ('000 sq m) Office Supply and Demand Total office stock (in areas surveyed by Jones Lang LaSalle see definitions page for details) is approximately 1.6 million sq m. Only one building was completed in Q The 10,600 sq m Sultan Building located on Olaya Road just north of Arouba. A further 462,000 sq m is scheduled for completion over the rest of 2012 including the first buildings in both King Abdullah Financial District (KAFD) and ITCC. Other projects to be completed over the second quarter of the year include Granada Business Park on Eastern Ring Road and Al-Anoud II Tower and Moon Tower on King Fahd Road. While some of this space is likely to be delayed into 2013, all these projects are well under construction and are likely to result in a sizeable increase in quality office stock in Riyadh over the next two years. There remains demand for this new and high quality space. This is evidenced by one of the largest ever deals in the Riyadh market occurring during Q A large Saudi telecom company has pre leased 80,000 sq m in the first phase of the ITCC project that is due to be completed later this year. Another indicator of the continued demand for high quality space is that Riyadh Business Gate is leasing quickly as it nears handover to tenants with only 5% space remaining for lease. 3,500 3,000 2,500 2,000 1,500 1, Riyadh Office Supply ( ) ,532 2,826 2,027 1,565 1, Completed Stock Future Supply Source: Jones Lang LaSalle, Q

7 Major Existing & Future Offices Projects 5 1 Faisaliyah Center Kingdom Center 3 Tatweer Tower 1 KAFD 2 ITCC 3 Granada Business Park 4 The Business Gate 5 Tamkeen Tower Existing 6 Olaya Towers Future 7

8 SAR per sq m p.a. Office Rental Performance There has been virtually no change in average office rents in Riyadh over Q1 2012, with the average across completed grade A and B buildings decreasing by just 1% to SAR 1,110 per sq m p.a. Prime rents (for the best quality building in the market) remained unchanged at SAR 1,900 per sq m p.a., with the average for Grade A and Grade B buildings also largely unchanged at SAR 1,360 and SAR 920 respectively. Vacancy rates also remained generally stable in Q1, with citywide and CBD vacancies at 12% and 16% respectively. However there will be upward pressure on vacancy rates over the rest of 2012 given the expected injection of new supply into the market. This will result in intense competition to secure large tenants. New schemes will need to be very aggressive on incentives to maintain current rental levels. While rentals and vacancies in the prime buildings (eg: Kingdom Tower and Failsaiyah are unlikely to change significantly. It is expected that market wide vacancies will increase, placing downward pressure on rental levels over the remainder of 2012 and into ,600 1,400 1,200 1, Rental Performance (Q Q1 2012) Average Grade A Average Grade B Average (completed Grade A and Grade B buildings) Q Q Q Q Q Source: Jones Lang LaSalle, Q

9 Office Market Summary (Q1 2012) Indicator Level Comment / Outlook Current Office Stock 1.6 million sq m Includes Grade A, B & C space within major precincts (see definitions for further details). Future Supply ( ) 1.2 million sq m The Riyadh market will face a major supply shock over the next two years with the release of space in projects such as ITCC, KAFD and Granada Business Park. City-wide Vacancy CBD Vacancy 12% 16% Average Grade A Rental SAR 1,360 per sq m p.a. Average Grade B Rental SAR 920 per sq m p.a. 9

10 Riyadh Residential Market Overview Al Qasr Project

11 Number of units (in 000's) Residential Supply & Demand Approximately 23,000 additional residential units are expected to be completed across the market throughout the remainder of 2012 bringing expected total residential stock to just over 912,000 units by the end of The majority of this supply will be delivered through small projects comprising less than 20 units. An additional 130,000 units are due to enter the market before the end of Most of the new supply completed during the last quarter has been sold with a very limited inventory currently available. The first affordable housing project by the Ministry of Housing in Riyadh is expected to deliver 2,000 units over the next five years. Commercial banks and financing companies have relaxed their financing terms for end users. Families can now submit a joint mortgage application to fulfil the salary criteria. Following the success of Rafal Tower, interest in offering branded residences for sale is increasing. New supply in residential compounds like California, Nakhala and Faisaliyah will deliver over 2,000 units in With continually high land prices, we expect to see a greater share of apartments in the compound market in the future. Riyadh Residential Supply ( ) 1,050 1, Completed Stock Future Supply Source: Jones Lang LaSalle, Q

12 6 5 Major Existing & Future Residential Projects Al Qasr Project 2 Balencya Project 1 3 Al Argan Project 4 Maskan Arabiah Al Rabiah Project 2 Al Shams Arriyadh Project Existing Future 3 3 Al Ghroub Project 4 Rafal Tower Project 5 Akaria Village 6 Durrat Al Riyadh

13 SAR per sq m SAR per sq m Residential Sale Prices Average villa prices have increased across all districts of Riyadh, however districts in the North and West have experienced greater increases than those to the East and South. The average price of new villas during Q increased to SAR 4,236 per sq m. Opening of the second north ring road was a major factor leading to increased land and villa prices. Malaqa, Yasmeen, and Sahfa in the North, Ghroub and Khuzama in the West and Qurtaba and Rowdah in the East are perceived as the most attractive locations for villas. The new concept of mixing apartments with villas through a separate access is becoming more popular in low end districts to the South and West. Villa Average Price 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Q Q Q Source: Jones Lang LaSalle, Q The average sale price of apartments has increased in districts in the East, South, and West of Riyadh during Q The average asking price for new apartments during Q stood at SAR 2,628 (excludes the branded apartments) per sq m. Apartment averages will increase further once Al-Argan releases its apartments for sale. Apartments in Rafal Tower have received a good response and this project is setting new standards for branded residences. Currently, most apartments available for sale are located in the low income areas of Azizia, Shifa, Dar Al Biyda, Zaharat Laban, and Ahamadia. 3,000 2,500 2,000 1,500 1, Apartment Average Price 0 Q Q Q Source: Jones Lang LaSalle, Q

14 SAR p.a. Rental Performance - Villas Villa rents have increased by 8% between Q and Q Rents for high income villas in the West and Centre have increased more than in other districts. Villa rents in residential areas such as Nakheel, Khuzama Ghadeer, Rahmania, Ishbiliyah and Al-Hamra are higher than those in surrounding neighborhoods. Villas in residential compounds have shown a larger increase in rents, reflecting the long waiting lists for access to this kind of accommodation. The availability of new villas for lease is greatest in areas such as Qurtaba, Malaqa, Sahfa, Yasmin and Monisia. Many villas in Sulaimania, Malaz and Nassem are used as offices. Villas Average Annual Rent 160, , , ,000 80,000 60,000 40,000 20,000 0 North South East West Center Q Q Q Q Q Source: Jones Lang LaSalle, Q

15 SAR p.a. Rental Performance - Apartments Apartment rents have increased at a higher rate, growing by 13% from Q to Q and now stand at SAR 28,700 p.a. for an average 2 bed unit. Apartment rents in areas such as Olaya, Maather and King Fahd are higher than those in other districts. Due to high occupancy rates, and the concentration of private schools and hospitals, rents in areas such as Warooud, Malaz, Olaya and Sulaimania continue to grow at higher levels. Expansion of the industrial areas have increased rents in the low income areas such as Batha, Khaladia and Manfoua. However, Modon is trying to provide new housing in the second industrial city and has awarded contracts to private developers to build new labour and staff accommodation. A few apartment buildings in the CBD have been converted to budget hotels. 40,000 Apartments Average Annual Rent 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 North South East West Center Source: Jones Lang LaSalle, Q Q Q Q Q Q

16 Residential Market Summary (Q1 2012) Indicator Level Comment / Outlook Current Residential Stock 889,000 units Based on the National Housing Census (2010) and units completed during 2011 and Q Future Supply ( ) 130,000 additional units in all projects Includes all of types of housing. Average 2 Bed Apartment Rent SAR 28,700 p.a. Apartment rents expected to increase further throughout 2012 if housing allowances for Government employees are increased. Average 2 Bed Apartment Sale Price SAR 2,600 per sq m Average price is expected to increase once Alargan releases better quality apartments. Average 4 Bed Villa Rent SAR 112,000 p.a. Rents are expected to increase. Average 3 Bed Villa Sale Price SAR 4,200 per sq m Average prices are expected to increase further in

17 Riyadh Retail Market Overview Al Qasr Mall

18 Total GLA ('000 sq m) Retail Supply There were no additions to mall based retail space in Q1 2012, keeping the retail stock in major retail malls (those over 10,000 sq m in size) across Riyadh, constant at approximately 1.1 million sq m. Outside of the organised mall sector there was one significant completion in Q1 2012, an Electro standalone store on Salahudin Al Ayoubi Street to the South of Riyadh. Lulu Supermarket / Hypermarket is expanding in Riyadh and is expected to open its third outlet in Bathaa in the second quarter of Al-Qasr Mall in Sweidi area is the next major mall expected to complete (later in 2012). 60% of the 76,000 sq m in this mall is already preleased. Total mall based retail supply is expected to reach around 1.52 million sq m by the end of Around 188,000 sq m of this additional retail space is in mixed use projects within the KAFD and ITCC. There has been increased repositioning and renovation of existing malls in Riyadh. The Sadhan Mall in Sulemania has reopened their hypermarket and the Al Bustan Center is also currently undergoing renovation. Riyadh Retail Supply ( ) 1,800 1,600 1, , , ,107 1,107 1,203 1,337 1, Completed Stock Future Supply Source: Jones Lang LaSalle, Q

19 Major Existing & Future Retail Malls 1 Riyadh Gallery 2 Sahara Mall Hayat Mall 4 Khurais Plaza 5 Al Otheim MAll 6 Granada Mall 1 7 Rimal Center 8 Panorama Mall Existing Future 1 Al Qasr Mall 2 KAFD Retail

20 SAR per sq m Rental Performance Estimated Rental Value (ERV) Average retail rents for line stores in regional and community retail malls remained unchanged during Q and currently average SAR 2,380 per sq m p.a. Line store rents have remained unchanged in all the centres monitored, with no pressure being experienced for rental increases given availability within existing malls and planned future supply. Rents in the strongest performing centres are expected to increase over the second half of Average rents are however unlikely to increase as there are many poorly performing centres that will need to reduce rents to retain tenants. There remains demand for retail space outside of organised malls. Anchor tenants such as Electro, Fitness Time and Euromarche have all leased large retail space outside malls during the quarter as they seek to expand their presence in the Riyadh market. Strip retail also remains popular with specialist retailers, with continued demand for units in new strip retail centers in Kurais and King Abdullah Street. It is not only centre owners that are seeking to redevelop and reposition projects. Individual retailers like Maghrabi Optical are also paying increased attention to upgrading and are improving the quality of fit out within their existing outlets in Riyadh. Average Annual Retail Rentals (Q Q1 2012) 3,000 2,500 2,000 1,500 1, Super Regional Regional Community Q Q Q Q Q Source: Jones Lang LaSalle, Q

21 Retail Sector Summary (Q1 2012) Indicator Level Comment / Outlook Current Retail Space (GLA) 1.1 million sq m Existing stock within organised retail malls over 10,000 sq m GLA. Future Supply ( ) 417,000 sq m Al Qasr Mall is the next major mall expected to be delivered in Q Average Estimated Rental Value SAR 2,380 per sq m p.a. Average rental for in-line stores in major malls has been stable in Q1 but could increase later in Average Regional Mall Vacancy 11% Vacancies range from 0-30% in major malls. 21

22 Riyadh Hotel Market Overview Ritz Carlton Hotel

23 Number of Rooms Hotel Supply Following the significant increase in supply in 2011 (1,200 rooms) there were no additions to the supply of hotel rooms in the Riyadh market in the first quarter, with stock remaining at 7,100 rooms. The Ritz Carlton is now fully operational following its soft opening in This was the last completed hotel, adding 493 rooms to the luxury sector of the market. Approximately 1,250 additional rooms are expected to be opened by the end of 2012, increasing the current supply by nearly 17%. The new supply for 2012 includes internationally branded properties ranging from budget to upscale level. These include the Ibis Olaya, Hilton Garden Inn Al Muroj, Holiday Inn Meydan Olaya, Hyatt Regency Plaza Olaya and the Courtyard by Marriott Olaya. The Marriott Executive Apartments is expected to open in Q2 2012, increasing the quality supply in the serviced apartment market. The InterContinental Hotel Group recently announced two properties in the city s King Abdullah Financial District, with a second InterContinental in Riyadh and the first Indigo hotel in the Middle East. Hilton has also recently announced its fourth property in Riyadh, to be constructed on King Fahd Road for completion in Riyadh Hotel Supply ( ) 14,000 12,000 1,350 10,000 2,350 8,000 1,250 6,000 10,700 4,000 8,350 7,100 2, F 2013F 2014F Current Supply Future Additions Source: Jones Lang LaSalle Hotels 23

24 Major Existing & Future Hotels 1 Four Seasons Hotel 2 Faisaliyah Hotel 3 Novotel Hotel Ritz Carlton Hotel 5 InterContinental Hotel Sheraton Hotel 1 Kempinski Hotel 2 Crown Plaza Hotel 3 Indigo Hotel 4 Hilton Hotel 5 Fairmont Hotel Existing Future 6 Nobu Hotel 7 Hyatt Regency

25 ADR (USD) Occupancy Hotel Performance The Riyadh hotel market has witnessed a softening in performance over the first quarter of 2012 as arrival figures have failed to keep pace with the significant increase in supply recorded in Riyadh Hotel Performance (YT April ) Occupancy levels declined to 64% over the first 4 months (YT April), down from the 71% achieved over the same period in Average Daily Rates (ADR) also declined marginally (down to USD 270) in the YT April, reversing the increase witnessed during Falling occupancies and room rates resulted in RevPAR declining (13%) from USD 198 in the first four months of 2011 to USD 173 during YT April The current softening is expected to be short term, with the longer term prospects for the Riyadh market looking very healthy as the Saudi Government is spending increased amounts to promote more visitors to the Capital YTApril 2009 YTApril 2010 YTApril 2011 YTApril 2012 YTApril ADR(USD) Occupancy(%) Source: STR Global 25

26 Hotel Market Summary Indicator Level Comment / Outlook Current Hotel Supply 7,100 rooms The hospitality landscape of Riyadh is evolving. 1,200 rooms were added in 2011, mainly in the internationally branded segment. No additional projects completed in Q Future Supply ( ) 4,950 rooms Supply entering the market 2012 will include the Ibis Olaya, Hilton Garden Inn Al Muroj, Holiday Inn Meydan Olaya, Crowne Plaza Olaya and the Courtyard by Marriott Olaya (YT April) Occupancy 64% Decline in YTD levels of occupancy, reversing the positive trend in (YT April) ADR USD 270 The increase in supply in 2011 has placed downward pressure on average rates. RevPAR also contracted (by 13%) over the first four months of 2012 compared to the same period in

27 Definitions and Methodology Residential: The supply data is based on the National Housing Census (2010) and our quarterly survey of major projects and stand alone developments in selected areas of Riyadh. Completed building refers to a building that is handed over for immediate occupation. Residential performance data is based on two separate baskets one for rentals in villas and apartments and another basket for sales performance for both villas and apartments. The two baskets cover projects in selected locations across Riyadh. Retail: Retail supply data covers floor space of organised malls over 10,000 sq m. Classification of Retail Centres is based upon the ULI definition as published in Retail Development, 4th Edition published by ULI. Rent represents the average quoted average rent for line stores in the major shopping malls in Riyadh. Retail supply relates to the Gross Lettable Area (GLA) within retail malls. Office: The supply data is based on our quarterly survey of the Grade A office space located in CBD, North and East Ring roads, Khurais, Mazer, and Sitteen Streets. Completed building refers to a building that is handed over for immediate occupation. Prime Office Rent represents the top open-market rent that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The Prime Rent reflects an occupational lease that is standard for the local market. It is a face rent that does not reflect the financial impact of tenant incentives, and excludes service charges and local taxes. Hotels: Hotel room supply is based on existing supply figures provided by Saudi Commission for Tourism and Antiques as well as future hotel development data tracked by Jones Lang LaSalle Hotels. Room supply includes all graded supply and excludes serviced apartments. STR performance data is based on monthly survey conducted by STR Global. 27

28 Contacts: John Harris Head of Riyadh Office Chiheb Ben-Mahmoud Executive Vice President, Hotels Soraka Al Khatib Head of Jeddah Office Fayyaz Ahmad Associate, Research David Macadam Head of Retail, MENA Diyaa Ayoub Senior Market Intelligence Analyst Follow us on: COPYRIGHT JONES LANG LASALLE IP, INC This 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.