Dubai Real Estate Market Overview - Q3 2014
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Q3 2014 Dubai Real Estate Market Overview
Dubai Market Summary
The Dubai real estate market saw a welcome levelling-off during the summer months. The
broad based recovery witnessed in the residential sector over the past 18 months has
now slowed down, as rental prices and sale values have stabilized in most locations.
While new project’s continue to be announced, these have no immediate impact on supply
as they are phased over a longer timeframe. Although the hotel sector underperformed
over the month of July, registering 50% occupancy rates, it is expected to trend upwards
into the peak season in the last quarter of the year. Elsewhere in the market, the retail
segment maintained its solid growth while the recovery of the office sector remains
patchy, as high levels of supply continue to constrain the market.
Dubai Prime Rental Clock
Q3 2013
Rental Rents
Growth Falling
Slowing
Rental Rents
Growth Bottoming
Accelerating Out
Hotel*
Residential
Retail Office
Q3 2014
Residential
Rental Rents
Growth Falling
Slowing
Hotel*
Rental Rents
Growth Bottoming
Accelerating Out
Retail
Office
* 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: JLLDubai Office Market Overview
Market Summary Hot Topics
The third quarter of 2014 continued to see a two-tier office market. A number of local and international companies looking for
While prime CBD rents have remained stable over the quarter, headquarters in Dubai are going for build-to-suit options. While
they are expected to increase as demand remains strong for Habib Bank AG Zurich on Sheikh Zayed Road is one example,
Grade A office space. Meanwhile, rents in secondary locations are others remain in the market on the look out for suitable land
expected to remain under downward pressure as more Grade A plots.
office space enters the market by 2015. On the demand side,
As occupancy rates in the core DIFC buildings (e.g. The Gate)
corporates are becoming increasingly aware of the importance of
remain high, we see a spill over in demand to other non-DIFC
sustainability and there is heightened interest for LEED certified
managed buildings in the precinct (e.g. Index Tower/Burj
buildings. As traffic congestion increases, tenants and therefore
Daman). These offer rents 25%-35% lower than the DIFC
owners are also paying more attention to access and parking
buildings and are of Grade A quality.
issues.
Office Supply
Current Supply (2011–2014) Future Supply (2014–2016)
6.3M 6.9M 7.3M 7.4M 0.4M 0.6M 0.5M
sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA)
2011 2012 2013 Q3 2014 Q4 2014 2015 2016
Office Performance
CBD Vacancy Rate Prime CBD Rents (per sq m)
30% 24% 1,830 1,860
Q3 2013 Q3 2014
AED Q3 2013 Q3 2014
2014 / 2015 2014 / 2015
Outlook Outlook
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014Dubai Residential Market Overview
Market Summary Hot Topics
While property values in Dubai have increased over the past As existing communities become fully established, developers
year, the third quarter saw more subdued growth levels in both are looking at alternative locations for their new projects (e.g.
apartment & villa sale prices & rents. Average rents & sale Tecom have announced Lantana Villas in Umm Suqeim / Jersey
prices grew by just 2% & 1% respectively in Q3 (down from 3% Properties launched the first freehold property project in Mirdif;
& 6% in Q2). Driven by tighter government regulations and an Mirdif Tulip).
increasing mismatch between buyer and seller expectations, the
There is a shift in developer attitudes towards the off-plan sales
residential sector is now experiencing a welcomed period of
market. Developers are seeking to attract more end-users by
stability. As the various new project announcements will have no
introducing flexible payment terms, with a higher proportion of
immediate effect on supply, we expect rents & prices to remain
the final price payable due after handover.
relatively stable over the remainder of 2014, with the market
behaving in a more sustainable and healthy manner.
Residential Supply
Current Supply (2011–2014) Future Supply (2014–2016)
342K 356K 366K 373K 9K 22K 11K
units units units units units units units
2011 2012 2013 Q3 2014 Q4 2014 2015 2016
Residential
Residential Performance
Performance
Dubai Residential Property Rent and Sale Indices
Apartment Sales Rentals
Villa Sales Rentals
residential 1% 2% residential 3% 0%
Q-o-Q Q-o-Q
Sales Rentals Sales Rentals
34% 24% 20% 9%
Source : REIDIN Y-o-Y Source : REIDIN Y-o-Y
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014Dubai Retail Market Overview
Market Summary Hot Topics
The Dubai retail market has witnessed the completion of two The Road and Transport Authority (RTA) has appointed JLL to
projects in the third quarter of 2014. The Discovery Gardens lease and manage 10,000 sq m of retail space at the Red and
(8,700 sq m) and Jumeirah Park (10,600 sq m) Community Green line metro stations. In 2013, the metro attracted on
Centers have increased the total retail stock to 2.9 million sq m. average almost 450,000 passengers a day and is expected to
While size still matters (Mall of the World), some developers are draw in additional retail revenues for Dubai.
shifting their focus to community & neighborhood centers that
While the majority of supply in the residential sector is expected
capture the attention of residents, and generate additional
to enter the pipeline in 2017 and beyond, the retail market will
recurring revenues as opposed to cyclical residential sales.
witness more stock over the next two years.
Three such malls are scheduled for completion over the last
quarter of the year.
Retail Supply
Current Supply (2011–2014) Future Supply (2014–2016)
2.7M 2.8M 2.9M 2.9M 20K 256K 396K
sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA) sq m (GLA)
2011 2012 2013 Q3 2014 Q4 2014 2015 2016
Retail Performance
Vacancy Rate Average Retail Rents (per sq m)
Super Regional Malls Super Regional Malls
13% 8% Primary 5,000 7,700
Q3 2013 Q3 2014
Q3 2013 Q3 2014 AED
Secondary 1,725 2,400
Q3 2013 Q3 2014
2014 / 2015 2014 / 2015
Outlook Outlook
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014Dubai Hotel Market Overview
Market Summary Hot Topics
Year to August saw occupancy rates and average daily room While the bulk of the supply pipeline is currently positioned in the
rates remain largely unchanged Y-o-Y. On the supply side, the upscale segment, initiatives to promote and facilitate
third quarter of 2014 saw the opening of the Warwick Hotel on development of midscale hotels are being undertaken by the
Sheikh Zayed Road and Doubletree by Hilton JBR, increasing tourism authorities.
the current hotel stock to 62,800 keys. While the remaining three
Following the sale of the Movenpick JBR earlier in 2014, in the
months of the year are expected to witness some openings, the
coming years we can expect to see more high-profile hotel
sector is likely to maintain its strong performance as Dubai
transactions as a result the result of a more transparent and
continues to position itself as a leading tourist destination.
sophisticated market.
Hotel Supply
Current Supply (2011–2014) Future Supply (2014–2017)
53,400 57,000 60,150 62,800 2,400 2,800 6,000 7,600
keys keys keys keys keys keys keys keys
2011 2012 2013 Q3 2014 Q4 2014 2015 2016 2017
Hotel Performance
Occupancy Rate Average Daily Rate
79% 78% 235 238
YT Aug YT Aug
YT Aug YT Aug USD
2013 2014 2013 2014
2014 / 2015 2014 / 2015
Outlook Outlook
Source : STR Global
Source : STR Global
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014Definitions and methodology Interpretation of market positions: 6 o’clock 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 o’clock 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 o’clock 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 o’ clock 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. The supply and stock data is based on our quarterly survey of 53 sub markets, starting from 2009. This data excludes labour accommodation and local Emirati housing supply. Completed buildings refer to those handed over for immediate occupation. Future supply is based on projects in the announced and under construction phases. Residential performance data is based on the REIDIN monthly index. REIDIN Dubai Residential Property Price Indices (RPPIs) use monthly sample of offered/asked listing price data and land registry price data (trans- action data). Index series are set at 100 starting at the beginning of each data set. The supply data is based on our quarterly survey of 32 sub-markets, starting from 2009. Completed buildings refer to those handed over for immediate occupation. Future supply is based on projects in the announced and under construction phases. Central Business District includes DIFC, DTCD, Sheikh Zayed Road, Burj Khalifa Downtown. Prime Office Rent represents the top open-market net rent (exclusive of service charge) for a new lease that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date. Data relates to headline rents, exclusive of incentives. Vacancy rate is based on estimates from the JLL Agency team, and represents the average rate across a basket of buildings in the CBD. Classification of Retail Centres 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 • Neighbourhood Malls have a GLA of 3,000 - 10,000 sq m • Convenience Malls have a GLA of less than 3,000 sq m The supply data is based on our quarterly survey of 45 sub-markets, starting from 2009. Future supply is based on projects in the announced and under construction phases. Malls are categorized based on their turnover levels. Primary Malls are the good performing malls with high levels of turnover. Secondary Malls are the average performing malls with lower levels of turnover. Prime Rent Shopping Centre represents the top open market net rent expected for a standard in line unit shop of 100 sq m at super regional malls.. 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 malls. Hotel room supply is based on existing supply figures provided by DTCM as well as future hotel development data tracked by JLL Hotels. Room supply includes all graded supply and excludes serviced apartments. STR performance data is based on a monthly survey conducted by STR Global on a sample of more than 32,000 rooms across Dubai.
Dubai Emaar Square Building 1, Office 403 Sheikh Zayed Road PO Box 214029 Dubai, UAE Tel: +971 4 426 6999 Fax: +971 4 365 3260 For questions and inquires about the Dubai real estate market, please contact: Dana Williamson Andrew Williamson Chiheb Ben-Mahmoud Head of Agency Head of Retail Head of Hotels & Hospitality MENA MENA MEA dana.williamson@eu.jll.com andrew.williamson@eu.jll.com chiheb.ben-mahmoud@eu.jll.com Craig Plumb Dana Salbak Head of Research Senior Research Analyst MENA MENA craig.plumb@eu.jll.com dana.salbak@eu.jll.com @JLLMENA youtube.com/joneslanglasalle linkedin.com/companies/jll joneslanglasalleblog.com/EMEAResearch jll-mena.com COPYRIGHT © JONES LANG LASALLE IP, INC. 2014 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.
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