Q Abu Dhabi Real Estate Market Overview

Transcription

1 Abu Dhabi Real Estate Market Overview

2 Abu Dhabi Market Summary The first quarter of 2015 recorded further growth in the residential rental and hospitality sectors while the residential sales, retail and office sectors remained stable. Following the decline in oil prices, we expect there to be a reduction in government spending this year which will slow down the pace of demand growth. On the other hand, the short-term supply picture is generally constrained leading to relatively stable market conditions. Residential Rental growth continued at 4% during (following 11% growth in 2014) due to limited quality supply across all price points and the rent cap having been removed. The Residential Sales market remained stable (following 25% growth during 2014) due to a decline in investor sentiment following the reduction in oil prices. The Office market remained stable following two successive quarters of recovery and growth with demand remaining relatively flat and limited supply completions. Vacancy rates for office space are expected to remain stable this year given that a significant amount of the new supply in the pipeline is pre-committed. Retail rents remained stable this quarter. There were no major supply completions in Q1 and completions in the rest of 2015 and 2016 are limited, although there are a number of super regional malls expected to enter the market in the medium term (post 2018). The Hospitality market was the strongest performing sector this quarter, driven by wide-ranging government initiatives to boost tourism. While Dubai registered a slowdown in the hospitality market this quarter, Abu Dhabi saw an increase in hotel ADRs for the first time since 2010 (YT February up 12% from the previous year). Hotel occupancies registered 77% in YT February, up one percentage point from the same period in Abu Dhabi Prime Rental Clock Rental Growth Slowing Rents Falling Rental Growth Slowing Rents Falling Rental Growth Accelerating Rents Bottoming Out Rental Growth Accelerating Rents Bottoming Out Retail Residential Office Hotel* * Hotel clock reflects the movement of RevPAR Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and economic conditions. Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods. Source: JLL

3 Abu Dhabi Office Market Overview Market Summary Total stock reached approximately 3.2 million sq m GLA in Q1, with the only delivery being Finance House HQ at Capital Centre adding approximately 25,000 sq m GLA. An additional 359,000 sq m of office GLA is expected to be delivered throughout the year including Addax Tower on Reem Island, ADIB HQ on Airport Road and Al Hilal Bank HQ on Al Maryah Island. Average Grade A and B office rents remained stable this quarter at AED 1,730 per sq m and AED 1,180 per sq m respectively due to limited supply completions and demand remaining relatively flat. Large-scale requirements continue to be driven by the government sector and state-owned enterprises with the bulk of private sector demand focused on smaller office suites. With limited completions during Q1, the market-wide vacancy rate remained at 25%, with vacancy rates remaining minimal within prime schemes. Overall vacancy rates are expected to remain at this level throughout the year, given the significant proportion of near-term completions that are pre-committed. Hot Topic Abu Dhabi Global Market (ADGM), concluded its extensive public consultation process on the new laws and regulations that will apply to businesses operating within the free zone. Leasing of the Abu Dhabi Global Market Square (previously Sowwah Square) is still largely on-hold pending finalisation of the new freezone regulations. However, Abu Dhabi Global Market (ADGM) has signed a 50-year lease with Mubadala Development Company for the Abu Dhabi Global Market Building that was originally planned for the Abu Dhabi Securities Exchange. The Minister of Economy announced that the UAE is at an advanced stage of drafting a foreign investment law allowing 10 foreign ownership of companies operating outside free zones. This will, however, only apply to some strategic sectors. This new law is intended to support innovation and technology transfer through foreign direct investment. The extent to which this will be implemented in Abu Dhabi in the short term is still to be determined. Office Supply Current Supply ( ) Future Supply ( ) 2.9M 3.0M 3.1M 3.2M 359K 155K 291K M Office Performance Vacancy Rate Average Rents (per sq m) / Annual Change 39% 25% AED Grade A 1,540 Grade B 1,180 1,730 1,180 12%

4 Abu Dhabi Residential Market Overview Market Summary No major deliveries took place during the first quarter of However, approximately 5,000 residential are expected to enter the market by the end of 2015, dominated by the delivery of The Views (Saraya), Hydra Avenue and The Wave (Al Reem Island), C59 (Rawdhat) and Amwaj 2 (Al Raha Beach). While sale prices in Dubai have declined, Abu Dhabi s sale prices for residential (apartments and villas) remained stable during Q1 at approximately AED16,000 per sq m. Rents for prime 2 bedroom apartments continued to increase this quarter given the limited supply in the market, registering a 4% increase to reach approximately AED 163,000 p.a. There remains a shortage of quality supply across all price points and an acute shortage of affordable housing. Hot Topic Residential demand remains dominated by those wanting to rent rather than buy, with sales transaction volumes remaining much lower in Abu Dhabi than Dubai. Average prime rents grew by 17% in 2013 and 11% in 2014, driven by demand growth outstripping supply completions and compounded by the removal of the rent cap. We expect there to be a reduction in government spending this year with rental growth reducing to single-digit levels, and stabilisation as further supply enters the market. The sales market witnessed much higher growth rates over the last two years (25% per annum during 2013 and 2014), with prices stabilising since Q4 2014, largely due to the impact on sentiment from the decline in oil prices and equities markets. Sale prices are expected to remain stable this year. Residential Supply Current Supply ( ) Future Supply ( ) 225K 236K 244K 244K 5K 5K 14K M Residential Performance Abu Dhabi Residential Property Rent and Sale Growth Apartment residential Sales Rentals 4% Villa residential Sales Rentals Q-o-Q (2BR) Q-o-Q (3BR) Sales 1 Rentals 12% Sales 15% Rentals 8% (2BR) (3BR)

5 Abu Dhabi Retail Market Overview Market Summary No major deliveries took place during the first quarter of 2015 keeping the total retail supply at 2.6 million sq m of retail GLA. About 87,000 sq m of retail GLA is expected to enter the market by the end of 2015, largely as non mall retail within mixed-use developments. A number of super regional malls are scheduled to enter the market from 2018, which will substantially increase Abu Dhabi s retail supply in the medium term, leading to a polarisation of the retail market. In the meantime, retail rents are expected to remain stable. Average line store rents within well-located malls have remained stable at AED 3,000 per sq m p.a. (Abu Dhabi Island) and AED 1,860 per sq m p.a. (off Island). Vacancies remain minimal within established regional and super regional malls. Hot Topic Yas Mall completed its first full quarter of trading and has been well received by consumers and retailers. Gulf Related has announced that the main contract for Al Maryah Central Mall will be awarded in May 2015 and that work will start in August. Also in Q1, National Real Estate Company (NREC) has appointed a consultancy team to manage the development of Reem Mall on Reem Island. This mall is currently at concept design stage, with construction expected to start this year. Retail Supply Current Supply ( ) Future Supply ( ) 1.9M 2.2M 2.5M 2.6M 87K 85K 78K M Retail Performance Vacancy Rate Average Retail Rents (per sq m) /Annual Change 2% 2% AED AD Island Off AD Island 3,000 1,820 3,000 1,860 2%

6 Abu Dhabi Hotel Market Overview Market Summary Two major openings occurred during TRYP by Wyndham (146 ) and the Swiss-Belhotel Corniche (189 ). Additionally, 500 were added to the serviced apartments sector with the opening of the Meera Time Residence in Saraya and Danat Residences in Danet Abu Dhabi. Approximately 3,000 additional rooms are expected to enter the market by the end of 2015, including the Millennium Bab Al Qasr with 677 rooms and Grand Hyatt with 368 rooms. By the end of 2017, 5,500 rooms are planned to be added to the overall supply in the upscale and upper upscale segments. This will bring the total room supply to approximately 25,700 rooms by the end of According to ADTCA, approximately 3.5 million guests visited the Emirate in 2014, which represents a 24% increase over Abu Dhabi tourism is heavily reliant on GCC countries which represent nearly 4 of total hotel guests. Asia is the fastest growing market, with a 37% increase in Asian hotel guests in Hot Topic Despite the heavy competition in the market, ADR levels increased for the first time since 2010 to reach approximately USD 169, reflecting an increase of 12% in YT February This is largely driven by wide-ranging government initiatives to increase tourism including the expansion of Etihad Airways, the further improvement of Abu Dhabi s leisure offering and campaigns by the Abu Dhabi Tourism and Culture Authority to promote Abu Dhabi internationally. Occupancy rates witnessed a far lower rate of growth, reaching 77% in the first two months of 2015, just one percentage point higher than The combined growth of improved ADR levels and occupancy rates pushed the RevPAR up by 14%, to reach approximately USD 132. Hotel Supply 15,700 Current Supply ( ) 18,150 19,700 20,200 3,000 Future Supply ( ) 1,200 1, M Hotel Performance 76% YT Feb 2014 Occupancy Rate 77% YT Feb 2015 USD Average Daily Rate/Annual Change 169 YT Feb YT Feb % Source : STR Global Source : STR Global

7 Definitions and methodology Interpretation of market positions: 6 o clock indicates a turning point towards rental growth. At this position, we believe the market has reached its lowest point and the next movement in rents is likely to be upwards. 9 o clock indicates the market has reached the rental growth peak, while rents may continue to increase over coming quarters the market is heading towards a period of rental stabilisation. 12 o clock indicates a turning point towards a market consolidation / slowdown. At this position, the market has no further rental growth potential left in the current cycle, with the next move likely to be downwards. 3 O clock indicates the market has reached its point of fastest decline. While rents may continue to decline for some time, the rate of decrease is expected to slow as the market moves towards a period of rental stabilisation. Completed residential building refers to a building that is handed over for immediate occupation. This data excludes labour accommodation. Residential performance data is based on asking prices from a basket of selected developments. Office buildings are considered handed over once they are ready for tenant fit-outs. Total supply excludes government owned and wholly occupied buildings (such as Abu Dhabi Municipality). Average Grade A Office rents represent the average effective rents taken from a basket of selected buildings defined as superior in the current market. It is an effective rent that accounts for rent free periods only (and not the financial impact of any other tenant incentive/s) and excludes service charges and local taxes. Vacancy rate is based on estimates from the JLL Agency team. It represents the average rate across all buildings in the supply sheet. Retail space is considered handed over once it is open and operational. Classification of Retail Centers is based upon the ULI definition and based on their GLA: Super Regional Malls have a GLA of above 90,000 sq m Regional Malls have a GLA of 30,000-90,000 sq m Community Malls have a GLA of 10,000-30,000 sq m Neighborhood Malls have a GLA of 3,000-10,000 sq m Convenience Malls have a GLA of less than 3,000 sq m Prime Rent Shopping Centre represents the top open market net rent that could be expected for a notional standard line unit shop situated in a specified shopping centre, as at the survey date. Vacancy rate is based on estimates from the JLL Retail team, and represents the average rate across standard in line unit shops at super regional & regional malls on Abu Dhabi Island. Hotels are considered handed over once they are open and operational. Hotel room supply is based on existing supply figures provided by ADTCA as well as future hotel development data tracked by JLL Hotels. Room supply includes all graded supply and excludes serviced apartments. Hotel performance data is based on a monthly survey conducted by STR Global on a sample of international standard midscale upscale hotels.

8 Abu Dhabi Abu Dhabi Trade Centre Building 7th Floor, Office No. 3 PO Box Tourist Club Area Abu Dhabi, UAE Tel: Fax: For questions and inquires about the Abu Dhabi real estate market, please contact: David Dudley Regional Director / Head of Abu Dhabi Office david.dudley@eu.jll.com Peter Stebbings Head of Valuation Advisory Abu Dhabi peter.stebbings@eu.jll.com Chiheb Ben-Mahmoud Head of Hotels & Hospitality MEA chiheb.ben-mahmoud@eu.jll.com Andrew Williamson Head of Retail MENA andrew.williamson@eu.jll.com Craig Plumb Head of Research MENA craig.plumb@eu.jll.com Corinna Klaus Senior Agent, Agency Abu Dhabi corinna.klaus@eu.jll.com Andreas Skiadopoulos Manager Strategic Consulting Abu Dhabi Andreas.skiadopoulos@eu.jll.com Mai Hassan Financial Analyst - Strategic Consulting Abu Dhabi youtube.com/joneslanglasalle linkedin.com/companies/jll joneslanglasalleblog.com/emearesearch jll-mena.com 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 JLL 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. JLL does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.