executive summary · the address is the flagship brand of emaar’shospitality brand and is one of...
TRANSCRIPT
Executive Summary
A price analysis of serviced/hotel apartments reveals that they trade at a significant premium compared to the standard residential units. In the
ready space in Downtown and Dubai Marina, they trade nearly double to their non-serviced counterparts. However, in Palm Jumeirah they have
only a 38% premium. In the off-plan space can witness that developers have already factored some portion of the premium in the launch prices.
For example in both Creek Harbor and The Hills the serviced/hotel apartment component was launched at a premium of 50-60%.
A community-wise analysis reveals that in Downtown, ready units trade at a premium compared to their off-plan counterparts, where as in
Business Bay the reverse has transpired. This indicates that in Business Bay, the quality of serviced apartments is generally increasing with better
brand names now coming in. In Palm Jumeirah we can witness that the ready serviced apartments trade at a discount by an average of 20%. We
opine reason for the premium in off-plan units are the rental guarantees and extended payment plans offered by developers, and that these
guarantees have for the most part been baked into the launch prices of the projects.
A supply analysis reveals there are approximately 15,000 freehold completed serviced units in the emirate, with an expected 30,000 units to enter
the market over the next 5 years. The expected surge in the serviced apartment space reflects the optimism regarding tourism numbers, and is in
line with the increase in hotels throughout the city as well. Government Related Entity (GRE) developers account for 34% of existing stock in the
serviced/hotel apartment space, and this number is expected to further reduce to 19% by 2021, implying that GRE developers will focus on the
upper end of the market in all likelihood.
The Address is the flagship brand of Emaar’s hospitality brand and is one of the most prestigious hotels in the UAE. A price analysis of the Address
hotels in downtown against the community index reveals that the former has outperformed by more than a factor of 3 in the case of the Address
Lake Hotel and in the case of Address Blvd a factor of 7. Within the Address portfolio there is a 30% discount for the off-plan projects compared to
ready, implying that as the projects come closer to completion we can expect a uptick in pricing. This is what traditional real estate models predict,
and what has been observed for the most part empirically in comparable builds.
Contents
01
03
02
04A look in the Supply
DynamicsA Closer look into Emaar’s
Address
The Premiums of Serviced
to Standard Units
Off-Plan vs Ready in the
Serviced Apartment Space
The Premiums of Serviced to Standard Units
“Above all else, show the data”
Edward R. Tufte
Premiums of Serviced Apartments: Ready Space
Ready Space: Premiums of Serviced Apartments to the Standard Apartments
Source: REIDN
A price analysis of serviced/hotel apartments reveals that they trade at a significant premium compared to the standard residential units.
In the ready space in Downtown and Dubai Marina they trade nearly double to their non-serviced counterparts. However, in Palm
Jumeirah they have only a 38% premium. The lower premiums witnessed in Palm Jumeirah may be a result of a confluence of factors,
including but not limited to the fact that there is a steady pipeline of off plan projects that will likely pivot prices higher.
Premiums of Serviced Apartments to the Standard Apartments
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Downtown Marina Palm Jumeirah
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Downtown Marina Palm Jumeirah
AED
/Sq
f
.Serviced Apartments .Standard Apartments
Premiums of Serviced Apartments: Off-Plan Space
Off-Plan Space: Premiums of Serviced Apartments to the Standard Apartments
Source: REIDN
In the off-plan space we can witness that developers have already factored some portion of the premium in the launch prices. For
example in both Creek Harbor and The Hills the serviced/hotel apartment component was launched at a premium of 50-60%. The high
level of demand that has been witnessed nonetheless has been due to the strong brand power of the Address and Vida Brands of Emaar,
along with the expectation of a general surge in tourism that are expected to make these investments higher yielding than their
residential counterparts in the medium to long term.
Off-Plan Space: Premiums of Serviced Apartments to the Standard Apartments
0
500
1,000
1,500
2,000
2,500
3,000
Creek Harbour The Hills0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Creek Harbour The Hills
.Serviced Apartments .Standard Apartments
AED
/Sq
f
Off-Plan vs Ready in the Serviced Apartment Space
“Risk comes from not knowing what you’re doing.”
Warren Buffet
Downtown & Business Bay: Ready vs Off-Plan Serviced/Hotel Apartments
Downtown: Ready vs Off-Plan Serviced/Hotel Apartments
Source: REIDN
An analysis of Downtown serviced/hotel apartments reveals that ready units trade at a premium compared to their off-plan
counterparts, where as in Business Bay the reverse has transpired. This indicates that in Business Bay, the quality of serviced apartments
is generally increasing (with better brand names now coming in), whereas in Downtown, the off plan segment has traded at a discount,
predominantly reflecting the opportunity cost of rental yields relative to their ready counterparts.
Business Bay: Ready vs Off-Plan Serviced/Hotel Apartments
0
1,000
2,000
3,000
4,000
5,000
6,000
AramaniResidence
TheAddress
BLVD
TheAddress
Dubai Mall
TheAddress
Lake
TheAddress
ResidenceFountain
View
TheAddress
ResidenceSky View
VidaResidenceDubai Mall
VidaResidenceDowntown
OperaGrand
0
500
1000
1500
2000
2500
3000Ready Off-Plan Ready Off-Plan
AED
/Sq
f
AED
/Sq
f
Palm Jumeirah & Dubai Marina: Ready vs Off-Plan Serviced/Hotel Apartments
Palm Jumeirah: Ready vs Off-Plan Serviced/Hotel Apartments
Source: REIDN
In Palm Jumeirah we can witness that the ready serviced apartments trade at a discount by an average of 20%. We opine reason for the
premium in off-plan units are the rental guarantees and extended payment plans offered by developers, and that these guarantees have
for the most part been baked into the launch prices of the projects. In the Marina, there are only a handful of off plan projects that are
left, and for the most part they are at a discount to the ready benchmark index.
Dubai Marina: Ready vs Off-Plan Serviced/Hotel Apartments
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
V HoldingsHotel
AnantaraResidence
KimpenskiPalm
Residence
Azizi Mina Royal Bay Palm Tower W Hotels DukesOceana
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Dubai MarinaAddress
Address JumeirahGate
Vida ResidencesDubai Marina
The One Jumeirah Living
Ready Off-PlanReady Off-Plan
AED
/Sq
f
AED
/Sq
f
A look in the Supply Dynamics
“The value of an idea lies in the using of it”
Thomas A. Edison
A look in the Supply Dynamics of Serviced Apartments
Supply of Serviced/Hotel Apartments Stock
Source: REIDN
The above graph reveals the completed and expected units of supply coming in the serviced/hotel apartment space. There are
approximately 15,000 freehold completed units in the emirate, with an expected 30,000 units to enter the market over the next 5 years.
The expected surge in the serviced apartment space reflects the optimism regarding tourism numbers, and is in line with the increase in
hotels throughout the city as well. Supply numbers may shift as developers adjust pipeline depending on market conditions; it is likely
however that the actualization rates in the serviced space will be much higher than in the residential space, given the quality of projects,
and the stage of completion that a number of these projects are currently at.
0
2000
4000
6000
8000
10000
12000
14000
16000
2003 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Ready Off-Plan
Government vs Private Sector Developers in the Serviced Apartment Space
Government vs Private Sector Developers: Completed Serviced Units
Source: REIDN
Government Related Entity (GRE) developers account for 34% of existing stock in the serviced/hotel apartment space, and this number is
expected to further reduce to 19% by 2021, as Private Sector developers take on the baton. Such a tilt is natural in Dubai’s real estate
landscape, and signifies that the former will presumably dominate the upper echelon of the market segment, leaving the private sector
to cater to the mid income segment predominantly. This trend has already started to transpire in various communities across Dubai; we
expect this trend to continue.
Government vs Private Sector Developers: Under Construction Serviced Units
GSD PrivateGSD Private
A closer look into the Address
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
George Soros
0%
20%
40%
60%
80%
100%
120%
140%
160%
Address Blvd Downtown Ready Index
0%
20%
40%
60%
80%
100%
120%
140%
160%
Address Lake Hotel Downtown Ready
Price Performance of Serviced Apartments
The Address Lake City vs Downtown Ready Index (2006-2017)
Source: REIDN
The Address is the flagship brand of Emaar’s hospitality brand and is one of the most prestigious hotels in the UAE. A price analysis of the
Address hotels in downtown against the community index reveals that the former has outperformed by more than a factor of 3 in the
case of the Address Lake Hotel and in the case of Address Blvd a factor of 7. This outperformance historically has been due to higher
occupancy ratios that these landmark properties have achieved; on a city wide basis, it is likely this relative outperformance will be
considerably narrower going forward.
The Address Blvd vs Downtown Ready Index (2013-2017)
Launched 2013Completed 2017
Launched 2006Completed 2008
A Closer look into Emaar’s Address
The Address: Ready Vs Off-Plan Prices
Source: REIDN
The above graph gives an overview of the pricing of the Address portfolio across Dubai in both the ready and off-plan space. On average
there is a 30% discount for the off-plan projects compared to ready, implying that as the projects come closer to completion we can
expect a uptick in pricing. This is what traditional real estate models predict, and what has been observed for the most part empirically in
comparable builds.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
The Address BLVD The AddressDubai Mall
The Address Lake Dubai MarinaAddress
The AddressResidence
Fountain View
The AddressResidence Sky
View
The AddressJumeirah Gate
Address HarbourPoint
Conclusions
The Premiums of Serviced to Standard Units Off-Plan vs Ready in the Serviced Apartment Space
Government Related Entity
(GRE) developers account for
34% of existing stock in the
serviced/hotel apartment
space, and this number is
expected to further reduce to
19% by 2021,
A Look into Supply Dynamics A Closer Look into the Address
A price analysis of
serviced/hotel apartments
reveals that they trade at a
significant premium
compared to the standard
residential units
A price analysis of standard units to serviced apartments
reveals that the latter trades at a premium of 40-90% across
various communities in the ready space (Palm Jumeirah,
Downtown and Dubai Marina).
Whereas in the off-plan space we can witness that developers
have already factored some portion of the premium in the
launch prices. The serviced/hotel apartments in Creek Harbor
and The Hills trade at premium in the range of 50-60% to their
standard counterparts.
A price analysis of the Address hotels in downtown against the
community index reveals that the former has outperformed. For
example the Address Lake Hotel has appreciated by 136%, whereas in
the in same time period the index has risen only 38%. Similarly in the
case of Address Blvd investors have experience capital gains of 80%,
whereas the index has risen only 10%.
Within the Address portfolio, we can witness that on average there is a
30% discount for the off-plan projects compared to ready, implying that
as the projects come closer to completion we can expect a uptick in
pricing.
An analysis of Downtown serviced/hotel apartments reveals that
ready units trade at a premium compared to their off-plan
counterparts, where as in Business Bay the reverse has transpired. This
indicates that in Business Bay, the quality of serviced apartments is
generally increasing with better brand names now coming in.
In Palm Jumeirah we can witness that the ready serviced apartments
trade at a discount by an average of 20%. We opine reason for the
premium in off-plan units are the rental guarantees and extended
payment plans offered by developers, and that these guarantees have
for the most part been baked into the launch prices of the projects.
Over the next 5 years it is expected that the serviced
apartment/hotel stock is to double. The expected surge in the
serviced apartment space reflects the optimism regarding
tourism numbers, and is in line with the increase in hotels
throughout the city as well.
Government Related Entity (GRE) developers account for 34%
of existing stock in the serviced/hotel apartment space, and
this number is expected to further reduce to 19% by 2021.
GCP believes in in-depth planning and discipline as a
mechanism to identify and exploit market discrepancy
and capitalize on diversified revenue streams.
Our purpose is to manage, direct, and create wealth for
our clients.
GCP is the author for these research reports
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