The document discusses the top real estate trends for the UAE in 2014 as identified by Jones Lang LaSalle. The key trends include avoiding another property bubble in Dubai through more measured development, the return of major mega-projects, future areas of growth, limited impact of Expo 2020 in 2014, varied approaches to real estate financing, a two-speed investment market, increased corporate activity driving workplace transformation, more hotel investment sales, sustainability moving from talk to action, and improved valuation and measurement standards. The trends are expected to have differing impacts across major UAE real estate markets like Dubai and Abu Dhabi.
4. Jones Lang LaSalle’s – Top Trends for 2013
01
Return of confidence impacts the Dubai market
02
Funding constraints will apply a natural brake to development activity
03
Increased involvement from Chinese and the Global South
04
Significant supply levels could offset improved sentiment
05
Greater attention to operating costs and property management
06
Sustainability – more talk than action
07
Government Initiatives will influence market conditions
Correct
Partially correct
Incorrect
7
5. Improving Macro Economic Climate
UAE outperforms global economy in 2013
Brighter prospects for 2014
Global
Middle East
2.5
3
2.5
4
•
Global Economic
Situation has improved
UAE
•
3.9
4.3
Regional geopolitical
situation remains mixed
Real GDP Growth (%)
8
6. Jones Lang LaSalle’s – Top Trends for 2014
1
Avoiding another bubble
6
Two speed investment market
2
More measured mega developments
7
Workplace transformation as corporate
activity increases
3
Future directions of growth
8
More hotel investment sales
4
Expo 2020. Limited impact in 2014
9
Sustainability – From talk to action
5
Varied approaches to finance real estate
10
Improved valuation and
measurement standards
9
7. 1: Avoiding another bubble in Dubai – Smarter the 2nd time around
Worrying signs of over heating
Unsustainable price growth in
residential market
Increasing cost pressures / resource
constraints
Return of speculative activity
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
Sale Price Index
% change Y-o-Y
10
% change Y-o-Y
400
350
300
250
200
150
100
50
0
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Expo 2020 causing
irrational exuberance
Index, Jan 2003=100
Land sales on generous
financial terms
Dubai Residential Sale Price Index
8. 1: Avoiding another bubble in Dubai – Smarter the 2nd time around
Differences this time around
Significant levels of new
supply
Larger projects are being
phased in line with demand
More caution from investors
Less reliance on pre-sales
and sub developers
Better regulations – aimed at
calming the market
11
9. 2: Return of mega projects - Dubai
Dubai Canal – Meraas / RTA
Mohammad Bin Rashid City –
Emaar / DPG
Dubai Waterfront – Nakheel
Bluewaters (Meraas)
Habtoor City
Dubai World Central (DWC)
Dubai Trade Centre District (DTCD)
Dubai Design District (d3)
15
10. 2: Return of mega projects – Abu Dhabi
Zayed City (Capital District)
UPC
Masdar (Mubadala)
Al Maryah Island (Mubadala)
Saadiyat Island / TDIC
Yas Island / Aldar
16
11. 2: More measured mega projects – Key Messages
Resumption of previously stalled projects
More awareness of need to phase projects in line with demand
More co-operation between master developers
Reduced role for sub developers
Improved regulations on pace of development
17
12. 3: Future Growth : Dubai
9
E311 Sheikh Zayed Road
8
6
5
3
10
2
11
E311 Sheikh Mohamed Bin
Zayed Road
4
7
1
15
12
E311 Emirates Road
Free Zone
13
14
1 Dubai Industrial City
3 JAFZA
5 JLT
7 Dubiotech
9 Dubai Maritime City
11 DAFZA
13 Academic City
2 TechnoPark
4 IMPZ
6 TECOM
8 DIFC
10 DHCC
12 Dubai Silicon Oasis
14 Dubai Outsource Zone
15 Dubai World Central
18
13. 3: Future Growth : Dubai
E311 Sheikh Zayed Road
3
5
1
4
6
2
E311 Sheikh Mohamed Bin
Zayed Road
E311 Emirates Road
Commercial District
1
CBD
3
TECOM A & B
5
JLT
2
Business Bay
4
TECOM C
6
Jebel Ali
19
14. 3: Future Growth : Dubai
E311 Sheikh Zayed Road
1
E311 Sheikh Mohamed Bin
Zayed Road
2
3
4
5
E311 Emirates Road
High Priority
Low Priority
1
Business Bay
3
Mohamed Bin Rashed City
2
Lagoons
4
Dubai World Central
5
Dubai Land
20
15. 3: Future Growth : Dubai
E311 Sheikh Zayed Road
E311 Sheikh Mohamed Bin
Zayed Road
South – towards
Abu Dhabi
Infill – filling in
the gaps
E311 Emirates Road
21
16. 3: Future Growth : Abu Dhabi
Mina Zaved
Hydra Village
Saadiyat
Al Maryah
Shams
Lulu
Yas Island
Saraya
Reem Island
Naimat
Al Reef
Bateen
Peninsulas
Raha Beach
Danet
Airport City
Rawdhat
Masdar
Hudayriat
Capital
Centre
ICT
Arzanah
BMC
Capital District
1
Horizontal + Vertical Development
2
Master Planning and / or infrastructure stage
22
Source: Jones Lang LaSalle
17. 4. Expo 2020 : Limited impact in 2014
Positive long term impact on UAE
Limited direct impact in 2014
Greatest benefit will be to the
hospitality, logistics and retail
sectors
Two potential problems will require
careful management in the short
term:
- Excessive price expectations
- Excessive potential new supply
23
18. 5: Varied approaches to finance real estate
Focus on equity rather than debt
Pre-sales remain important in residential market
Sale and leasebacks
Pre leases / build to suit
Limited use of IPO’s and bonds
Last mile financing
REIT’s
Banks remain cautious
24
19. 6: Two Speed Investment Market
Limited Interest from Western
institutions
Constrained by lack of investment
grade product
More ME institutions looking in
Dubai Strategic relationships
Chinese investment in the Pearl
is Government backed means of
selling expertise
Increased interest from
debt investors
26
25
20. 6: Two Speed Investment Market
Strong interest from private
investors
DLD report transactions of AED162
billion in 2013
Sales to more than 120 nationalities
Most sales either land or individual
homes / units
26
21. 7: Workplace Transformation as Corporate Activity Increases
Increasing Demand from Corporate
Occupiers
Overall market is improving – more
corporates now growing again
Mixed implications for the real estate
market
Continued two tier market
2014 will remain primarily a tenants
market, with no decline in excessive
overall vacancy
26
27
22. 7: Workplace Transformation as Corporate Activity Increases
Key Drivers and business objectives
driving work place transformation: Reducing property costs
Improving business performance
Attracting and retaining staff
Merging of organizations
Consolidations
27
28
23. 8: More investment sales in hotel sector across UAE
A larger number of operating hotels
Loan maturities
Current diversity of players
Specialization on core activities
(real estate developers vs hoteliers)
• Hotels perceived as ‘income
generating’ assets
• More professional asset
management places greater
emphasis on financial performance
28
29
24. 9: Sustainability – From talk to action
Case study of U Bora Tower
• Energy savings of 15%
• Water reduction
• Waste reduction
Small scale / low capital cost
Payback of less than 3 years
Reduces service charges
Increases tenant appeal
29
30
25. 9: Sustainability – From talk to action
Increased awareness of
importance of sustainability
Abu Dhabi continues to lead the
way
Dubai introduces new regulations
Emergence of a ‘sustainability
premium’
More focus on small scale
initiatives that can be retrofitted
29
31
26. 10: Improved valuation & measurement standards
Measurement standards
Plans to introduce global measurement
standards
Could impact measured areas and
therefore values by 25%
Variety of standards currently used in
UAE causes confusion and inhibits
transparency
Quote all projects in sq m rather than sq ft
Standard approach to convert BUA (supply
data) into GLA (demand).
30
32
27. 10: Improved valuation & measurement standards
Valuation standards
Better Quality - All Valuations will have to adhere to International Valuation
Standards
Better Transparency - Levels of openness and transparency laid down in IVS
Better Local Knowledge and skills - Valuers required to have expertise in both
the relevant asset class and geography.
31
33
29. Market Directions - Dubai - Prime Rental Clock
Q4 2012
Rental Growth
Slowing
Rental Growth
Accelerating
*Hotel clock reflects the
movement of RevPAR.
Note: The property clock
illustrates where Jones Lang
LaSalle estimates each prime
market is within its individual
rental cycle as at end of the
relevant quarter.
Source: Jones Lang LaSalle
Rents
Falling
Rents
Bottoming Out
* Hotel
Residential
Retail
Office
35
30. Market Directions - Dubai - Prime Rental Clock
Q4 2013
Rental Growth
Slowing
Residential
Rents
Falling
Rental Growth
Accelerating
Rents
Bottoming Out
* Hotel
*Hotel clock reflects the
movement of RevPAR.
Note: The property clock
illustrates where Jones Lang
LaSalle estimates each prime
market is within its individual
rental cycle as at end of the
relevant quarter.
Source: Jones Lang LaSalle
Retail
Office
36
31. Market Directions - Dubai - Prime Rental Clock
Q4 2014
Residential
*Hotel clock reflects the
movement of RevPAR.
Note: The property clock
illustrates where Jones Lang
LaSalle estimates each prime
market is within its individual
rental cycle as at end of the
relevant quarter.
Source: Jones Lang LaSalle
Rents
Falling
Rental Growth
Accelerating
* Hotel
Rental Growth
Slowing
Rents
Bottoming Out
Retail
Office
37
32. Market Directions - Abu Dhabi - Prime Rental Clock
Q4 2012
Rental Growth
Slowing
Rental Growth
Accelerating
*Hotel clock reflects the
movement of RevPAR.
Note: The property clock
illustrates where Jones Lang
LaSalle estimates each prime
market is within its individual
rental cycle as at end of the
relevant quarter.
Source: Jones Lang LaSalle
Rents
Falling
Rents
Bottoming Out
* Hotel
Retail
Office
Residential
38
33. Market Directions - Abu Dhabi - Prime Rental Clock
Q4 2013
Rental Growth
Slowing
Rental Growth
Accelerating
*Hotel clock reflects the
movement of RevPAR.
Note: The property clock
illustrates where Jones Lang
LaSalle estimates each prime
market is within its individual
rental cycle as at end of the
relevant quarter.
Source: Jones Lang LaSalle
Rents
Falling
Rents
Bottoming Out
Residential
Retail
* Hotel
Office
39
34. Market Directions - Abu Dhabi - Prime Rental Clock
Q4 2014
Rental Growth
Slowing
Residential
*Hotel clock reflects the
movement of RevPAR.
Note: The property clock
illustrates where Jones Lang
LaSalle estimates each prime
market is within its individual
rental cycle as at end of the
relevant quarter.
Source: Jones Lang LaSalle
Rents
Falling
Rental Growth
Accelerating
Rents
Bottoming Out
* Hotel
Office
Retail
40
35. Jones Lang LaSalle’s – Top Trends for 2014
1
Avoiding another bubble
6
Two speed investment market
2
More measured mega developments
7
Workplace transformation as corporate
activity increases
3
Future directions of growth
8
More hotel investment sales
4
Expo 2020. Limited impact in 2014
9
Sustainability – From talk to action
5
Varied approaches to finance real estate
10
Improved valuation and
measurement standards
46
37. Alan Robertson
CEO, MENA
alan.robertson@jll.com
David Dudley
Director of MENA
Operations
david.dudley@jll.com
Andrew Williamson
Head of Retail
andrew.williamson@jll.com
Chiheb Ben Mahmoud
Head of Hotels & Hospitality
Andrew Rotteveel
Head of Project and
Development Services
andrew.rotteveel@jll.com
Deepak Jain
Head of Strategic
Consulting
deepak.jain@jll.com
Gaurav Shivpuri
Head of Capital Markets
Gaurav.shivpuri@jll.com
Fadi Moussalli
Regional Director – ICG
fadi.moussalli@jll.com
Craig Plumb
Head of Research
craig.plumb@jll.com
Simon Brand
Head of Valuation Advisory
simon.brand@jll.com
chiheb.ben-mahmoud@jll.com
Dana Williamson
Head of Agency
dana.williamson@jll.com
Graham Howat
Head of Asset & Property
Management
graham.howat@jll.com
48