QUARTER REVIEW. Dubai Real Estate Market.

Transcription

1 rd QUARTER REVIEW 2017 Dubai Real Estate ket

2 2017Q3 Real Estate Performance VPI ValuStrat Price Index ket Intelligence. Simplified. Residential Office -1.2% Q3 Y-o-Y Source: ValuStrat 3.0% Q3 Y-o-Y Source: ValuStrat Key Indicators Transaction Volumes* Average Transacted Ticket Size* Apartment Asking Rents Villa Asking Rents -11% Q-o-Q -8% Q-o-Q -3.0% Q-o-Q -3.5% Q-o-Q *Residential & commercial trans. Source: DLD, ValuStrat *Residential & commercial trans. Source: DLD, ValuStrat Office Asking Rents Office Transacted Prices Hotel ADR Hotel Occupancy -4.3% Q-o-Q 7.6% Q-o-Q -4% Jan-Aug Y-o-Y 0% Jan-Aug Y-o-Y. Source: DTCM, ValuStrat Source: DTCM, ValuStrat 1 Dubai Real Estate ket 3rd Quarter 2017 Review

3 VPI ValuStrat Price Index Residential The third quarter 2017 VPI - Residential displayed an overall 1.2% annual decline in capital values, equivalent to 14.6% below 2014 peaks. However, sales price appreciation was seen in established prime locations such as Downtown Dubai, Palm Jumeirah (villas) and Emirates Hills, as values increased by between 0.6% - 1.2% quarterly and 1.8% - 8.1% annually. An exponential rise in sales of off-plan projects due for completion pre-expo2020, some in established locations, may now delay an expected near-term overall market recovery. Previously high yielding areas such as International City, Dubai Production City (IMPZ) and Motor City saw declining rents contribute towards quarterly capital declines of up to 2.8%. ValuStrat Price Index 16 Apartment and 10 Villa Locations in Dubai [Base: Jan 2014=100] Dec Dec Office Source: ValuStrat Our VPI-Office index is a quarterly review of prices for a representative basket of freehold offices within 19 towers located in five central business districts. The Q3 VPI stood at 91.3 points, suggesting that average capital values for office space are 6.5% lower than the same period during the base year 2015, 3% higher than the same period last year and 0.2% lower than the previous quarter. Jumeirah Lake Towers office prices saw the highest annual increase in capital values of 13.3%, while Business Bay office prices fell by 10.9% YoY. DIFC office prices remained stable. ValuStrat Price Index 5 Office Locations in Dubai [Base: Jan 2015=100] Dec Dec Source: ValuStrat 2

4 MacroEconomicSnapshot Total Foreign Direct Investment (FDI) capital inflows grew 8.4% in Q1 17 and amounted to AED 4.77 billion sourced mostly from the United States, Belgium, Japan, Cyprus and the Bahamas (based on the latest report from Dubai FDI) Population reached 2.85 million in tember DXB passenger traffic reached 59 million by end of August, an increase of 6.6% YoY A total of 10,646 new licenses were issued in H1 '17, up 0.29% from H1 '16. Reflective of an improved business confidence in the emirate 2,105,000 2,210,300 2,320,800 2,450,000 2,695, ,853, Q3 Dubai Population Source: Dubai Statistics Centre Consumer Price Index vs. Housing Index January 2015 YTD Jan Feb Apr May Jul Aug Oct Nov Dec Jan Feb Apr May Jul Aug Oct Nov Dec Jan Feb Apr May Jul Aug JAFZA witnessed 6% YoY growth in new entrants by attracting 267 companies during H1 17, with companies from the Gulf Region (59%), Asia-Pacific (20%), Europe (13%), North America and Africa (4% each) DIFC grew 6.2% in H1 17 to 1,750 companies under its authority As of August, Dubai s YoY inflation rate of less than 1% was at its lowest level since The monthly inflation rate stood at 0.22% Housing, water, electricity, gas and other fuel expenses as of August increased 0.47% YoY General Index (2014=100) Housing, Water, Electricity, Gas and Other Fuels Source: Dubai Statistics Centre 3 Dubai Real Estate ket 3rd Quarter 2017 Review

5 ResidentialSupply Approximately 50% of the projected 25,000 units for this year have been completed so far About 62% of total completions were concentrated in three areas: Dubailand, International City and Dubai Silicon Oasis A major reveal during this year s Cityscape was District 2020 in Dubai South, the master planned city that will continue the Expo legacy A total of 29 off-plan projects were launched in Q3, to add more than 21,000 units to the residential pipeline pre-2021 Notable announced projects were Azizi Riviera in Meydan, Park Lane Residence in Dubai South, wasl s Park Gate Residences in Zabeel and Dubai Properties asi Riverside in Business Bay Dubai Residential Supply ( 000 UNITS) Existing New Apartments* New Villas* 467 *May be subject to significant downward adjustment E 2018E Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat ResidentialPrices The median residential transacted price declined 3.4% YoY and 4.2% QoQ, as opposed to upticks seen last quarter The median transacted price for ready apartments stood at AED 11,259 per sq m (AED 1,046 per sq ft), down 3.4% YoY and 4.1% QoQ For ready villas, the median transacted price was AED 11,334 per sq m (1,053 per sq ft), declining 4% YoY and 5% QoQ The majority of residential transactions this quarter came from the sales of off-plan properties, accounting for 73% of overall residential sales volume, and causing a slowdown in price recovery across established areas Locations included Downtown Dubai with 88% of sales being off-plan, Business Bay at 83%, Dubai Silicon Oasis at 82% and Jumeirah Village at 78% In terms of total transaction value, AED 37.6 billion was invested in residential properties during the first nine months of this year, AED 23.5 billion of which was off-plan YTD off-plan values are already 26% higher than the whole of 2015 and 3% higher than all of 2016 Residential Median Transacted Prices 3.0% Last 2 Years -3.4% Last 6 Months * Ready Properties Only 3.4% Last Year -4.2% Last Quarter 4

6 ResidentialRents Overall residential asking rents were 10.5% lower YoY and 2.8% QoQ However, on a quarterly basis asking rents remained flat for both villas and apartments Compared to the same period last year, rents were down 11% for apartments and 9.2% for villas. Additionally, landlords have become more accommodating in reducing rents for existing tenants approaching lease renewal ValuStrat research has found that some families living in high-rise buildings in Dubai ina and neighbouring areas have opted to shift to townhouses located further east, due to insignificant difference in market rents For example, 90% of all 3-bed apartment rentals listed in Dubai ina are more or less equivalent in rent to a 3-bed townhouse in Arabian Ranches, The Springs, Jumeirah Village Circle, Al Furjan and Mira Residential Asking Rents -9.7% Last 2 Years -2.0% Last 6 Months -10.5% Last Year -2.8% Last Quarter OfficeSupply As of tember 2017, no major completions have taken place YTD, keeping the current estimated total office Gross Leasable Area (GLA) at 8.47 million sq m (91 million sq ft) Expected office completions for this year has been adjusted upwards to 285,000 sq m (3.1 million sq ft) Available data for office space under construction is estimated at 592,000 sq m (6.4 million sq ft) for delivery in the next three years Most upcoming office space will be concentrated in Jumeirah Lake Towers (50%), Business Bay (42%) and Barsha Heights (6.7%) Dubai Office Supply (Million sq m GLA) E 2018E Existing Stock Expected Supply Source: REIDIN, MEED Projects, ValuStrat 5 Dubai Real Estate ket 3rd Quarter 2017 Review

7 OfficePrices Overall transacted office prices were 4.7% higher than last year and 7.6% higher than last quarter The median transacted price stood at AED 11,302 per sq m (AED 1,050 per sq ft) Business Bay remained as the most popular choice for office set-ups as it took the majority at 61.7% of citywide sales transactions, followed by Jumeirah Lakes Towers (JLT) at 27.2% The median size of offices sold in Business Bay were 95 sq m (1,027 sq ft) and 104 sq m (1,119 sq ft) in JLT 32,000 sq m (344,400 sq ft) of total office GLA was sold during Q3 amounting to a total investment worth AED 390 million Office Median Transacted Prices -4.0% Last 2 Years 0.0% Last 6 Months 4.7% Last Year 7.6% Last Quarter OfficeRents Median asking rents were stable YoY but fell 4.3% QoQ Asking rents for this quarter were 9.2% lower than two years ago The citywide median asking rent for a typical office space now stands at AED 1,076 per sq m (AED 100 per sq ft) Median asking rents and typical office space varied based on location as shown below In Dubai International Financial Centre, the median asking rent was AED 2,100 per sq m (AED 195 per sq ft) for the typical unit size of 218 sq m (2,350 sq ft) In Barsha Heights, asking rents were AED 1,023 per sq m (AED 95 per sq ft) for the typical area of 130 sq m (1,400 sq ft) Office Median Asking Rents -9.2% Last 2 Years -0.1% Last 6 Months 0.1% Last Year -4.3% Last Quarter 6

8 RetailSupply Shopper s Mall, a new neighbourhood centre by Al Madina Group opened in August at Jebel Ali Industrial 1. With a Gross Leasable Area (GLA) of 5,574 sq m (60,000 sq ft) and featuring the group s healthcare brand Live Care Clinic and Pharmacy, among other retail offerings Emaar announced Dubai Hills Mall, a 185,800 sq m (2 million sq ft) GLA shopping centre with over 750 retail and F&B outlets, all set for a grand opening in 2019 Nakheel unveiled Discovery Gardens Mall project, a 41,800 sq m (450,000 sq ft) GLA retail centre featuring shopping, dining and tourism amenities expected to be ready by 2020 Union Properties through their newly established subsidiary Union Properties, through their newly established subsidiary Union Malls, announced their pilot project The Central Mall in Motor City. The centre will have a total area of 102,200 sq m (1.1 million sq ft) and will feature health, wellness and sports facilities Phase 1 of Meraas Al Seef development along Dubai Creek was opened late tember. Once the entire project is complete, it will add at least 65,000 sq m (700,000 sq ft) GLA of retail space offering dining, shopping and entertainment choices Retail Malls & Shopping Centres ( 000 sq m GLA) Convenience < 3k sq m Regional 30k-90k sq m 852 Neighbourhood 3k-10k sq m Super Regional > 90k sq m 1,878 Community 10k-30k sq m RetailPerformance Citywide shopping mall foot traffic increased 5.8% YoY Two top mall operators saw an increase in total visitors in 2016, with Emaar Malls welcoming 125 million and Majid Al Futtaim s shopping centres attracting 119 million The Dubai Mall welcomed 39 million visitors in H The highly anticipated digital marketplace platform Noon.com went live in the UAE in tember, competing with Amazons long running Souq.com. Coming quarters will tell how these large scale B2C e-commerce services impact traditional brick and mortar performance Number of Malls and Shopping Centres in Dubai Super Regional Regional 30k-90k sq m > 90k sq m 22 Convenience < 3k sq m 23 Community 10k-30k sq m 32 Neighbourhood 3k-10k sq m 7 Dubai Real Estate ket 3rd Quarter 2017 Review

9 HotelSupply As of August 2017, Dubai had 81,445 hotel rooms and 24,346 hotel apartments, with an additional 10,000 keys planned for the remainder of this year Notable openings during the quarter included the largest TRYP by Wyndham (650 rooms) and DoubleTree by Hilton (238 rooms). In total, 1,168 keys were added during Q3 Twelve new hotel projects and one hotel re-branding were announced to add a total of 3,737 keys to the pipeline over the next three years Noteworthy announcements included two new Address hotels, Address Fashion Avenue & Address Harbour Point (total 369 rooms), Vida Hotel Dubai Mall (195 keys), Courtyard & Residence Inn by riott (250 rooms), Dubawi Hotel (500 keys) and The Floating Venice at World Islands (440 rooms) Union Properties PJSC launched Al Etihad Hotel Management as a subsidiary to overlook their pilot hospitality projects in Motor City Hotel Room Supply ( 000 KEYS) E Hotel & Service Apt Rooms Source: DTCM, MEED Projects, ValuStrat New Supply E 116 HotelPerformance Source of Dubai Visitors by Region Jan - Aug 2017 Total international guests as of August rose 8% YoY to 10.4 million Average occupancy was kept at a healthy rate of 76% from January to August, which was similar to the same period last year Average Daily Rate (ADR) and Revenue Per Available (RevPAR) for YTD August 2017 were down 4% each from same period last year The top source markets for Dubai s visitors came from the GCC countries (21%), Western Europe (20%), South Asia (18%), MENA (11%), North & South-East Asia (11%), Russia with rest of Eastern Europe (6%), USA (6%) and Africa (5%) and Australasia (2%) 11% 6% 11% GCC Western Europe South Asia MENA North Asia & South East Asia Source: DTCM 6% 5% 2% 18% 21% 20% Americas Russia, CIS & Eastern Europe Africa Australia 8

10 IndustrialSupply Dubai Food Park (DFP) in Wholesale City was unveiled boasting 4.46 million sq m (48 million sq ft) of space exclusively allocated for all services and activities related to food industry A co-operation between Ningxia Forward Fund Management Company and DFP to build a 407,000 sq m (4.38 million sq ft) China-UAE Food Industrial Cluster was announced, set to house 30 food plants with a two-year handover schedule from start of construction Swiss company Access World Logistics LLC in partnership with Rais Hassan Saadi Group broke ground on a 3PL facility that include a multi-product warehouse measuring 15,000 sq m (161,00 sq ft) in Jebel Ali Free Zone Industrial Prices (AED/sq m) ,306 Al Quoz Price - Upper range 2,800 4,198 Dubai Investment Park 2,315 Price - Lower range 4,000 Jebel Ali Free Zone 2,045 Source: ValuStrat IndustrialPerformance Industrial property prices during Q have remained relatively stable and unchanged. Prices ranged between AED 2,045 - AED 4,306 per sq m (AED AED 400 per sq ft) with high specification / quality built and modern cold storage facilities priced at the upper scale Large and older warehouse properties continued to be priced under AED 2,153 per sq m (AED 200 per sq ft) We observed increasing development activity for warehouse and logistic properties in areas such as Techno Park and Dubai Industrial City Development activities in industrial parks in other Northern Emirates increased in conjunction with improved road networks/accesses to ports, and better utility services, thus providing increased competition in this sector Lower rents continue to be observed for older and larger warehouse properties in locations such as Jebel Ali, Ras Al Khor, and Al Qusais. Rentals ranged between AED 300 to AED 484 per sq m (AED 28 to AED 45 per sq ft) with marginal declines also seen in other locations such as DIC, DIP, Al Quoz, and JAFZA Industrial Rental Rates (AED/sq m) Al Quoz Al Quasis Dubai Investment Park Jebel Ali Free Zone Jebel Ali Industrial Area Dubai South Rent - Upper Range Source: ValuStrat Rent - Lower Range Dubai Real Estate ket 3rd Quarter 2017 Review

11 ValuStratInMedia Buying a Home Before Expo Some real estate investors are likely encouraged by the anticipated legacy benefits of Expo 2020 in associated locations, particularly where infrastructural deliveries such as metro, roads, schools and retail offerings are expected to have a long-term benefit on the property market, explains Declan King MRICS, Managing Director and Group Head of Real Estate at ValuStrat Women on Cityscape Global I consider Cityscape Global to be the highlight of Dubai s real estate calendar. It does an exceptional job in bringing together developers and service providers. The event is well-planned, has interesting exhibitors and serves as a one-stop shop for everyone interested in Dubai real estate, says Sarah Umerani, keting Manager at ValuStrat Adding Value to my Property "It should be remembered that the market will always place a premium on tasteful cosmetic improvements, but one should be cautious of overcapitalising and putting a bold personal stamp on a home, as your style and taste may not always match that of a potential buyer", says Cheryl McAdams MRICS, Head of Residential Valuation at ValuStrat Dubai Retail Realty Mix Evolves to Overcome Headwinds Analysts also expect the trend of neighbourhood malls such as City Walk and Box Park to accelerate. We expect this sector to continue to prosper, Declan King MRICS, Managing Director and Group Head of Real Estate, at ValuStrat, tells PW. With Expo 2020 driving tourists to the city, the event will also help deliver extra footfall to our major malls Land is Best Bet for Investors in Dubai Plots in established locations such as Downtown, the ina, Deira, Bur Dubai and Sheikh Zayed Road can be increasingly difficult to source as these districts become built out. Newer locations to the south and east of the city generally offer more availability, with open tracks of land being progressively opened up with installation of services and utilities, says Declan King, MRICS - Managing Director and Group Head of Real Estate, ValuStrat Cheaper New Homes Drag Down Prices in Dubailand Affordable homes in Dubai Sports City will be the main centre of activity for completions this year, with 2,100 units expected to be handed over, according to ValuStrat. This will be followed by Liwan (1,000 units) and Arjan (940). This new supply may create downward pressure on rental prices, as more choice is given to potential tenants, said Haider Tuaima, Head of Real Estate Research. 10

12 About ValuStrat is a firm regulated by RICS ValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuations, Research, Due Diligence and Divestment services across a diverse range of industry sectors since Offices in the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 800 corporate clients in the Middle East Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program. VPI ValuStrat Price Index Dubai Dubai@valustrat.com Doha Doha@valustrat.com Riyadh Riyadh@valustrat.com Jeddah Jeddah@valustrat.com Karachi London Karachi@valustrat.com London@valustrat.com VPI online The ValuStrat Price Index for Dubai s freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai s freehold residential sector is constructed to represent the monthly price change experienced by typical residential units within Dubai. The VPI uses a comprehensive weighted sample representing more than 90% of all property types across the city and is built by our expert RICS Registered Valuers. Research Methodology Every effort has been made to ensure the accuracy of this document. New supply data covers 38 defined areas in Dubai including non-freehold areas. Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. The new supply database does not take into account most private building projects. Prices are calculated from actual transactions that have been carefully cleansed to exclude duplicates, bulk sales and outdated transactions. Rental data is derived from a carefully cleansed database of listings that don t include duplicates, potential errors and outliers. Copyright ValuStrat Consulting FZCo This document is the property of ValuStrat Consulting FZCo and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat Consulting FZCo. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat Consulting FZCo does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document. Declan King, MRICS Managing Director & Group Head of Real Estate declan.king@valustrat.com Haider Tuaima Head of Real Estate Research haider.tuaima@valustrat.com Vismer Mulenga, MRICS Associate Director vismer.mulenga@valustrat.com Cheryl McAdam, MRICS Head of Residential Valuations cheryl.mcadam@valustrat.com Darshan Shah, MRICS Associate Director & Head of Industrial Consulting darshan.shah@valustrat.com