The Dubai Real Estate Market - Q3 2018 - JLL MENA
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Dubai The Dubai Real Estate Market Q3 2018
Dubai The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018
Market Summary
Cityscape remains a good barometer of sentiment towards the Dubai
real estate market. This year’s Cityscape Global event (held in Dubai
03
at the beginning of October) saw very few new launches, with most
developers focussing on the sale of existing inventories by offering
increasingly generous payment terms.
The UAE cabinet recently approved the space. The growth of flexible space is an continues to experience a downturn
largest federal budget in recent history emerging trend that could disrupt the in performance. More malls are now
(AED 60.3 billion), with more than half office market going forward. offering leasing incentives and even
of this total allocated to education and ‘turnover only’ leases, to retain existing
social development. The increase in The residential market has continued tenants and attract new ones. While
government spending (supported by to soften with single digit declines the longer term prospects for the retail
increasing oil prices) will be a positive in both sale prices and rents during sector remain positive, this sector is
to the real estate sector in the medium Q3 2018 despite recent government likely to decline further in the face of very
term. However, all sectors currently measures to inject confidence in the high supply levels over the next 2 years.
remain in the late downturn stage of their market by introducing 10 year residency
cycle, with further declines in rents and visas for certain categories of retiree. Despite softening in the Hotel market,
sale prices likely over the next 12 months. The lack of new project launches at Dubai was one of the world’s top 10
Cityscape reflects the subdued investor performing markets in 2017 (the latest
The office market has been generally sentiment and prices are likely to period for which data is available). Dubai
subdued, with rentals decreasing, as decline further over the next 12 months. recorded an average RevPAR of USD177
well as increasing incentives for tenants for the full year, ahead of other major
to lease the growing available supply Retail remains the most challenged global cities such as London (USD 156),
of new and existing (second hand) sector of the Dubai market and Tokyo (USD151) and Sydney (USD164).
Dubai Prime Rental Clock
Rental Rents Rental Rents
Growth Falling Growth Falling
Slowing Retail Slowing
Rental Rents Hotel Rental Rents
Growth Bottoming Growth Bottoming Retail
Accelerating Out Accelerating Out
Hotel
Residential Residential
Office Office
Q3 2017 Q3 2018
* Hotel clock reflects the movement of RevPAR (Revenue per available room: ADR * occupancy rate)
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 recognize 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: JLLOffice
04 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018
Office
Hot Topic
05
Following global trends, Dubai been constrained by the regulatory In May 2018, the UAE approved a new
continues to see a growth in the environment (with supply in Dubai investment law that could allow 100%
amount of flexible office space (defined lagging behind that in other global foreign ownership of companies in
as that available on leases of less office markets). However, the relaxation specific sectors of the economy to
than 1 year), with around 65,000 sq of the legislative environment could operate outside of free zones by end
m of space currently being offered result in a rapid increase in the supply of 2018. Once implemented, this law is
in over 50 projects. This sector has of flexible space in coming years. likely to increase FDI and demand.
Supply
The third quarter saw the completion components of their projects on hold tenants trying to reduce rental costs
of the HSBC headquarters in Downtown as current market conditions remain and opting for more flexible space. With
Dubai, along with The Opus in Business in favour of tenants. Notable projects a significant amount of supply available
Bay and The Lynx in Dubai Silicon Oasis, expected to be delivered by the end of in both the primary and secondary
collectively adding around 41,000 sq m the year include; Amesco Tower in JLT, market, tenants have access to more
of GLA. Although there is currently more DuBiotech Headquarters and Phase I of choices and the market is likely to move
than 138,000 sq m of office GLA under Innovation Hub in Dubai Internet City. further in their favour over the next 12
construction and due for completion by months as vacancies increase further.
the end of the year, it is likely that some Consolidations are continuing across
developers will delay or place the office various sectors of the market, with
2020F 9.4 0.08K
Annual supply
2019F 9.0 0.39K
2018F 8.9 0.14K
Q3 2018 8.9
2017 8.8
2016
Stock
8.6
2015 8.5
8.0 8.2 8.4 8.6 8.8 9.0 9.2 9.4 9.6 9.8
Million sq m of GLA
Source: JLL06 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018 07
Office Vacancy Rate (Weighted Average)
8% 10%
Performance
With the office market moving further declined by almost 13% Y-o-Y to reach of more ‘dual licensing’ arrangements, Q3 2017 Q3 2018
in favour of tenants, landlords continue AED 1,638 per sq m. This trend is likely allowing free zone and on-shore
to offer more attractive terms. These to continue in the short-term, given the licensed companies to lease space in
include reductions in rental rates, increased availability of Grade A stock the same project. We are aware of 8 dual
rent-free periods, fit-out contributions in the market. licensed projects, offering a combined 12-month
and other concessions, all in an effort 1.3 million sq m of office space and this Outlook
to retain existing and attract new Another sign of an increasingly flexible is likely to increase as more projects are
businesses. As a result, rents have leasing market is the announcement granted dual license status.
Rents (AED / sq m)
Q3 2017 Q3 2018
Y-o-Y
-13%
1,892 1,638
12-month
Outlook
Source: JLLResidential
08 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018
Residential
Hot Topic
09
Madinat Jumeirah Living was launched Both projects mark the introduction months. Most developers focussed on
by Dubai Holdings during Cityscape. This of freehold projects in a traditional selling existing inventories at Cityscape
will be the second major freehold project non- freehold location. We expect more and refrained from major new launches.
in the beach-side suburb of Jumeirah announcements of other freehold units
after the launch of La Mer by Meraas. in non-freehold areas in the coming
Supply
Residential stock is estimated at apartments (300 units) in Townsquare Al Khail Heights, Hayat townhouses in
approximately 513,000 units at the by Nshama. Major villa completions in Townsquare and apartment buildings
end of Q3 2018. The majority of Q2 included the Sama community in on Bluewater Island. Looking ahead,
completions during the third quarter Arabian Ranches 2 by Emaar. a total of 96,000 units are currently
were apartments (95%) with the largest scheduled to complete before the end
completions including Burj Vista (640 A further 23,000 units are currently of 2020, but we remain cautious of their
units) in Downtown, Damac Heights under construction and scheduled timings, with delays expected in many
(640 units) in Dubai Marina, Glitz 3 for delivery by the end of the year. projects.
(350 units) in Studio City and Al Zahra Major expected completions include
2020F 591 40
Annual supply
2019F 536 56
2018F 513 23
Q3 2018 513
2017 497
2016
Stock
480
2015 461
250 300 350 400 450 500 550 600 650 700
Thousand units
Source: JLL10 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018 11
Residential Apartments (% change)
Performance Sales Sales Rent Rent
Sale and rent prices continued to and rents have also fallen in the villa sales transactions excluding land stood
-2% -7% -3% -10%
decrease over the quarter for both sector, by 8% and 9% respectively when at AED 12.3 billion till Q3 2018, which Q-o-Q Y-o-Y Q-o-Q Y-o-Y
apartments and villas. Apartment compared to the same period last year. represents a decline of 32% compared 12-month
prices have decreased by 7%, with rents to the same period last year.
12-month
decreasing around 10% compared According to data from Dubai Land Outlook Outlook
to the same period last year. Prices Department (DLD), the total value of
Villas (% change)
Sales Sales Rent Rent
-2% -8% -0.1% -9%
Q-o-Q Y-o-Y Q-o-Q Y-o-Y
12-month 12-month
Outlook Outlook
Source: JLL & REIDINRetail
12 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018
Retail
Hot Topic
13
Developers are becoming increasingly and others agreeing to ‘turnover only’ developers who have adopted a ‘take it
flexible on lease terms, with some leases. This represents a major shift in or leave it’ approach.
offering contributions to capital behaviour in the Dubai market which
expenditure to smaller retailer groups has traditionally been dominated by
Supply
The third quarter of 2018 saw the 350,000 sq m of GLA), with notable Looking ahead, more than 1.1 million
completion of Badrah Pavilion projects including the Night Souk on sq m of retail GLA is expected to be
Community Centre in Nakheel’s Deira Islands, The Pointe on Palm delivered in Dubai in 2019 / 2020.
Jebel Ali Waterfront development Jumeirah and The Souq at Culture Notable projects in the pipeline include
(adding around 5,000 sq m of retail Village. We remain cautious of the the Nakheel Mall on Palm Jumeirah, Al
GLA) bringing the total stock to timings of many of these projects as Khail Avenue Mall in Jumeirah Village
approximately 3.7 million sq m. The delays have been experienced in the and Dubai Hills Estate Mall. The majority
remainder of 2018 is expected to see past and market conditions remain of the future supply is in super regional
much higher completion (around subdued. malls (65%), or regional malls (26%).
2020F 4.6 528K
Annual supply
2019F 4.0 576K
2018F 3.7 353K
Q3 2018 3.7
2017 3.6
2016
Stock
3.4
2015 3.1
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5
Million sq m of GLA
Source: JLL14 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018 15
Retail Vacancy Rate
12% 16%
Performance
With retail market continuing to be soft, recorded greater declines than in the As the retail market has softened over Q3 2017 Q3 2018
discounts are being offered on existing larger centres. Developers are offering the past year, market wide vacancies
and on new leases being signed. Rents shorter and more flexible lease terms have increased from 12% in Q3 2017 to
in super regional and regional malls to even smaller retailers taking into 16% in Q3 2018. Rents and vacancies
declined by around 5% and 8% when account the drop in sales. Luxury are expected to remain under pressure 12-month
compared to the second quarter of brands have been affected more by the due to the large supply scheduled to Outlook
2018. Smaller Neighbourhood and drop in sales when compared to the enter the market in the next two years.
Community malls have generally more affordable brands.
Change in Average Rents
Super Super
Regional Regional Regional Regional
-5% to -8% -17% -3 to -5% -19%
Q-o-Q Y-o-Y Q-o-Q Y-o-Y
12-month 12-month
Outlook Outlook
Source: JLLHotel
16 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018
Hotel
Hot Topic
17
More than 50 million transit passengers hours transit visa for layover passengers travelers. This step will provide a
are passing through Dubai airports with an option to extend the visa for boost in the hospitality industry and
annually, while only 10% get out of additional 96 hours for a minimal fee is expected to increase the number
the airport to explore the city. The of 50 AED. Hotels and tour operators of travelers who are ready to discover
latest government initiative that was are now in process of creating special and stay in Dubai before their final
introduced in July provides a free 48 packages to capture these short-stay destination.
Supply
A further 1,400 rooms were added to enter the market by the end of the year, highest levels of hotel rooms per capita
the market in the third quarter of 2018, however some projects are likely to be of any global city. Major global hotel
bringing the total stock of quality hotel delayed. Major hotels in the pipeline for chains have recognised the importance
rooms in Dubai to almost 88,100 keys. this year include W the Palm, Mandarin of the Dubai market as an entry point
Hotel openings included Hampton Oriental Jumeirah and Caesar Hotels in to the Region due to the city’s visibility
by Hilton (420 keys) in Qusais, Hilton Bluewaters Island. and connectivity and are increasing
Garden Inn (336 keys) in Jaddaf and their presence in the city, with a further
Grand Millennium Business Bay (251). Dubai is by far the largest hotel market 25,200 rooms scheduled to complete
A further 4,200 keys are expected to in the Middle East, with one of the by 2020.
2020F 107,800 5,600
Annual supply
2019F 92,400 15,400
2018F 88,100 4,200
Q3 2018 88,100
2017 83,300
2016
Stock
78,600
2015 70,900
70,000 75,000 80,000 85,000 90,000 95,000 100,000 105,000 110,000 115,000
Number of Hotel Rooms
Source: JLL18 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018 19
Hotel Occupancy
75% 74%
Performance
Hotel performance remains under ADRs, with YT August being recorded at world. According to The Department YT August Y-o-Y YT August
pressure, with the YT August RevPAR USD 171, a 5% decrease compared to of Tourism and Commerce Marketing 2017 -1.3 bp 2018
(USD 127) being the lowest level seen the same period last year. (DTCM), during the first eight months
in the last decade. Occupancy levels of 2018, Dubai welcomed 10.4 million 12-month
declined by 1.3 basis points compared Dubai is considered to be one of the visitors, with major source markets
to the same period last year reaching top tourist destinations globally, including Western Europe (21%), GCC
Outlook
74%. Similar decreases were seen in attracting visitors from all parts of the (19%) and South Asia (17%).
ADR (USD)
USD181 USD171
Y-o-Y
-5%
YT August YT August
12-month
2017 2018
Outlook
Source: STR20 The Dubai Real Estate Market Q3 2018 The Dubai Real Estate Market Q3 2018 21
Property Clock Definitions
12 O’clock Office Residential Supply data is based on our quarterly
survey of 89 sub-markets, starting from
Indicates a turning point towards a The supply data is based on our The supply and stock data has been 2009. Future supply is based on projects
market consolidation / slowdown. At quarterly survey of 69 sub-markets, updated based on data from the Dubai in the under construction phase. Malls
this position, the market has no further starting from 2009.Our supply figures Government. Our quarterly survey now are categorized based on their turnover
rental growth potential left in the exclude government owned and covers 158 sub markets (the entire levels. Primary Malls are the best
current cycle, with the next move likely wholly occupied buildings. Completed Dubai market) starting from 2010. This performing malls with highest levels
to be downwards. buildings refer to those handed over data excludes labour accommodation of turnover. Secondary Malls are the
for immediate occupation. Future and local Emirati housing supply. average performing malls with lower
supply is based on projects in the under Completed buildings refer to those levels of turnover.
construction phase. Central Business handed over for immediate occupation.
District (CBD) includes DIFC, Downtown, Future supply is based on projects in Average rents represent the top open
9 O’clock 3 O’clock DTCD and Sheikh Zayed Road as far as the under construction phase. market net rent expected for a standard
Interchange 1. in line unit shop of 100 sq m in a basket
Indicates the market has reached the Indicates the market has reached its Residential performance data is based of regional and super regional centres.
rental growth peak. While rents may point of fastest decline. While rents Weighted Average Grade A rents on the REIDIN monthly index. REIDIN Given the variation in rentals, we quote
continue to increase over coming may continue to decline for some time, represents the top open-market net Dubai Residential Property Price Indices % change for retail rents rather than
quarters the market is heading towards the rate of decrease is expected to slow rent (exclusive of service charge) for a (RPPIs) use monthly sample of offered/ actual figures.
a period of rental stabilisation. as the market moves towards a period new lease that could be expected for asked listing price data and land
of rental stabilisation. a notional office unit of the highest registry price data (transaction data). Vacancy rate is based on estimates from
quality and specification in the best Index series are set at 100 starting at the the JLL Retail team, and represents the
location in a market, as at the survey beginning of each data set. average rate across standard in line unit
date. Data relates to headline rents, shops at super regional malls.
exclusive of incentives. Vacancy rate Retail
is based on estimates from the JLL Hotels
6 O’clock Business Office and Business Space Classification of Retail Centers is based
team. It represents the weighted upon the ULI definition and based on Hotel room supply is based on existing
Indicates a turning point towards rental average rate across a basket of their Gross Leasable Area (GLA): supply figures provided by DTCM as
growth. At this position, we believe the buildings in the CBD that make up well as future hotel development data
market has reached its lowest point and around 80% of the CBD supply and 15% • Super Regional Malls have a GLA of tracked by JLL. Room supply includes
the next movement in rents is likely to of the total current supply. above 90,000 sq m all graded supply and excludes serviced
be upwards. • Regional Malls have a GLA of 30,000 apartments.
-90,000 sq m
• Community Malls have a GLA of STR performance data is based on
10,000 -30,000 sq m a monthly survey conducted by STR
• Neighborhood Malls have a GLA of Global on a sample of more than 55,000
3,000 -10,000 sq m rooms across Dubai.
• Convenience Malls have a GLA of
less than 3,000 sq m
Definitions22 The Dubai Real Estate Market Q3 2018 Dubai Office 403, Building 1 Emaar Square 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 John Fekete Ben Jackson Head of Corporate Solutions Head of Consulting, MENA Head of Project & Development & Tenant Representation, MENA john.fekete@eu.jll.com Services, UAE dana.williamson@eu.jll.com benjamin.jackson@eu.jll.com Amr El Nady Craig Plumb Dana Salbak Head of Hotels & Hospitality, MENA Head of Research, MENA Associate, Research, MENA SVP, Global Hotel Desk craig.plumb@eu.jll.com dana.salbak@eu.jll.com amr.elnady@eu.jll.com Faraz Ahmed Manager, Research, MENA faraz.ahmed@eu.jll.com With MEA offices in: Abu Dhabi, Cairo, Riyadh, Jeddah, Al Khobar, Johannesburg, Nairobi, Lagos and Casablanca. COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.
You can also read
