Research Highlights: A weekly market commentary Contents Market Commentary Charts to Note Activity Monitor: Dubai, Kuwait, Riyadh - KSA, Dammam KSA Qatar Markaz Research is available on: Bloomberg - Type MRKZ <Go> Thomson Research, Reuters Knowledge ReutersRealEstate.com Nooz Zawya Investor ISI Emerging markets Thomas K. Mathew Senior Research Analyst +965 2224 8051 tmathew@markaz.com Venkat Ramadoss ACA, CFA Manager +965 2224 8548 vramadoss@markaz.com Bassam N. Al-Othman Executive Vice President +965 2224 8011 bothman@markaz.com Kuwait Financial Centre Markaz P.O. Box 23444, Safat 13095, Kuwait Tel: +965 2224 8000 Fax: +965 2242 5828 markaz.com Kuwait Financial Centre Markaz MENA REAL ESTATE RESEARCH Real Estate Market Commentary 09-Dec-12 to 22-Dec-12 KSA -Riyadh: JLL s Riyadh Q3-12 report revealed that, apartment & villa rentals continued to move higher & increased 1.3% & 2.7% respectively Q-o-Q. Apartment rents at Warooud, Malaz, Olaya & Sulaimania reportedly witnessed the highest increases due to high occupancy rates and close proximity of schools and hospitals, while villas in compounds exhibited the highest rental increases due to high demand. JLL forecasts rents & prices in Riyadh s residential market to increase in spite of supply of 101,000 units earmarked over 2013-15. For the office market, it was reported that Grade A & B office rents declined c.1.9% & 1% respectively on a Q-o-Q basis and that city wide & CBD vacancy rates increased to 15% (Q2-12:14%) & 17% (Q2-12: 16%) respectively, due to oversupply. JLL expects more than 1 Mn sq.m of supply over 2013 & 14 mainly from ITCC, KAFD & Olaya Towers, and expects this to result in lower rents & higher vacancy rates across Riyadh s office market. Separately Reuters reported that JLL expects the supply of villas in compounds to increase by 50% over 2013 & 14, adding 3,000 units to market. They however expect the demand to be much higher than supply over this period, due to a huge backlog of demand. KSA -Jeddah: As per JLL s Q3-12 Jeddah report, apartment rents moved up by 3.2% Q-o-Q, while villa rentals grew by 2.2%. Apartment rents witnessed the higher increases on the Corniche (West), while rents for villas in compounds reportedly increased more than other villas from expat demand, similar to Riyadh. It was also mentioned that the Ministry of Housing approved five locations of 9.5 Mn sq.m combined, for development of residential projects. JLL forecasts apartment & villa rents to increase from higher expat demand for apartments & despite significant supply coming on-stream for villas. For office, vacancy rates at Jeddah s CBD reportedly declined significantly to 16% in Q3-12 (Q2-12:27%) due to higher take-up of entire buildings leading average CBD rents to increase by 7.5%. This development is in line with our findings from our KSA outlook from Nov-12, where we had highlighted that Jeddah s office oversupply could be taken up quicker than Riyadh. Abu Dhabi: According to the Statistics Centre Abu Dhabi (SCAD) s Nov release, construction costs remained mostly stable during Nov-12 declining marginally by 0.4% M-o-M and by 0.6% on a Y-o-Y basis. Average prices of 8 of the 21 building material groups experienced an M-o-M increase during Feb-12, while prices of 11 groups receded. Notable price increases were reported in glass, cement and concrete while declines were most prominent in labor, wires and power cables. MENA: In their Dec-12 industrial occupier conditions report, JLL outlined that industrial demand remains strong in UAE & KSA, due to lower labor costs and a growing local customer demand base. UAE: Industrial rents in Dubai & Abu Dhabi reportedly remained stable in Dec- 12 as against Jun-12, due to the stable macro environment aided by good infrastructure quality. JLL expects demand to improve further for Dubai s industrial supply pipeline, due to better quality and proximity to Al Makhtoum airport & Jebel Ali Port, pushing rents higher. KSA: Rents for industrial space in Riyadh & Jeddah reportedly moved up by 11.5% & 14% respectively in Dec-12 as compared to Jun-12, driven by strong demand in construction, food and FMCG sectors. JLL forecasts rents to move higher in KSA, from higher demand. Moreover JLL also mentioned that most of the upcoming supply is built-to-suit and not speculative. Developments sourced from various sources including news portals like Gulfbase, Zawya, Reuters, Bloomberg, Trade Arabia, Business 24/7, Arabian Business, The Peninsula, Gulf News, Property Wire, Khaleej Times, Saudi Gazette, KUNA etc and also from published reports of real estate brokers and investment research houses
Charts to note MENA REAL ESTATE RESEARCH Chart 1: Riyadh residential supply estimates -2011-15 Chart 2: Jeddah residential supply estimates -2011-15 Kuwait Financial Centre Markaz 2
Chart 3: Riyadh office supply estimates -2011-15 Chart 4: Jeddah office supply estimates -2011-15 Kuwait Financial Centre Markaz 3
Chart 5: KSA residential Q-o-Q rental changes (%) Q3-12 over Q2-12 Chart 6: KSA office vacancy rates development Q1-12 to Q3-12 Kuwait Financial Centre Markaz 4
Chart 7: UAE & KSA industrial rents development Jun-12 & Dec-12 Chart 8: M-o-M Building Materials Price Change Abu Dhabi (Nov-12) Source: Statistics Centre Abu Dhabi (SCAD), Markaz Analysis Kuwait Financial Centre Markaz 5
Activity Monitor Dubai Real Estate Transactions (2011 & 2012) Land Transactions Villa Transactions Kuwait Financial Centre Markaz 6
Apartment Transactions Source: Dubai Land Department Note: 1) The above table/chart represents transactions as per the registration date and not the transaction date 2) Outliers identified are removed for better clarity. Kuwait Financial Centre Markaz 7
Kuwait Real Estate Transactions (2011 & 2012) Private Residential Property transactions Investment Property transactions Source: MOJ, Kuwait Kuwait Financial Centre Markaz 8
KSA Real Estate Transactions (2011 & 2012) Riyadh Real Estate Transactions Riyadh Residential transactions Riyadh Commercial transactions Source: MOJ Kuwait Financial Centre Markaz 9
Dammam Real Estate Transactions MENA REAL ESTATE RESEARCH Dammam Residential transactions Dammam Commercial transactions Source: MOJ Kuwait Financial Centre Markaz 10
Qatar Real Estate Transactions (2011 & 2012) Source: MOJ Kuwait Financial Centre Markaz 11
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