Real Estate Market Overview

Transcription

1 Dubai Jeddah Real Estate Market Overview Q1 2013

2 Macroeconomic overview Indicator (f) 2014 (f) Saudi Arabia Population (millions) Real GDP Growth (Y-o-Y) 6.8% 4.2% 3.6% Inflation (% Change) 4.5% 4.3% 3.8% Budget Surplus (USD billions) Jeddah Population (millions) Cost of Living Index (% change) 4.9% 3.5% 3.6% Sources: Sama, Jadwa, IHS Global Insights April 2013, CDS, 2012 f:forecasted 2

3 Economic highlights Q Real GDP in KSA grew by 6.8% in High oil production and expansionary fiscal policy have kept the Kingdom s growth at a high level. Retail sales continued to increase, growing by 25% in Q compared to the same quarter last year. Bank lending to building and construction has increased by 27% in Q from the same period last year. This reflects greater participation in infrastructure and housing projects. To facilitate housing construction program, King Abdullah has approved the creation of a new USD 67 billion housing fund. At 3.9% Y-o-Y, inflation increased for the third consecutive month in March. This was almost entirely due to higher rental inflation and increasing food prices. Saudi banks increased their lending to real estate end users (mostly mortgages) by 30% in 2012, the largest increase during the last five years. 3

4 Property & project news Q Jeddah Municipality has approved 64,000 residential units in a range of projects across Jeddah. These include developments by Jeddah Development & Urban Regeneration Company (JDURC), the Ministry of Housing and private developers. Da em Real Estate Company has announced a new residential project in Jeddah called Da em Residence. Located in Al Marwa district, it consists of 120 residential units to be completed in Saudi Industrial Property Authority (MODON) has approved SAR 50 million to develop the infrastructure of phase-1 of the Fourth Industrial City, located 25km north of Jeddah. Land rents in the project have been set at SAR 3 sq m per year Makkah Municipality has allocated another 1 million sq m of land near Makkah Gate to its industrial city project. Makkiyoun has announced a new 1,800 unit residential project in Makkah called Makkah Oaisi. The company has also announced that the completion date for its Al Tilal Project will be late This project in Al Haram area, consists of a mall, wedding hall and a conference hall. Kingdom Holdings expects work on the world second deepest (72m) pumping station in Jeddah to be complete in Q

5 Jeddah prime rental clock *Hotel clock reflects the movement of RevPAR. Note: The property clock illustrates where Jones Lang LaSalle estimate each prime market is within its individual rental cycle as at end of relevant quarter. Source: Jones Lang LaSalle 5

6 Jeddah office market overview

7 Total Stock (000 s sq m) Office supply and demand Around 38,000 sq m was completed in Q1 2013, with the major additions to stock being private offices (14,400 sq m) on Prince Sultan Street, Diwan Najia (14,700 sq m) on Tahlia Street and Al-Sohaily 2 on Andalus street. This brings the total office stock in areas surveyed by Jones Lang LaSalle (see definitions page for details) to approximately 661,000 sq m in the first quarter of A major increase in supply (103,000 sq m) is expected in 2013, the majority of which will be delivered in the Headquarters Building (75,000 sq m). The office market has witnessed strong demand during the first quarter of 2013, with strong take up recorded across the city. A major driver for this demand is government expenditure in sectors such as infrastructure, healthcare and transportation. There is also increased demand from the private sector with multinational firms expanding their business across Jeddah. Government initiatives to improve the regulatory environment (such as Sawaed and Nitaqat) will further enhance the demand for office space in Jeddah. 1, Jeddah Office Stock ( ) Future Supply Completed Stock Source: Jones Lang LaSalle, Q

8 Major Existing Future Offices Projects Major existing & future offices projects 1 Zahran 2 King Road Tower 3 Bin Sulaiman 4 Jameel Square 5 Jeddah Private Offices 7 Diwan Najyah 2 1 Headquarters Murjan Tower 1 KAFD 3 Al Khair Tower 2 ITCC Existing Olaya Towers MIG Tower Existing Future 8

9 SAR per sq m p.a. Rental performance Rents for both Grade A and B office space have remained stable in Q Average grade A rents have remained stable at SAR 1,092 per sq m p.a., while Grade B rents average have also remained constant at SAR 690 per sq m p.a. This has resulted in a stable average city-wide rent of SAR 890 SAR per sq m p.a. Rental stability is due to healthy demand and the decline in vacancy levels. Vacancy levels have dropped from 16% last quarter to 12% this quarter due to take up exceeding new supply. Vacancies are expected to decline further in the short term, until more of the supply in the pipeline becomes ready for lease. A number of other occupiers have also expanded and taken 1000 sqm. The strongest demand is currently for office space of between 500 and 800 sq m, which represents higher demand for larger units than in Examples of the strong demand include KPMG and Alwan that have both expanded within the Zahran Business Centre in the north. Taking 2,000 sq m and 2,200 sq m respectively. 1,200 1, Rental Performance (Q Q1 2013) Average Grade A Average Grade B Average (completed Grade A & B Buildings) Q Q Q Q Q Source: Jones Lang LaSalle, Q

10 Office market summary Indicator Level Comment / Outlook Current Office Stock (CBD) 661,000 sq m Includes Grade A & B buildings within the CBD. Increase in stock in Q is due to the completion of Private Offices, Diwan Najia and Al-Sohaily 2. Total city-wide stock is estimated to be around 1.8 million sq m GLA. Future Supply ( ) 232,000 sq m Major future supply will be available on major roads such as Madinah and Prince Sultan. CBD Vacancy 12% The vacancy rate has decreased, due to continued strong demand. Average CBD Rental Average Grade A Rental Average Grade B Rental SAR 890 per sq m p.a. SAR 1,092 per sq m p.a. SAR 690 per sq m p.a.. No change in Q with prospects for stable rental levels in

11 Jeddah residential market overview

12 Total Stock (Number of units in 000's) Residential supply and demand Apart from a small number of mega government projects, the majority of new residential supply is coming from individuals and small developers undertaking small scale projects. Jeddah Residential Stock ( ) Approximately 4,500 units were completed in projects monitored by Jones Lang LaSalle during first quarter of This new supply has all been in small projects comprising between units, with no major projects completed. A further 15,000 additional residential units are expected to be completed during the remainder of Once again the majority of this new supply will be in small projects. Aayan Real Estate Development will complete its Diyar Jaddah 2 project located in South Obhor in the final quarter of Da em Residences, offering 120 units (expected to be completed by 2015) is the only major project announced during Q Ewan has commenced construction of the second phase of its Al Faridah Residential Project (460 units) as well as commencing the infrastructure work for the third and fourth phases Future Supply Completed Stock Source: Jones Lang LaSalle, Q A number of major high-rise towers located on the Corniche are expected to complete during 2013 including Al Jawhara Tower, developed by Damac and the Beach Tower. Diyar Jeddah Fund has progressed with the servicing of raw land in its new subdivision Diyar Jeddah 2, located east of Jeddah. 12

13 Major existing & future residential projects Diyar Al-Bahar 1 JDURC 5 Lamar 2 Farsi Towers 2 Fareeda 6 Jawhara 4 3 Corniche Dreams 3 Masharef 7 Kingdom Tower Existing 4 Jeddah Gate 4 PPA Future 13

14 SAR/per sq m SAR/per sq m Residential sale prices The average sale price of villas in those locations monitored by Jones Lang LaSalle has increased to SAR 4,600 per sq m in Q Average villa prices are however remain at the same level as Q This average disguises considerable variation between different districts. Sale prices for villas continued to increase in the Western districts of Jeddah during Q1. In the North, the previous decline has been reversed with a small increase recorded in Q1. North East districts have seen prices continue to decline due to new supply. The Western region (closest to the Red Sea) remains the prime location for villas, with the price exceeding SAR 6,600 per sq m in selective locations. Demand for apartments is currently higher than that for villas in Jeddah, which is keeping average prices stable. The average asking price for apartments has remained stable during Q1 at SAR 4,150 per sq m. The average sale price of apartments has declined slightly in the South and West districts of Jeddah while prices of apartments in the East continue to increase. It should be noted that this data does not include high end waterfront projects and apartments e.g Jeddah Gate. Villa - Average Sales Price Apartment - Average Sales Price 7,000 6,000 6,000 5,000 4,000 3,000 2,000 1,000 5,000 4,000 3,000 2,000 1,000 0 West North North-East 0 West East South Q Q Q Q Q Q Q Q Q Q Source: Jones Lang LaSalle, Q Source: Jones Lang LaSalle, Q

15 SAR/per annum SAR/per annum Rental performance Villa rents increased by 4% in the preferred Northern regions of Jeddah in Q reaching an average of SAR 112,000 p.a. Villa rents in residential areas such as South Obhour, North Obhour, Zahrah and Golden Beach remain higher than surrounding neighborhoods Average villa rents also increased in the West (by 3%) to reach SAR 186,000, while rents in the North West decreased marginally to average SAR 75,000. Villas in residential compounds have shown continuous strong performance in terms of rents and occupancy due to the preferences of expatriate families to live in gated communities. The limited availability of such products in the market has also contributed to the growth in rentals. Average rentals for apartments have remained stable during Q In Q there was a small decrease in rents in projects that we monitored in the South and West of Jeddah. Rents for projects in the West have registered an increase due to higher demand, to reach SAR 52,000 and 50,400 per year. Rents of apartments in the south Jeddah have slightly decreased during the first quarter. Apartment rents on the Corniche (West) are higher than those in surrounding neighborhoods, however these projects witnessed a major increase in their rents during Q Rents in high income North Western areas such as Al Hamra, Al Zahra, and Al Rawdah have shown moderate performance during Q Villa - Average Annual Rent Apartment - Average Annual Rent 250,000 60, ,000 50, , ,000 40,000 30,000 20,000 50,000 10,000 0 West North North-East 0 South East West Q Q Q Q Q Source: Jones Lang LaSalle, Q Q Q Q Q Q Source: Jones Lang LaSalle, Q

16 Residential market summary Indicator Level Comment / Outlook Current Residential Stock 739,000 units Based on National Housing Census (2010) and units completed in locations monitored by Jones Lang LaSalle since Future Supply ( ) 89,000 additional units in all projects New affordable housing stock built by JDURC, PPA and the Ministry of Housing may increase this figure. Average 3 Bed Apartment Rent SAR 38,000 p.a. Apartment rents expected to increase further throughout 2013 due to higher demand for apartments for lease from expatriates. Average 3 Bed Apartment Sale Price SAR 4,150 per sq m Increase in middle priced units will escalate average prices. Average 4 Bed Villa Rent SAR 124,000 p.a. Rents are expected to increase despite significant additions to supply. Average 4 Bed Villa Sale Price SAR 4,600 per sq m Average villa sale price has remained stable in Q1 but is expected to increase over the coming year Note: Direction arrows are based on the performance of the REIDIN monthly index. 16

17 Jeddah retail market overview

18 Total Stock ( 000 sq m) Retail supply and demand There were no additions to shopping mall stock in Jeddah during Q Jeddah Retail Stock ( ) At the first quarter, the total stock of mall based retail space in Jeddah stayed constant at 780,000 sq m. Flamingo Mall on Prince Majid road is the next major mall expected to be completed in the second quarter of We are witnessing strong demand from retailers for locations to the North and North East of Jeddah to service the residential growth planned in this area. There also remains demand from retailers for malls located in the city center, such as Tahliyah, due to high population and workforce catchments in central Jeddah. 1,200 1, Future Supply Completed Stock ,044 The Red Sea Mall (one of the leading retail centers in Jeddah) has reopened after a recent fire. The repositioning of non performing retail centers also continues Mall operators continue to refresh their tenant mix and replace existing tenants with better quality brands to maintain high footfall. Source: Jones Lang LaSalle, Q

19 Major existing & future retail projects 1 Red Sea mall 1 2 Arab Mall Andalus Mall 4 Le Beteau 5 Stars Avenue Le Prestige 2 Galleria 3 Sairafi 2 4 Flamingo 3 4 Existing 3 Future 19

20 SAR/per sq m Rental Performance Estimated Rental Value (ERV) Overall ERV s remain stable across all types of retail centres, with a slight increase on average in regional shopping malls. The average ERV is approximately SAR 2,420 per sq m p.a. in Q Most of the newer shopping malls have high occupancy rates. Demand is strong and all centres under construction have managed to prelease a significant proportion of their space. Increased take up in Central Park has kept the market wide vacancy rate around 4% in Q Mall rents are expected to remain stable over the second half of Increasing occupancy of regional malls has resulted in a marginal increase in average rentals of regional malls from SAR 2,367 per sq m to SAR 2,392 per sq m. Average rentals in community malls have reduced by a similar marginal amount during Q1. Entertainment options and F&B retailers continue to be a major source of attraction and differentiation between malls in Jeddah. With no completions during Q1 2013, projects that are under construction (eg La Prestige and Flamingo Mall) are experiencing continued demand and have preleased significant space before opening. Strip retail centers continue to perform well across the city due to high demand from customers. We see future opportunities for this product, especially towards the north and north east of Jeddah. 2,500 2,250 2,000 1,750 1,500 1,250 1, Average Retail Rentals Community Regional Super Regional Q Q Q Q Q Source: Jones Lang LaSalle, Q

21 Retail sector summary Indicator Level Comment / Outlook Current Retail Space* (GLA) 780,000 sq m No additions to the mall stock during the first quarter of Future Supply ( ) 265,000 sq m Next major centre (Flamingo Mall) expected to open in the second quarter of Average Estimated Rental Value SAR 2,420 per sq m p.a. Average rental for line store in major malls is expected to remain stable, although market may become more fragmented with not all centres able to maintain current rental levels. Average Regional Mall Vacancy 4% Vacancies have remained stable over Q due to no new completions during Q

22 Jeddah hotel market overview

23 No. of Rooms Hotel supply There have been no major supply additions to the Jeddah market over the past three years and no projects were completed in Q With many of the proposed projects currently on hold or cancelled, no new hotels are expected enter the Jeddah market during There are a number of projects that could deliver an additional 1,440 rooms over the remainder of These include the Rocco Forte, Novotel Jeddah, Elaf Galleria on Tahliah Road, the Dusit Thani overlooking the Obhur Creek, the Park Inn by Radisson and the Ibis Jeddah on Malik Road. In reality many of these projects are likely to experience further delays and not enter the market in These additions will increase the total hotel room supply in Jeddah to around quality hotel rooms by the end of 2015, an increase of around 15% on the current stock of rooms. Looking forward, the hospitality supply is spreading from the North Corniche Strip and moving further inland as well as to the north of Jeddah. Jeddah Hotel Stock ( ) 14,000 1, ,000 10,000 8,000 6,000 11,300 11,300 12,750 12,750 4,000 2, Completed Stock Future Supply Source: Jones Lang LaSalle, Q

24 ADR (in USD) Occupancy ( %) Hotel performance Jeddah remained one of the best performing hotels markets in the Middle East in terms of occupancy during Occupancy levels have increased continuously since 2010 but are now stabilising, with Q recording the same occupancy level as Q (78%). Average room rates (ADR) have also registered a continuous increase since 2010, 2012 showed an increase of 9.3% over last year. On a YT [explain] March basis, the ADR increased by 10.3% in comparison to YT March The combination of stabilized occupancy and higher room rates have resulted in a 10% growth in RevPAR over YT March 2012 at USD 182. The strong performance of the hotel sector reflects the continued attractiveness of Jeddah as a leisure destination for Saudi families. Hotel Performance (2008 YT March 2013) % 73% 68% 71% 79% 78% 78% YTD 2012 Average Daily Rate YTD 2013 Occupancy Rate 90% 80% 70% 60% 50% 40% 30% Source: STR Global 24

25 Hotel market summary Indicator Level Comment / Outlook Current Hotel Supply 11,300 rooms There have been no major additions to the Jeddah hotel supply since Future Supply ( ) 1,440 units While a number of new hotel projects have been announced in the city, the majority of these are experiencing delays with some being put on hold. Many hotels scheduled to open in 2012 and 2013 are now in the pipeline for Q Occupancy 78% Notable increase in occupancies in Positive trend following up on the increase in occupancy levels of Q Occupancies showed stabilized performance at 78%. Q ADR USD 234 Q showed a 10.3% increase in ADR over the same period in the previous year. 25

26 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: Market Sector North (Villa) West (Villa) North-East (Villa) West (Apt) East (Apt) South (Apt) Districts Covered North Obhor and South Obhor Basateen, Shatie, Mohammadia Asfan, Salhia, Kassarat Zahra, Rowdah, Salamah, Hamra Al Marwah, Safa, Al Manar, Naseem Waziria, Shafa, Madaen Al Fahad, Ajaweed 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 Jeddah. 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 quoted average rent for the major shopping malls in Jeddah 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 & B office space located in the Jeddah CBD, defined as Prince Sultan, Tahlia, Al-Malek, Ibrahim Al Jaffali, Madinah, King Abdullah and Rowdah 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. 26

27 Contacts: Peter Bibby Co-Head Jeddah John Harris Co-Head Riyadh Andrew Williamson Head of Retail MENA Gabriel Matar Director, MEA Hotels & Hospitality Group Craig Plumb Head of Research MENA Fayyaz Ahmad Associate Director, Advisory Saudi Arabia Diyaa Ayoub Senior Analyst Saudi youtube.com/joneslanglasalle linkedin.com/company/jones-lang-lasalle joneslanglasalleblog.com/emearesearch mena.com 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.