UAE MARKET REVIEW AND FORECAST 2021 - Research - Knight Frank
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UAE MARKET REVIEW AND FORECAST 2021 33.0%, which sits below historic averages. This in softer level of demand was largely underpinned putting further pressure on prices. part has underpinned moderation in sales price by a significant drop-off in off-plan sales, which Whilst Dubai’s prime residential market saw and rental rate declines and even in some cases fell by 32.1% in 2020. Secondary market sales prices decrease by 4.2% in the year to December increases. on the other hand increased by 7.2% over the 2020, we are beginning to see signs of a recovery same period and for the first time in five years in price performance in some prime sub-markets. accounted for the largest share of activity in the For example in the six months to December 2020, market. Dubai residential market apartment and villa prices on the Palm Jumeirah Average mainstream prices in Dubai fell by 7.1% increased by 5.1% and 9.4% respectively. Over review in the 12 months to December 2020. Price falls the same period, villa prices in District One Despite Dubai seeing some of the most stringent were largely concentrated in the apartments have increased by 3.5%. Other prime markets lockdown measures in the UAE throughout the segment of the market, where prices fell by such as Downtown Dubai and Emirates Hills are early stages of the pandemic, residential demand 8.0%, whereas villa prices were relatively stable. also showing similar signs of improvement in was relatively resilient in 2020. Initial data shows Average prices for new-build apartments fell market performance. More so, in contrast to the that almost 33,000 residential units transacted on average by 4.0% in the year to December mainstream market, prime transaction volumes in 2020, down 16.4% compared to 2019. This 2020, with softer demand for off-plan properties increased by 7.9% in 2020 compared to 2019. Abu Dhabi, Mainstream Price Abu Dhabi, Mainstream Rental Abu Dhabi, Residential Mainstream Performance, Year-on-Year % Change Performance, Year-on-Year % Change Gross Yields to December 2020 to December 2020 Macroeconomic overview Looking ahead, the UAE’s GDP is forecast to average by 2.0% in 2020, down from 7.5% a year All Properties Apartments Villas All Properties Apartments Villas All Properties Apartments Villas expand by 1.1% in 2021 and by 4.0% in 2022, earlier. Whilst over this period we have seen The adage of “there are decades where nothing according to data from Oxford Economics. average apartment prices fall by 3.0%, average happens; and there are weeks where decades During this period, GDP growth rates between prices for villas have increased by 2.0%, the first 3.0% 0.0% happen” certainly applies to the weeks of March Abu Dhabi and Dubai are initially expected annual increase in prices since 2014. 0.5% 2020. As the COVID-19 pandemic raged, we saw 2.0% 2.0% to fragment, where Abu Dhabi and Dubai are -1.0% Residential rents in Abu Dhabi continued to social mobility norms curtailed in a manner expected to record growth rates of 1.6% and 5.4% 1.0% -1.5% Dec-19 6.7% 7.0% 5.8% soften in 2020, with average rents decreasing by never experienced before. Almost uniformly, the in 2021, before converging to 5.3% and 5.0% in 4.3%. Over this period, average apartment and 0.0% -2.0% world came to a standstill, with flights grounded, 2022 respectively. villa rents fell by 4.6% and 2.6% respectively. -2.5% -2.6% businesses shuttered and curfews enacted in -1.0% -3.0% large swathes across the world. As at December 2020, gross yields in Abu Dhabi’s Dec-20 6.5% 6.9% 5.5% -2.0% -2.0% -3.5% Such a seismic shock would also go on to have Abu Dhabi residential mainstream market registered on average at -4.0% -4.3% 6.5%, down from 6.7% a year earlier. -3.0% -3.0% major impacts on global economic activity, market review -4.5% -4.6% where it is estimated that global GDP decreased A total of 2,815 units were delivered in Abu Dhabi -4.0% -5.0% by 3.5% in 2020. In the UAE, initial estimates Residential sales prices in Abu Dhabi fell on in 2020, an estimated materialisation rate of Source: Knight Frank Research, REIDIN Source: Knight Frank Research, REIDIN Source: Knight Frank Research, REIDIN show that GDP is expected to contract by 7.7% in 2020; a trend underpinned by the fact its core economic sectors, the hydrocarbon, tourism and retail sectors, are arguably amongst the most affected by the pandemic. However, despite this Dubai, Mainstream Price Performance, Dubai, Mainstream Rental Dubai, Residential Mainstream shock, the UAE’s commendable handling of the Year-on-Year % Change to December Performance, Year-on-Year % Change Gross Yields pandemic and fiscal and monetary stimulus UAE GDP, Year-on-Year Change 2020 to December 2020 plans have seen recovery ensue in these and All Properties Apartments Villas New Build All Properties Apartments Villas All Properties Apartments Villas 8.0% other sectors. Apartments 6.0% The UAE’s Purchasing Managers’ Index (PMI), 4.0% 0.0% 0.0% which tracks the country’s private non-oil -0.4% economy, shows that business activity has 2.0% -1.0% -2.0% stabilised in Q3 and Q4 2020, where the index -2.0% 0.0% -4.0% Dec-19 6.4% 6.7% 5.4% registered average readings of 50.4 and 50.1 -4.4% -3.0% respectively. However, the PMI’s employment -2.0% -6.0% -4.0% -4.0% index fell for the 12th month in a row, where -4.0% -5.0% -8.0% in 2020 employment in the UAE is expected to Dec-20 6.1% 6.3% 5.2% decrease by 8.5%. Job cuts are expected to be -6.0% -6.0% -10.0% largely focused in the transport, industry and -7.0% -7.1% -8.0% -12.0% consumer services sectors, whereas the financial -12.2% 1/1/15 1/1/16 1/1/17 1/1/18 1/1/19 1/1/20 1/1/21 1/1/22 -8.0% -8.0% -13.3% and business services sector is expected to see a -10.0% -14.0% UAE GDP Abu Dhabi Dubai -9.0% relatively immaterial rate of decline. Source: Knight Frank Research, REIDIN Source: Knight Frank Research, REIDIN Source: Knight Frank Research, REIDIN Source: Knight Frank Research, Macrobond and the Central Bank of the UAE Please refer to the important notice at the end of this report.
UAE MARKET REVIEW AND FORECAST 2021 UAE MARKET REVIEW AND FORECAST 2021 Due to the continuing influx of supply – where outperformance to the latter. Abu Dhabi office market uncertainty, unsurprisingly, we have seen in 2020, 35,808 units were delivered – and limited levels of activity from new market existing vacancy in the market, average rents in In rental markets, even with employment levels review entrants in Dubai’s corporate occupier market. Abu Dhabi Average Office Rents (AED/ sq m/ p.a.) expected to pick up in 2021, we expect that rental Dubai have fallen by 12.2% in 2020, up from the In Abu Dhabi’s occupier market, we continue to Where we are seeing new market entrants rates will continue to decline at material rates. 2,500 8.1% decline registered a year earlier. As is the see occupiers take flight to quality, as they look or existing occupiers seeking additional In Dubai, due to influx of supply and existing case in the sales market, market performance is to take advantage of softer market conditions, office space, it is largely driven by project led vacancy, which has increased by 1.8 percentage 2,000 fragmented, where in the year to December 2020, although in the Prime market, landlords are demand. The vast majority of demand in the points over the course of 2020 to 18.3%, the apartment rents fell by 13.3% whereas villa rents resolute on rental rates. market continues to stem from existing market rate of decline is only expected to moderate AED/SQM/P.A. 1,500 softened by 4.4%. participants looking to consolidate operations or marginally. In Abu Dhabi, challenging economic Demand remains relatively subdued and geared improve the quality of their space. In response to conditions are likely to keep the current rate of towards the 100 square metres segment, with 1,000 this, landlords, in an attempt to retain tenants, decline persistent throughout 2021. fitted out space requirements being favoured. are offering competitive rent-free periods. More UAE residential market Taking a longer-term view on the market, we Large shell and core requirements remain often than not, many occupiers are exercising 500 relatively rare, particularly those originating outlook expect new supply levels to begin to ease from such options, particularly as many are reluctant 0 2022 in Abu Dhabi and from late 2023 in Dubai. from the private sector. As a result, the market to undertake capital-intensive office fit-outs Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Whilst there are a broad range of measures in In Abu Dhabi and Dubai, new launches in 2020 remains tenant-favoured. at this time and such contributions from place designed to entice demand for residential were at the lowest levels since 2004 and 2012 In the year to Q4 2020, Prime rents in Abu Dhabi landlords are still only reserved for larger space Grade A office rents Prime office rents Citywide office rents Source: Knight Frank Research property, aimed at both residents and respectively. In Abu Dhabi, the number of have increased by 2.3% to an average of AED requirements. international investors, the UAE’s residential residential launches are expected to increase 1,660 (sqm/p.a.). Over the same period, Grade A As at Q4 2020, average Prime rents in Dubai market continues to face a range of challenges over the coming year and given the relatively rents fell by 3.8% to AED 1,203 (sqm/p.a.). and registered at AED 209 (sq.ft./p.a.), down 3.0% going forward. These challenges stem from both restrained levels of completions over recent Citywide rents by 3.0% to AED 939,(sqm/p.a.). compared to the same period a year earlier. excess levels of supply and now weaker demand years, we expect this not to have a drastic Abu Dubai Office Supply levels. The average vacancy rate in Abu Dhabi as at Q4 Grade A office rental rates have seen rates of impact on the market. In Dubai, the number 4,500,000 2020, registered at 21.9%. Vacancy rates in Prime declines moderate on average in the 12-months In 2021, both Abu Dhabi and Dubai’s residential of residential launches are expected to remain and Grade A stock have decreased and remained to Q4 2020, where rents fell by 4.0%, registering 4,000,000 market are expected to record historic levels materially below the average seen over recent stable respectively, whereas Citywide stock has at an average rate of AED 129 (sq.ft./p.a.). Estimated supply, miilion sq m of GLA of new supply of circa 14,000 and 83,000 units years. 3,500,000 seen vacancy rates increase by 3.7 percentage Citywide rents declined by 6.9% over the same respectively. Even, as expected, this scheduled Assuming these trends remain constant, 3,000,000 points. period to an average of AED 99 (sq.ft./p.a.). supply only materialises to historic precedents, mortgage rates remain at or around historic 2,500,000 we are likely to see sales prices continue to Vacancy in Dubai’s office market is estimated to lows and loan-to-value ratios are kept at current decrease at a similar rate to 2020. In Dubai, we have increased by 5.5 percentage points in 2020 2,000,000 levels, we are likely to see prices begin to bottom to 24.3%. Whilst Prime and Grade A vacancy expect market performance to fragment across out during 2022. In prime markets with limited Dubai office market review rates have edged higher over the last year, 1,500,000 prime and non-prime neighbourhoods, whereby levels of new supply, we are likely to see prices the former segment is expected to show relative Given current economic conditions and market Citywide stock has seen the most significant 1,000,000 being to recover six-months prior to this. increase in vacancy rates. 500,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Dubai, Residential Transaction UAE office market outlook Existing office supply Forecast office supply Source: Knight Frank Research There has been many discussions about the 5000 future of office spaces and their requirements 4500 going forward. There is no doubt that the will be particularly relevant and are already From a supply perspective during 2020, in Abu 4000 pandemic will change working patterns and as being played out. First, as with many markets Dhabi, an estimated 59,000 square metres of 3500 a result, the form and function of office space around the world, the UAE has a great quantity office space is set was delivered. Over the next 3000 will also need to change, however, we believe of low quality space. We believe this is the first two years we expect a further 356,000 square 2500 2000 the office will remain central to our working segment of space that will be shed, as occupiers metres of space to be added, bringing the total 1500 lives. Going forward, the office will be more take advantage of softer market conditions and GLA to 4.10 million square metres by 2023. As a 1000 than just a work setting but rather a place for take flight to quality. large portion of these additions continue to be in 500 socialisation, for collaboration, for innovation non-core locations or are for owner-occupation, 0 More so, going forward we will see demand for and, increasingly, for education. This topic is we expect that they will not have a material 40 both conventional office space but also for space discussed in Knight Frank’s 12 dynamics of the impact on market performance going forward. 30 as a service, where occupiers can have the option post-Covid19- workplace report, which outlines 20 to take additional space, likely provided by an In Dubai, as at 2020, an estimated 241,000 the 12 dynamics of the post-COVID-19 workplace 10 operator which specialises in such services. square metres of GLA was delivered, bringing the on a corporate, market and building level. More % 0 Not only will this be required due to economic total GLA to 10.2 million square metres. The vast so, we note that in most cases, the pandemic has -10 uncertainties which will persist over the coming majority of this new supply is classed as Grade fast-tracked changes in working patterns and -20 years, but also due to the nature if project driven A and as a result, we are likely to see further office space requirements that we were currently -30 work in the region. This demand for quality pressure be exerted on rents in this segment seeing. Therefore, the pandemic is not the root -40 conventional and serviced office space going of the market. This trend is likely to be further 2018 2019 2020 cause of the change but an accelerator of it. forward, with access to a range of amenities and exacerbated in 2021 where all of the circa 75,000 Total Ready Off-Plan Ready, YTD Year-On-Year % Change Off-Plan, YTD Year-On-Year % Change Total, YTD Year-On-Year % Change For market occupiers in the UAE, some of the service, is expected to create new benchmarks, square metres of space is classified as Grade A Source: Knight Frank Research trends highlighted in the aforementioned report both in terms of office product and pricing. space.
UAE MARKET REVIEW AND FORECAST 2021 UAE MARKET REVIEW AND FORECAST 2021 UAE retail market review Prior to the onset of the pandemic, the UAE’s Abu Dhabi Retail Activity Dubai Office Supply retail sector was already under considerable 10 pressure. This slowdown in demand was 12,000,000 underpinned by sluggish economic growth, a Data from Google’s Mobility 0 substantial increase in supply of regional and 10,000,000 Index shows that, post -2.00% neighbourhood retail and a growing and a price lockdown to the end of 2020, Estimated supply, miilion sq m of GLA -10 competitive e-commerce sector. 8,000,000 the total visitor numbers -20 Percent -17.86% Therefore, the onset of the pandemic, which 6,000,000 to Abu Dhabi and Dubai’s prohibited non-essential stores from operating retail and recreational -30 without restrictions for months, has pushed 4,000,000 establishments on average sat many retailers to the brink and beyond. As at -40 2020, in the UAE, annual resident based retail at 31.0% and 36.2% below their spending is forecast to have declined by AED8.2 2,000,000 pre-pandemic baselines -50 billion. Around 47% of this decline is expected 0 -60 Novemver December October March August September to be attributable to Dubai, where resident based April June July May 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 retail spending is expected to decrease by 4.7%. 2020 2021 Existing office supply Forecast office supply Source: Knight Frank Research In Abu Dhabi, resident based retail spend is Retail & Recreation Grocery & Pharmacy Source: Knight Frank, Macroboard expected to decline by AED2.3 billion, equating to a decline of around 4.0%. of development of multi-channel operators in However, whilst resident based spending is the UAE, which will in turn boost physical retail. important to the market, for certain markets, Dubai Average Office Rents (AED/ sq ft/ p.a.) Pure-play online retailers and multi-channel Dubai Retail Activity particularly Dubai, tourism spending accounts retailers will not wholly displace physical retail. 10 Restriction Eased for a significant portion of total demand. As a 300 Instead, at maturity where physical retailers take 0 result, it is not surprising that we continue to advantage of the technologies on offer, the lines 3.14% 250 see footfall levels sit considerably below pre- that differentiate the two are likely to converge. -10 pandemic baselines. Data from Google’s Mobility More so, if turnover rents become the norm, from 200 -20 Index shows that, post lockdown to the end of a landlords perspective this may provide access -18.43% AED/SQM/P.A. 2020, the total visitor numbers to Abu Dhabi and Percent 150 to additional revenue lines which may help -30 Dubai’s retail and recreational establishments on bolster returns. -40 average sat at 31.0% and 36.2% below their pre- 100 That being said, with margins shrinking and pandemic baselines. -50 50 competition increasing we are likely to see -70 Given this continued lack of footfall, many further pressure exerted on rents. Additional 0 landlords have transitioned, at least for the short competition in the market is not only stemming -60 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 run, to turnover rent models. Large landlords from e-commerce but also from additional -80 have also enacted tiered rent relief policies. December Novemver physical retail. In 2020, Abu Dhabi has seen October March August September April June July May Listed retail landlords provide the clearest Prime office rents Grade A office rents Citywide office rents Source: Knight Frank Research 87,000 square metres of GLA being added, taking picture of the scale of the challenge faced by the total GLA to 1.99m square metres. By 2024, 2020 2021 Retail & Recreation Grocery & Pharmacy Source: Knight Frank, Macroboard the sector. Emaar Malls has seen its base rent we expect this to increase to 2.70m square metres revenues decrease by 60% y-o-y in the year-to- of GLA. date to September 2020, whilst its turnover rent Definitions (With guidance from the Best Practice Standards for Office Developments During 2020, Dubai has seen 202,000 square revenues have increased by 437% over the same (2015 V2.0) by the Middle East Council for metres of GLA added, bringing its total GLA to period. Laudably, occupancy for Emaar Malls 3.86m square metres. By 2024, Knight Frank Abu Dhabi Existing Retail Supply, Dubai Existing Retail Supply, over this period fell by only one percentage Offices (MECO): By Type By Type expects Dubai’s total GLA to increase to 4.77m point. Prime: The Prime segment represents the square metres. 0.4% 2.0% 6.4% 2.3% average rent of the top 5% of all lettings in 0.5% 1.6% 3.0% the market This additional supply is likely to continue localising demand at the expense of non-prime UAE retail market outlook Grade A: This segment of the market assets that have a limited number of demand represents offices which are adjacent to the Looking ahead, reduced footfall levels and the drivers. Whilst historically these secondary city centre, with rents on average higher Total Supply: 1.99 million sqm fast-tracked adoption of e-commerce over the assets have been able to somewhat protect Total Supply: 3.86 million sqm than those in the citywide market last year will continue to provide considerable income by undertaking relatively low cost headwinds to the UAE’s retail sector. However, Citywide: This segment represents the repurposing projects, such as utilising vacant 95.5% 88.3% this is not to say that the sector is to be written broader city offices market, outside the units as offices and co-working hubs, the surge off. Physical retail destinations, particularly ‘core city’, where usually a significant of in prime assets offering such services may crowd Mall Strip Mall Special Mall Special purpose purpose those supported by demand drivers, will office buildings are grouped these secondary assets out of the market. continue to attract both retailers and footfall. Souk Type Community Mall Open Air Centre Community Mall The pandemic may in fact accelerate the pace Source: Knight Frank Research Source: Knight Frank Research
UAE MARKET REVIEW AND FORECAST 2021 UAE MARKET REVIEW AND FORECAST 2021 UAE hospitality market investment horizons, where investment decisions headline rents in Abu Dhabi and Dubai fell by are more closely correlated with the longer term 9.4% and 17.6% in the year to Q4 2020. review outlook, investment in the sector will remain UAE Key Performance Indicators, 2020 vs 2019 The COVID-19 pandemic has presented the global steadfast. hospitality market with an unprecedented set OCC ADR RevPAR Room Rev Room Avail Room Sold UAE industrial market of challenges. The sector was not only the first to be affected but to date has undoubtedly been United Arab Emirates -29.3% -16.5% -41.0% -43.1% -3.6% -31.8% outlook the hardest hit. In addition to this, it is also most UAE industrial market Looking ahead, we expect that average rents Abu Dhabi review -16.8% -24.2% -37.0% -37.3% -0.5% -17.2% likely to see long-lasting changes which have been are likely to soften further over the coming six bought about purely by the pandemic. Dubai -34.5% -15.4% -44.6% -46.7% -3.8% -37.0% months before we see a floor in rental rates. The UAE’s industrial market can largely be First, we have seen activity in the global travel Ras Al Khaimah singled out as one of the few sectors to benefit With the 100% foreign ownership legislation -29.1% 13.2% -19.7% -27.1% -9.1% -35.6% market decline dramatically. In 2020, the from the pandemic. now in effect, consolidation of space is likely to total number of flights globally fell from its Sharjah -30.2% -11.9% -38.6% -42.0% -5.6% -34.2% continue. This will not only drive demand for Demand has remained strong in both Free Zone 2019 average of almost 115,000 per day to lows larger sites, but is likely to contribute to rents Fujairah -16.9% 10.1% -8.5% -14.1% -6.1% -22.0% and non-Free Zone locations throughout 2020. of around 28,000 in the early stages of the softening. However, as discussed, the lack of For the former, many firms operating primarily pandemic. As lockdown restrictions around the Ajman -27.9% -0.9% -28.5% -30.8% -3.2% -30.2% institutional grade stock is likely to limit the true as exporters have seen strong growth in their world eased and traveler confidence returned, extent of this demand coming to fruition. businesses, largely due to supply bottlenecks activity has partially recovered to an average Source: STR Global in international supply chains and as a result of almost 70,000 flights per day in 2020, are looking to increase the quantum of space representing a decline of 39.1% from a year earlier. occupied. For the latter, demand has largely Abu Dubai Average Industrial Rents, AED per sq.m. per annum In turn, total international tourism arrivals stemmed from the requirement of last mile have also decreased, with the World Tourism Global, Total Tracked Commercial Flights fulfilment centres, a trend underpinned by the 1000 Organisation estimating that in 2020, 130,000 increased utilisation of e-commerce platforms, a 900 international tourist arrivals were 74% lower 120,000 significant by-product of the pandemic. 800 than in 2019, with some 1.07 billion fewer tourists 110,000 International demand has been less forthcoming travelling in 2020. 2019 Avg: 700 10,0000 114,912 over the course of the year. However, as travel AED/Sq.ft. 600 The UAE has seen similar trends unfold, where 90,000 routes begins to reopen we are seeing early signs Number of Flights it all but grounded flights in March 2020 with 8,0000 of growth from this segment of the market. 500 activity resuming, in parts, in early July 2020. 70,000 Enquiries to date have mostly originated from 400 2019 Avg: As a result, passenger traffic volumes at Dubai 69,988 firms looking to near-shore operations in global 60,000 300 International Airport, fell to 17 million in 2020, hubs. More so, in Abu Dhabi we have seen a 50,000 down from 86.4 million in the year before. strong surge in enquiries from firms looking to 200 4,0000 set-up vertical farming operations, on the back 100 Despite efforts to reopen, visitation remains 3,0000 of government led initiatives. As a result of the materially below pre-pandemic norms. Using 20,000 0 pandemic, food security has been a key area Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Jan Dec Mar Apr May Jun Jul Aug Sep Oct Nov Feb Dubai as a proxy for demand shows that, where the government is looking increasingly visitation in the year-to-date to November 2020 Number of commercial flights 2019 Number of commercial flights 2020 Number of commercial flights 2021 to achieve self-sufficiency. In the short-run, to Abu Dhabi Airport Free zone ICAD1 Mussafah Kizad Al Markaz is estimated to total around 5.37m, down 64.2% Source: Knight Frank Research FlightRadar24 AB achieve security, demand from government Source: Knight Frank Research year-on-year. Therefore, it is unsurprising that related entities for industrial units suitable we have seen performance decline across almost for foodstuffs storage has also seen a marked every Key Performance Indicator. Year-on-Year UAE hospitality market increase. in the year to date December 2020, citywide RevPARs in the UAE have fallen between 8.5% outlook Availability of institutional quality assets is still Dubai, Average Industrial Rents, AED per sq.ft. per annum and 44.6%. There have been markets which have limited in the UAE which poses a significant Looking ahead, despite the drive to inoculate recorded relative outperformance, with demand challenge to the development of the market. 60 the global population we are still not expecting to these markets largely stemming from diverted This is the case in Free Zone and non-Free Zone tourism being able to return in a meaningful 50 demand from UAE residents, who are either locations alike, where many occupiers are looking manner until the latter part of 2022. This is unwilling or unable to holiday in their preferred to consolidate operations and increase the quality despite the UAE’s commendable handling of the 40 destinations and instead are choosing to holiday of space they occupy. In non-Free Zone locations pandemic, establishment of air-bridges and its within the UAE. Such markets of note are Abu Passenger traffic volumes this trend is particularly acute in the standalone 30 AED/Sq.ft. relatively agreeable weather for most parts of the Dhabi, Ras Al-Khaimah, Fujairah and the beach warehouse segment of the market where vacancy year. at Dubai International 20 property market segment in Dubai. rates now stand below 5%. More so, in these on- The rescheduled Expo 2020 will help bolster Airport, fell to 17 million shore locations, this demand largely stems from 10 On a broader UAE level, performance data since demand, although visitation is unlikely to match in 2020, down from 86.4 changing consumption patterns where there are the reopening of borders in July to December the pre-pandemic expectations of 25 million million in the year before now a growing number of requirements from 0 2020, paints a significantly better picture. Over Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 visitors. Despite challenging market conditions, multi-channel retailers looking to improve their this period, we have seen the UAE’s Average Daily asset owners understand that this is a short term last mile delivery networks. Rate (ADR) increase by 68.4% and occupancy Al Quoz Al Quoz (Class 2) Dubai Industrial Park Dubai Maritime City Dubai South shock, rather a long term structural change to the rates increase by 29.7 percentage points, resulting With the market seeing high levels of non- market. As a result, given the sector’s favourable DIP JAFZA Class 2 National Industries Park Jebel Ali Ind (Class 2) JAFZA in Revenue per Available Room (RevPAR) institutional grade stock and institutional grade long term outlook and investors’ extended Source: Knight Frank Research increasing by 201%. market remaining tenant favourable, average
KEY CONTACTS HEAD OF MIDDLE EAST & AFRICA RESEARCH REAL ESTATE STRATEGY & CONSULTING James Lewis, MRICS Taimur Khan Shehzad Jamal Managing Director Associate Partner Partner +971 50 2265 368 +971 56 4202 312 +971 56 4101 298 james.lewis@knightfrank.com taimur.khan@me.knightfrank.com shehzad.jamal@me.knightfrank.com HOSPITALITY & LEISURE VALUATION & ADVISORY SERVICES VALUATION & ADVISORY SERVICES Stephen Flanagan, MRICS Jonathan Jeffrey, MRICS Ali Manzoor Partner Partner Partner +971 50 8133 402 +971 56 1100 251 +971 56 4202 314 stephen.flanagan@me.knightfrank.com jonathan.jeffrey@me.knightfrank.com ali.manzoor@me.knightfrank.com ME CAPITAL MARKETS AND OSCA MENA RESIDENTIAL MARKETING Andrew Love Maria Morris Thomas Farmer Partner Partner Associate Partner +971 50 777 9595 +971 56 4542 983 +971 56 4204 312 andrew.love@me.knightfrank.com maria.morris@me.knightfrank.com thomas.farmer@me.knightfrank.com Knight Frank Research Reports Important Notice are available at © Knight Frank 2021 - This report is published for general information only and not to be relied upon in any way. Although high KnightFrank.ae/Research standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears. Knight Frank UAE Limited (Dubai Branch) Prime Star International Real Estate Brokers (PSIREB RERA ORN: 11964 trading as Knight Frank with registration number 653414. Our registered office is: 5th Floor, Building 2, Emaar Business Park, PO Box 487207, Dubai, UAE. @KnightFrankME @KnightFrankMiddleEast @KnightFrankMiddleEast @KnightFrankME @KnightFrankMiddleEast
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