abu dhabi real estate market overview - q1 2015

Q1 2015

Abu Dhabi Real Estate Market Overview

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 Q1 2015 (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 2014.

* 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

Abu Dhabi Market Summary

Abu Dhabi Prime Rental Clock Q1 2015

Rental Growth Slowing

Rents Falling

Rental Growth

Accelerating

Rents Bottoming

Out

Rents Falling

Rental Growth

Accelerating

Rents Bottoming

Out

Office Retail Residential

Rental Growth Slowing

Q1 2014

Hotel*

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

100% 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.

Abu Dhabi Office Market Overview

Future Supply (20152017) Current Supply (20122015)

Office Supply

Office Performance

COPYRIGHT JONES LANG LASALLE IP, INC. 2015

2015 / 2016 Outlook

2015 / 2016 Outlook

2.9M sq m (GLA)

3.0M sq m (GLA)

3.1M sq m (GLA)

3.2M sq m (GLA)

359K sq m (GLA)

155K sq m (GLA)

291K sq m (GLA)

Vacancy Rate

39% Q1 2014

25% Q1 2015

Average Rents (per sq m) / Annual Change

Grade A 1,540 Q1 2014

1,730 Q1 2015

12% Y-o-Y

Grade B 1,180 Q1 2014

1,180 Q1 2015

0% Y-o-Y

AED

2012 2013 Q1 2015 2014 9M 2015 2016 2017

Market Summary

No major deliveries took place during the first quarter of 2015.

However, approximately 5,000 residential units 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 Dhabis sale prices for residential units (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.

Rentals

4% Sales

0%

Apartment residential

Rentals

12% Sales

10%

Q-o-Q (2BR)

Y-o-Y (2BR)

Abu Dhabi Residential Market Overview

Rentals

0% Sales

0%

Villa residential

Rentals

8% Sales

15%

Q-o-Q (3BR)

Y-o-Y (3BR)

Residential Performance

Abu Dhabi Residential Property Rent and Sale Growth

9M 2015

5K units

2017

244K units

Q1 2015

236K units

2014

225K units

2013 2012


Residential Supply


Residential Performance

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.

244K units

2016

5K units

14K units

Vacancy Rate

2% Q1 2014

2% Q1 2015

Average Retail Rents (per sq m) /Annual Change

AD

Island 3,000

Q1 2014

3,000 Q1 2015

0% Y-o-Y

Off AD

Island 1,820

Q1 2014

1,860 Q1 2015

2% Y-o-Y

1.9M sq m (GLA)

2.2M sq m (GLA)

2.5M sq m (GLA)

2.6M sq m (GLA)

87K sq m (GLA)

85K sq m (GLA)

78K sq m (GLA)

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 Dhabis 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.

Abu Dhabi Retail Market Overview

9M 2015 2017 Q1 2015 2014 2013 2012


Retail Supply

Retail Performance

2015 / 2016 Outlook


2015 / 2016 Outlook

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.

AED

2016

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 2015.

This is largely driven by wide-ranging government initiatives to

increase tourism including the expansion of Etihad Airways, the further improvement of Abu Dhabis 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 2014.

The combined growth of improved ADR levels and occupancy

rates pushed the RevPAR up by 14%, to reach approximately

USD 132.

Average Daily Rate/Annual Change

151 YT Feb 2014

169 YT Feb 2015

12% Y-o-Y

Occupancy Rate

76% YT Feb 2014

77% YT Feb 2015

Source : STR Global

Abu Dhabi Hotel Market Overview

Hotel Performance


Hotel Supply

2017 2016 Q1 2015 2014 2013

Source : STR Global


2015 / 2016 Outlook

2015 / 2016 Outlook

15,700 keys

18,150 keys

19,700 keys

20,200 keys

3,000 keys

1,200 keys

1,300 keys

Market Summary

Two major openings occurred during Q1 2015 TRYP by Wyndham (146 keys) and the Swiss-Belhotel Corniche (189

keys). Additionally, 500 keys 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 2017.

According to ADTCA, approximately 3.5 million guests visited the

Emirate in 2014, which represents a 24% increase over 2013.

Abu Dhabi tourism is heavily reliant on GCC countries which

represent nearly 40% of total hotel guests. Asia is the fastest

growing market, with a 37% increase in Asian hotel guests in

2014.

USD

2012 9M 2015

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.

Definitions and methodology

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.

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.

Interpretation of market positions:

6 oclock 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 oclock 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 oclock 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 Oclock 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.

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.

Abu Dhabi

Abu Dhabi Trade Centre Building

7th Floor, Office No. 3

PO Box 36788

Tourist Club Area

Abu Dhabi, UAE

Tel: +971 2 443 7772

Fax: +971 2 443 7762

For questions and inquires about the Abu Dhabi real estate market, please contact:

@JLLMENA youtube.com/joneslanglasalle linkedin.com/companies/jll joneslanglasalleblog.com/EMEAResearch

David Dudley

Regional Director / Head of

Abu Dhabi Office

[email protected]

Peter Stebbings

Head of Valuation Advisory

Abu Dhabi

[email protected]

Andrew Williamson

Head of Retail

MENA

[email protected]

Chiheb Ben-Mahmoud

Head of Hotels & Hospitality

MEA

[email protected]

Corinna Klaus

Senior Agent, Agency

Abu Dhabi

[email protected]

Mai Hassan

Financial Analyst - Strategic Consulting

Abu Dhabi

[email protected]

Craig Plumb

Head of Research

MENA

[email protected]

Andreas Skiadopoulos

Manager Strategic Consulting Abu Dhabi

[email protected]

abu dhabi real estate market overview - q1 2015

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