About Established in 2008, Cavendish Maxwell is one of the largest and most respected property consultancies in the region. An influential partner and trusted advisor to key stakeholders in real estate markets throughout the Middle East and Africa, we offer a comprehensive range of exceptional property services across a diverse mix of sectors and asset classes. Cavendish Maxwell is a certified member firm of the Royal Institution of Chartered Surveyors (RICS), bringing together a world-class team of handpicked property consultants and surveyors, unmatched elsewhere in the region. Our team of highly qualified professionals is trusted by real estate market stakeholders throughout the region, including international and domestic banks, property developers, governments, owners and investors, asset managers and professional services firms. We service a diverse mix of specialist property sectors including residential, retail, offices, hospitality, healthcare, education, industrial and logistics. Cavendish Maxwell also publishes independent reports, prepared to globally accepted standards, for loan security, bank lending, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, purchase and sale advice, and third-party reliance purposes. Our quarterly market reports provide updates on price movement, rent and yield statistics, residential transactions, and upcoming supply of residential properties through the real estate data intelligence platform, Property Monitor.
2
Q4 2O2O
UAE PROPERTY MARKET REPORT
Foreword In a year dominated by restrictions on activities from trade to travel due to the spread of a highly contagious virus, each country has taken measures to secure its people and bolster its economy. However, the speed of the UAE in responding to the virus by rolling out relief measures, opening up its economy and protecting its residents has been extraordinary. In all, the total value of economic relief packages and measures provided by the federal and local governments since the start of the pandemic has surpassed AED 388 billion. To ensure the health of the economy is maintained, the focus has now moved away from movement restrictions to mass inoculation, with the UAE earning a reputation of organising the world’s second fastest vaccine campaign. While growth has undoubtedly suffered in 2020, with a 6.6% contraction estimated by the International Monetary Fund (IMF), expansion is set to return in 2021. Expo 2020, which will be held after a delay of a year due to the pandemic, is expected to be a key driver of this growth as the world stumbles back to normalcy. Considering the developments of the past year, and measures specifically rolled out for the real estate sector, we analyse the performance of the UAE real estate market with a comprehensive overview of the residential, office, retail, hospitality and industrial sectors across the emirates.
Contents 4
Residential Market Overview
24
Office and Retail Market Overview
30
Hospitality Market Overview
38
Industrial Market Overview
42
A Word from our Chief Economist
3
Dubai Residential Market Overview As the COVID-19 pandemic exacerbated the property price decline already underway in Dubai over recent years, developers and the government undertook various measures to reinvigorate the market. Some interesting trends have therefore emerged with the stakeholders involved adopting innovative steps to tide over the crisis. Developers were forced to take a relook at their construction and launch pipelines. Many have made the decision to temporarily suspend new launches and focus instead on completing projects already under construction. Liquidity for developers has increasingly dried up as raising debt became more challenging in a tight market. Also, the equity demand on developers has increased owing to higher instances of post-construction and post-handover payment plans. To overcome this issue and ensure projects are completed, developers have turned to alternate funding options such as fractional ownership of real estate, buybacks ensuring guaranteed returns on investment, and crowdfunding. Lootah Real Estate Development is one such developer who recently offered a fractional ownership scheme where investors can own a part of a property in Dubai for as little as AED 5,000. The liquidity crunch will have naturally led to a delay in completing projects. To address the issue, Sheikh Mohammed bin Rashid Al Maktoum announced the Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai and Settlement of Related Rights. The latest decree replaces the earlier special committee for unfinished and cancelled real estate projects in the emirate.
4
To further rein in project costs, developers have begun to bypass contractors and source supplies directly for their projects. The recent demise of contracting major Arabtec Holding has likely played a role in this situation which has led developers to become more cautious and self-reliant. One of the major announcements made in Q4 that could boost the residential property market was the issuance of the remote working visa, keeping with the popular global trend of working from anywhere. As part of the programme, Dubai will issue a visa renewable on an annual basis to remote working professionals around the world that will allow them to live in the emirate while continuing to work for their employers in their home country. Implementing further reforms to aid the sector, Dubai’s Executive Council approved the Dubai Building Code. The Code will aim to reduce construction costs by streamlining building rules and ease overall procedures for consultants, contractors and developers, further increasing Dubai’s investment attractiveness and promoting diversification of projects in the construction sector. To support property owners, the Dubai Supreme Council of Energy has directed district cooling companies to lower rates—utility charges currently account for 50% of the overall service charges to be paid by owners. The move also aligns with Dubai’s Demand Side Management Strategy 2030 which aims at reducing demand for electricity and water by 30% by 2030.
40.2% 1 cheque
0.2% 5 cheques
28.9% 4 cheques 18.4% 2 cheques 5.4% 3 cheques
UAE PROPERTY MARKET REPORT
RENT CHEQUE TRENDS - Q4 2020
3.8% 6 cheques 2.5% 12 cheques
0.2% 7 cheques 0.2% 8 cheques 0.1% 10 cheques 0.1% 11 cheques
Price performance According to Property Monitor, average residential property prices in Dubai declined 4.4% over the 12-month period from Q4 2019 to Q4 2020 but grew 1.2% on a quarterly basis.
While most communities recorded declines on a yearly basis, some have shown stability and even price appreciation on a quarterly basis. These include Downtown Dubai, Dubai Marina, Dubai Silicon Oasis, International City and Motor City. Locations such as Business Bay, Al Furjan and Palm Jumeirah have displayed greater resilience over the quarters.
Overall, the traditionally sought-after villa and townhouse communities of Arabian Ranches 2, Jumeirah Golf Estates and Jumeirah Park have showcased strong performance since the onset of the pandemic as preferences changed towards bigger spaces that were now more affordable. The market has also reported more tenants turn end users of property, taking advantage of the favourable interest rate environment and the increased loan-to-value (LTV) ratio made possible by the UAE Central Bank.
5
RESIDENTIAL
Q4 2O2O
Price performance APARTMENTS
Al Furjan
14%
2.1% 3%
Business Bay Culture Village
4.2%
-8.2%
Downtown Dubai
-0.1%
-4.4%
Dubai Marina
-0.4%
-9.8%
Dubai Silicon Oasis
5%
-4.6%
Dubai Production City
-2%
-6.6%
International City
2%
-6.9%
Jumeirah Beach Residence
-9.6% -8%
Jumeirah Village Triangle Motor City
3.5% 4%
-7%
Palm Jumeirah
5%
0.9%
-26 -24 -22 -20 -18 -16 -14 -12 -10
-8
-6
-4
-2
0
2
6
4
8
10
12
14
Percentage change
Quarterly Q3 2020 - Q4 2020
Yearly Q4 2019 - Q4 2020
VILLAS/TOWNHOUSES
Al Furjan
7.7%
-0.8%
Arabian Ranches 2
2.1%
-6.6%
Dubai Silicon Oasis Jumeirah Golf Estates
11.4%
2.5% 4.4%
-13.4%
9.8%
Jumeirah Islands 4.9% 5.5%
Jumeirah Park
6%
The Villa Town Square
-7.7%
-14
-12
-10
-8
10.7%
2.5%
-6
-4
-2
0
2
4
6
8
10
12
Percentage change
Quarterly Q3 2020 - Q4 2020
Source: Property Monitor Note: Some of quarterly/yearly performance figures have not been provided due to insufficient data
6
Yearly Q4 2019 - Q4 2020
UAE PROPERTY MARKET REPORT
Palm Jumeirah
Business Bay
Culture Village
AED 976/sq ft
AED 958/sq ft
AED 1,066/sq ft
Downtown Dubai AED 1,250/sq ft
International City AED 432/sq ft
Mohammed Bin Rashid City AED 1,399/sq ft
Jumeirah Beach Residence Dubai Silicon Oasis
AED 850/sq ft
AED 521/sq ft AED 617/sq ft
Barsha Heights (TECOM) AED 800/sq ft
The Villa
Jumeirah Village Triangle
AED 675/sq ft
AED 596/sq ft AED 683/sq ft
Dubai Marina AED 918/sq ft
Jumeirah Islands Motor City
AED 851/sq ft
AED 624/sq ft
Jumeirah Park
Dubai Sports City
AED 750/sq ft
Arabian Ranches 2 AED 784/sq ft
AED 433/sq ft
Al Furjan AED 765/sq ft AED 599/sq ft
Jumeirah Golf Estates AED 750/sq ft
Town Square
AED 880/sq ft
AED 578/sq ft
Dubai Production City AED 510/sq ft
7
RESIDENTIAL
Q4 2O2O
Rent performance
Average apartment rents declined 16% over the 12-month period from Q4 2019 to Q4 2020 and 4% on a quarterly basis while villa/townhouse rents were lower by 1.7% on a yearly basis but higher by 3.4% from the previous quarter.
With greater supply and the increased possibility of cost savings on rents, the market continued to be governed by tenants in the last quarter of the year. With an abundance of options now available at more affordable rates, many tenants have chosen to move into bigger spaces or better communities, or both. On a yearly basis, the steepest declines in rents was observed in communities such as Al Furjan, Dubai South, International City and Jumeirah Lakes Towers.
-19
-5.9
-8.8 -1.9
Dubai Marina
Barsha Heigh
AED 40,000 AED 55,800
AED 36,270 AED 49,281
AED 83,700
AED 65,100
-4.7 -17.6
-3.1
Palm Jumeirah
Jum Village
AED 51,150
Annual rent by bedroom
AED 88,350
AED 8
AED 102,300
* Data as of 31 December 2020
APARTMENT Studio 1 BR 2 BR 12-month % change
AED 10 AED 11
-22.4 -5.5 Jumeirah Lakes Towers AED 29,760
-3.5 -13.9
AED 45,570
Jumeirah Beach Residence
AED 65,100
AED 46,500 AED 60,450 AED 74,400
Quarterly % change
4.8
0
Jumeirah Islands AED 243,000 AED 314,999
VILLA/TOWNHOUSE 3 BR 4 BR 5 BR 12-month % change
AED 148,500 AED 162,000 AED 218,250 Jumeirah Park
2.4
Quarterly % change
0
-20.4 -7.1 Discovery Gardens AED 23,250 AED 32,549 AED 52,127
Note: Some of the quarterly/yearly performance figures have not been provided due to insufficient data.
AED 99,000 AED 110,000 AED 144,000 Al Furjan
5.9
-5.3
AED 24,180 AED 39,060 AED 56,729 Al Furjan
-28.8 -9.6
-27.7
Dub
AED
AED
AED
8
-3.3 -17.1 Culture Village
AED 38,549
AED 46,500
AED 55,800
AED 65,100
AED 35,340 AED 53,475
AED 79,050
AED 102,300
AED 78,585
-6.1 -11.5 City Walk
-2.8 -22.2
AED 103,230 AED 130,200
International City AED 21,855 AED 26,040 AED 37,200
-9.5 -19.2
0
-6.5 -12.2
Al Khail Heights
Dubai Silicon Oasis
AED 26,970 AED 39,990
AED 23,250 AED 33,000
AED 55,799
AED 52,080
-16.1 -7.8 1.8
Jumeirah Village Circle
Arjan
81,000
AED 26,040
AED 25,000
03,500 17,000
AED 40,920
AED 42,000
AED 56,730
AED 48,000
-20
-9.1
Dubai Sports City
0
5.7
meirah Circle
7
Downtown Dubai
Business Bay
hts (Tecom)
1
-14.9 -5.1
-1.6 -10.1
UAE PROPERTY MARKET REPORT
The Villa
5.1
AED 135,000 AED 162,000
4.7
DAMAC Hills
AED 23,250
AED 94,500
AED 31,620
AED 140,000 AED 157,500
AED 47,429
4.1
0
-11.9
0
DAMAC Hills AED 29,760 AED 46,500 AED 79,050
4.7
6.8
0
Arabian Ranches 2
Dubai Sports City
AED 126,000 AED 146,250
AED 99,000 AED 121,500
AED 162,000
AED 247,500
-14.8 -2.1 3.9
Town Square
0
AED 20,925
Jumeirah Golf Estates
AED 32,550
AED 103,500 AED 247,500
AED 41,850
AED 308,000
0
bai South
D 20,460
D 26,040
D 37,200
AED 32,550 AED 41,850
AED 85,000 AED 117,000
AED 66,960
AED 180,000
Motor City
Mudon
-10.6 2.4
0
0 Source: Property Monitor
9
RESIDENTIAL RESIDENTIAL
Q4 2O2O
Transaction overview In Q4 2020, there were 10,754 transactions recorded compared to 12,465 in Q4 2019, a decrease of 13.7% year-on-year. However, on a quarterly basis, Q4 2020 registered a significant increase of 26.4% in transactions compared to 8,508 in Q3 2020, reflecting an accelerated pace of recovery in the real estate sector post the lifting of COVID-19 restrictions in Dubai. In Q4 2020, the total number of secondary apartments transferred was 3,575 while off-plan apartments stood at 2,679. The total number of villas/townhouses transferred was 2,243 and off-plan villas/townhouses transferred were 714. According to Property Monitor, over the past six months, off-plan sales have declined and the volume of completed property deals has significantly increased due to initial developer sales in completed properties and a stronger resale market overall.
10
436
40
38
33
31
Arabian Ranches 2
Dubai South
Arabian Ranches 3
Cherrywoods
0
Tilal Al Ghaf
150
100
50
158
OFF-PLAN
300
250
200
150
100 0
450
0
480 393 246 193 Arjan
200
213
171
163
155
124
Town Square
250
Downtown Dubai
300
Jumeirah Village Circle
400
Dubai Marina
400
Number of transactions 450
Dubai Hills Estate
178
Dubai Creek Harbour
500
450
Dubai Investments Park
192
Downtown Dubai
350
Business Bay
442
Business Bay
500
Nad Al Sheba
350
Number of transactions
449
Jumeirah Village Circle
0 Mohammed Bin Rashid City
Number of transactions
OFF-PLAN
Emirates Living
Number of transactions
Q4 2O2O
Top five locations for apartment transfers in Q4 2020 TRANSFERRED SALES
350
300
250
200
150
100 50 188
Top five locations for villa/townhouse transfers in Q4 2020
TRANSFERRED SALES
250
400
200
150
100
50
50
Source: Property Monitor
11
RESIDENTIAL
UAE PROPERTY MARKET REPORT
Dubai upcoming supply In Q4 2020, many developers, including the major players, announced that they had temporarily halted the launch of new projects in the face of the pandemic. Instead they will focus on completing existing projects already underway. The conscious and timely decision by developers, coupled with the efforts of the Higher Committee of Real Estate established in 2019, would help restore balance between demand and supply and stabilise prices.
Upcoming supply
28,255 units
APARTMENTS
VILLAS/TOWNHOUSES
86%
14%
Source: Cavendish Maxwell
Supply scheduled to be completed in Q1 2021
> 2,500 2,001 - 2,500 1,501-2,000 1,001-1,500 501-1,000 101-500 <100
Source: Cavendish Maxwell
12
Al Mamzar
UAE PROPERTY MARKET REPORT
Al Qusais
Al Karama Al Mankhool Al Raffa Muhaisnah
Al Khawaneej Oud Metha
Al Badaâ&#x20AC;&#x2122;a
Ras Al Khor Dubai Creek Harbour
Al Satwa
Nadd Al Hamar Downtown Dubai
Opera District Business Bay
International City Mohammed Bin Rashid City
Dubai Silicon Oasis
Palm Jumeirah Jumeirah Village Circle
Al Barsha
Dubai Science Park
Dubailand
Jumeirah Lakes Towers Jumeirah Village Triangle Dubai Production City
Dubai Sports City
Dubai Studio City
Al Furjan
DAMAC Hills
Akoya Oxygen
Dubai Investments Park (DIP)
13
RESIDENTIAL
Q4 2O2O
Abu Dhabi Residential Market Overview In 2020, Abu Dhabi implemented a number of measures to support the population, stimulate residential real estate demand and stabilise the overall market. Under a new policy, Abu Dhabi government employeesâ&#x20AC;&#x201D; nationals who live in the capital and expats who own or rent a residential property in Abu Dhabiâ&#x20AC;&#x201D;are to receive a housing stipend in line with their job grade. Eligible employees would also receive an education allowance for their children who attend schools in Abu Dhabi. To undertake continuous growth and development in the real estate sector and ensure completion of projects, Abu Dhabibased holding company ADQ and Aldar Properties have entered into an agreement under which Aldar will take over the management of government capital projects valued at AED 30 billion. Projects include the developments of Riyadh City and Baniyas North along with other projects in Al Ain and Al Dhafra.
14
These and other measures by the UAE government seem to have helped overall, retaining confidence in the sector and generating demand. Testament to the success of the efforts is the recent sell out of Aldar Propertiesâ&#x20AC;&#x2122; 510-unit Noya residential community on Yas Island in a span of four hours. Construction is set to begin in Q2 2021 with handovers to commence in Q2 2023. For the quarter ended September, the developer reported a 30% yearly increase in revenue to AED 2.1 billion. Gross profit was up 5% to AED 696 million and net profit rose 8% to AED 416 million driven by record quarterly home sales in its core market of Abu Dhabi. Overall, limited upcoming supply of properties in the capital has also helped achieve stability in the sector.
UAE PROPERTY MARKET REPORT
Price and rent performance While prices in Abu Dhabi continue to show yearly declines, they have recovered on a quarterly basis and recorded a modest increase.
Rents in Abu Dhabi registered declines in Q4 2020 for both apartments and villas/townhouses. The average decline was 6% for apartments in the quarterly period from Q3 2020 to Q4 2020 and 15% yearly. Villas/townhouses saw a 3% yearly decline and a 2% quarterly increase.
Average sales prices in Abu Dhabiâ&#x20AC;&#x2122;s major residential zones declined by 8% for apartments on a yearly basis and increased by 1% on a quarterly basis. Villa/townhouse prices registered a yearly decline of 6% and a quarterly increase of 2%.
APARTMENT PRICE PERFORMANCE
Saadiyat Beach Residences
-6%
1,159
-11.6%
Percentage change
-6%
990
-13.9%
Al Raha Beach
20%
975
Al Reem Island -8%
Al Ghadeer
635
-14.7%
Al Reef Downtown
-8%
-6%
-4%
4%
644
-3.8%
-16% -14% -12% -10%
6.5%
-2%
0
2%
4%
Yearly Q4 2019 - Q4 2020
Quarterly Q3 2020 - Q4 2020
6%
8%
10%
12% 14%
16%
18%
20%
18%
20%
Average price per sq ft
VILLA/TOWNHOUSE PRICE PERFORMANCE
Percentage change
Saadiyat Beach Villas
-6.3%
1,187
-11.7%
Al Raha Gardens
-1.2%
Al Reef Villas -8%
Quarterly Q3 2020 - Q4 2020
-6%
5.9%
591
-4.7%
-16% -14% -12% -10%
7.2%
756
-4%
-2%
0
2%
4%
Yearly Q4 2019 - Q4 2020
6%
8%
10%
12% 14%
16%
Average price per sq ft
Source: Cavendish Maxwell
15
RESIDENTIAL
Q4 2O2O
APARTMENT RENT PERFORMANCE
32,400 45,000
-9.4%
Al Reef Downtown
56,700
-17.1%
Al Reem Island
23,400 32,400
0.1%
Al Ghadeer
-15.4%
43,200
36,000 51,300
-8.3% -18.5%
68,850
58,500 62,100
-2.4%
Al Raha Beach
-6.7%
Saadiyat Beach Residences
90,000
-8.9%
73,125
-16.9%
-20%
-18%
117,000
-16%
-14%
-12% -10%
-8%
-6%
-4%
-2%
0
0
2
150,000
Rent (AED/year)
Percentage change
Studio
Yearly Q4 2019 - Q4 2020
Quarterly Q3 2020 - Q4 2020
100,000
50,000
1 BR
2 BR
Source: Cavendish Maxwell
VILLA/TOWNHOUSE RENT PERFORMANCE
0.3%
171,000
99,000
4.5%
Al Reef villas
Saadiyat Beach Villas
135,000 144,000
1%
Al Raha Gardens
117,000
-0.6%
130,500
261,000 288,000
0.4% -8.1%
-10%
-8%
391,500
-6%
-4%
-2%
0
2
4
6
0
100,000
Percentage change
Quarterly Q3 2020 - Q4 2020
Source: Cavendish Maxwell
16
Yearly Q4 2019 - Q4 2020
200,000
300,000
400,000
Rent (AED/year)
3 BR
4 BR
5 BR
UAE PROPERTY MARKET REPORT
Abu Dhabi upcoming supply Scheduled upcoming supply for Q1 2021 is estimated to be over 5,200 apartments and over 900 villas/townhouses in both, investment zones and Abu Dhabi City. However, actual materialisation may be lower due to project delays and staggered and phased delivery by developers.
6,193
Upcoming supply
APARTMENTS
VILLAS/TOWNHOUSES
85%
15%
Source: Cavendish Maxwell
Supply scheduled to be completed in Q1 2021
1,501-2,000 501-1,000 101 - 500
Al Rahba
Saadiyat Island Yas Island Al Zahiyah
Al Raha Beach Development
Al Reem Island
Al Qudra
ICT - Lu’luat Al Raha
Rawdhat
Al ‘Azeeziyyah
Al Mirfaa
Al Ain
17
RESIDENTIAL
Q4 2O2O
Northern Emirates Residential Market Overview On a quarterly basis, rent declines were more pronounced in some of the northern emirates than others. For instance, rents in Sharjah declined over the previous quarter but rents in Ras Al Khaimah were largely unchanged during the same period.
18
UAE PROPERTY MARKET REPORT
AVERAGE RESIDENTIAL RENTS Q4 2020 Sharjah 13,000 24,000 30,000 36,000
Ajman 12,000 18,000 24,000 30,000
Ras Al Khaimah 12,000 17,000 23,000 28,000
Fujairah 14,000 20,000 26,000 30,000
Umm Al Quwain 12,000 16,000 22,000 27,000
0
10,000
20,000
30,000
40,000
Annual rent
Studio
1 BR
2 BR
3 BR
Source: Cavendish Maxwell
19
RESIDENTIAL
Q4 2O2O
Sharjah Amid the COVID-19 pandemic, average rents in Sharjah remained under pressure during Q4 2020 with prime apartments recording noticeable quarterly declines. To help individuals and business overcome this, Sharjah announced a second stimulus package amounting to AED 512 million after a first package that was estimated at AED 481 million. The measures included lowering fees and providing flexible payment options for utility services, municipality services and real estate leasing and registration, among others. To encourage investment into property, Sharjah Investment and Development Authority (Shurooq) has launched attractive payment plans for its Sharjah Sustainable City development. The payment plan requires a 10% down payment of the property
20
value, monthly installments, and offers zero service charges for the first five years. Each villa on offer boasts state-ofthe-art smart home features and energy-saving kitchen appliances in line with the communityâ&#x20AC;&#x2122;s vision of modern sustainability. At a time when other emirates like Dubai were slowing down new launches, Sharjah announced the launch of a mega project by Arada in December 2020. The AED 24 billion Naseej District is located in the heart of new Sharjah and will be centred on art, design and culture. The development will contain 16 apartment buildings and various cultural attractions. Construction is expected to begin in Q2 2021 with the first units to be delivered in Q1 2023.
UAE PROPERTY MARKET REPORT
Al Azra Rolla Wasit Suburb Abu Shagara
Al Majaz
Al Khan
Al Rahmaniya
Al Taawun Al Nahda
Hoshi
Al Suyoh
Al Tai
SHARJAH APARTMENT RENTS (AED/YEAR) Q4 2020 PRIME APARTMENTS
PRIME APARTMENTS
Studio
1 BR
2 BR
3 BR
Studio
1 BR
2 BR
3 BR
13,000 - 18,000
19,000 - 24,000
26,000 - 30,000
31,000 - 38,000
17,000
33,000
40,000
52,000
SECONDARY APARTMENTS
SECONDARY APARTMENTS
Studio
1 BR
2 BR
3 BR
Studio
1 BR
2 BR
3 BR
10,000 - 14,000
16,000 - 20,000
22,000 - 26,000
28,000 - 32,000
14,000
22,000
29,000
32,000
PRIME VILLAS 4 BR
5 BR
6 BR
60,000 - 80,000
95,000 - 115,000
110,000 - 130,000
4 BR
5 BR
6 BR
65,000 - 80,000
80,000 - 100,000
90,000 - 110,000
SECONDARY VILLAS
Source: Cavendish Maxwell
21
RESIDENTIAL
Q4 2O2O
Ajman As of Q4 2020, the annual rent for apartments in Ajman ranged from AED 12,000 per year for studios to AED 35,000 per year for three-bedroom apartments.
AJMAN APARTMENT RENTS (AED/YEAR) Q4 2020
Al Jurf
Al Bustan PRIME APARTMENTS Studio 14,500
Al Rashidiya Al Naemiya
1 BR 23,000
2 BR 30,000
3 BR 35,000
2 BR 23,000
3 BR 27,000
Al Rawda SECONDARY APARTMENTS Studio 1 BR 17,000 12,000 Source: Cavendish Maxwell
Fujairah
Umm Al Quwain
As of Q4 2020, the annual rent for apartments in Al Fujairah ranged from AED 13,000 to 28,000 per year for studios to AED 28,000 - 36,000 per year for three-bedroom apartments, based on property location, condition and specification.
As of Q4 2020, the annual rent for apartments in Umm Al Quwain ranged from AED 12,000 per year for studios to AED 27,000 per year for three-bedroom apartments.
Since 2018, Fujairah has seen prices and rents for residential and commercial properties weaken, first as supply steadily increased amid tepid demand, and now due to the pandemic. Ongoing infrastructure development, which has reduced accessibility of the arterial roads, and thereby business of many stores, is likely to be completed soon. The restoration of accessibility coupled with the rollout of the COVID-19 vaccine will likely help the recovery of various sectors in Fujairah in 2021.
22
UAE PROPERTY MARKET REPORT
Ras Al Khaimah As part of a strategy for a post-COVID investment environment, the developer of Al Hamra in Ras Al Khaimah has announced that it will offer a 12-year residency and a business licence to property investors. Buyers who purchase a ready seafront or golf course view home in Al Hamra Village or Bab Al Bahr will be eligible for the scheme. The emirate is also ramping up its entertainment and tourism offerings in a bid to attract visitors and investors.
Under its sustainability agenda, Ras Al Khaimah Municipality has completed the first solar energy project in Ras Al Khaimah government buildings. It has constructed car parks covered with solar panels with a capacity of 230 kw at the headquarters of the department.
RAS AL KHAIMAH APARTMENT RENTS (AED/YEAR) Q4 2020
Al Marjan Island Al Hamra Village Mina Al Arab
PRIME APARTMENTS Studio
1 BR
2 BR
3 BR
18,000
27,000
40,000
54,000
Source: Cavendish Maxwell
23
RESIDENTIAL
Q4 2O2O
Dubai Office Market Overview the central business districts (CBDs) landlords have displayed greater flexibility and have offered other incentives to secure new tenants. Fully-fitted options in CBDs have been offered with rent-free periods of 2-3 months for each year of lease commitment.
The last quarter of the year continued to be beneficial for tenants as landlords extended incentives and flexible terms to ensure occupancy of their properties. The goal was to retain tenants, and landlords have been flexible even in cases where tenants needed to downsize or consolidate their footprint.
Vacancy levels were gradually increasing even before the pandemic, with Grade A spaces displaying more resilience than older stock. Going forward, the office market in Dubai is likely to remain under pressure in the near term as many companies are yet to resume operations at pre-pandemic levels. Also, the uncertainty brought on by the pandemic has made it challenging for companies to make medium to long-term decisions. Many would prefer to see how the current situation plays out prior to making any long-term commitments.
Since the onset of the pandemic, companies have been looking to move to smaller office spaces as working from home was increasingly adopted. Many others showed a preference for plug and play options with a minimum capital expenditure (capex) spend. Some tenants even chose to relocate to more central locations. Demand for office space in the range of 5,000-10,000 sq ft increased from 25% of total demand in Q3 2020 to 40% in Q4 2020. Demand from the construction sector was negligible in the latest quarter compared to 20% in Q3, potentially indicating the increasing challenges for the sector as the pandemic raged on. Business Bay, Dubai Silicon Oasis, Jumeirah Lakes Towers and parts of Downtown and DIFC have seen rents decline on a quarterly basis.
Similarities with the residential sector are playing out where tenants are either moving to superior grade properties and areas which are now relatively affordable, or are citing difficult market conditions as a negotiation tactic to remain at their current locations with more favourable terms.
In general, we have observed that the longer the lease term, the lengthier the extended rent-free period being offered. Especially in
DUBAI OFFICE RENTS Q4 2020 (AED RANGE/SQ FT/YEAR)
Shell and Core (Min/Max) Fitted (Min/Max)
Sheikh Zayed Road 70-88 95-120
(Rates quoted are inclusive of service charge
Dubai Media City, Internet City, Knowledge Village 79-88 140-190
but excluding chiller/utilities)
Jumeirah Lakes Towers 30-70 65-80
47-70 70-88 Barsha Heights
JAFZA 37-120 150-160 90-110 74-90 Dubai Marina Dubai South 37-47
DIFC 140-159 210-235
56-66
47-74 67-80 Deira
56-66 40-50 Dubai World Trade Centre
37 37 Dubai Healthcare City
45-60 70-95 Business Bay
125-130 159-177 Dubai Design District
88-107 120-140 Downtown Dubai
Dubai Silicon Oasis 40-56 65-85
Dubai Investment Park 30-56
47-66
Source: Cavendish Maxwell
24
UAE PROPERTY MARKET REPORT
10% 20%
DUBAI OFFICE
DUBAI OFFICE ENQUIRIES BY
10%
SECTOR Q4 2020
ENQUIRIES BY SIZE (SQ FT)
60% 40%
50%
Q4 2020
10%
General Technology
Financial Services Professional Services
1,001 - 5,000
5,001 - 10,000
>10,000
Source: Cavendish Maxwell
Retail Market Overview Similar to the office market, extended rent-free periods and capex contributions were offered to attract and secure reliable tenants in the retail segment. Other innovative schemes included providing tenants with turnover-linked rent options. The aim was to keep vacancy levels low and accommodate tenantsâ&#x20AC;&#x2122; requests of lowering rents or relocating to smaller units as business requirements changed. However, with the easing of movement restrictions, relief packages which were extended on a temporary basis are no longer being offered to tenants. The pandemic rapidly changed customersâ&#x20AC;&#x2122; shopping habits in favour of online retail, especially for food orders and groceries. Most providers have had to ramp up their capacity through order fulfilment centres and last mile delivery options, potentially giving a boost to the industrial and warehousing segment.
Previously empty retail spaces, especially in residential locations, have been absorbed by dark or cloud kitchen concepts that operate a delivery-only model. In a trend observed in the fitness sector, premium fitness centres and gyms faced stiff competition from quality budget gyms and saw membership numbers dwindle. Some developers have already started to report green shoots of recovery from the retail segment. Azizi Developments has reportedly witnessed healthy demand for retail units across its projects in Q4 2020. The developer recorded 315 retail unit sales worth AED 459 million since October, with over 45% of their 700 available retail units now sold.
DUBAI RETAIL RENTS Q4 2020 (AED/SQ FT) Retail Type
Minimum
Maximum
Strip Retail or Retail in Residential Buildings
60
200
Community Malls
60
250
Regional Mall/Destination Retail
157
333
Central Business District (DIFC/Downtown Dubai/ Sheikh Zayed Road/City Walk)
120
350
Super Regional Malls
238
1,425
* Rates are inclusive of service charge and exclude rent fee/capex
Source: Cavendish Maxwell
25
COMMERCIAL
Q4 2O2O
Abu Dhabi Office Market Overview Office rents in Abu Dhabi remained largely unchanged on a quarterly basis. In Q4, the Abu Dhabi Department of Economic Development (ADDED) implemented the landmark Foreign Direct Investment Law under which it would issue licences enabling investors to own 100% of their businesses in Abu Dhabi. During the same quarter, the UAE allowed foreign nationals to own 100% of onshore companies, removing a previous stipulation of having an Emirati shareholder. While this will bode well for investments within and into the country, the impact remains to be seen on free zone companies whose unique offering has always been 100% foreign ownership. These reforms are expected to stimulate demand, and therefore rents, of commercial properties in Abu Dhabi.
With an aim to support businesses affected by the pandemic and attract entrepreneurs to Abu Dhabi, ADDED is providing a one-year extension to secure a Tajer Abu Dhabi licence even without an official business location in the emirate. The extension is applicable to all Tajer Abu Dhabi licences which expired in 2020. Targeting innovative companies in other high-growth areas, Abu Dhabi Investment Office (ADIO) is expanding its AgTech incentive programme to include the new â&#x20AC;&#x2DC;Innovation Programmeâ&#x20AC;&#x2122; with an increased incentive pool of AED 2 billion. Under the original AgTech programme, ADIO collaborated with seven agriculture innovators to launch R&D and operational facilities and develop cutting-edge projects. Continuing with its push for providing flexible working offices for costconscious SMEs, Abu Dhabi welcomed the launch of co-working space provider Cloud Spaces at Yas Mall. The move is also in line with the strategic moves of malls expanding offerings beyond retail and dining.
ABU DHABI OFFICE RENTS Q4 2020 (AED/SQ FT)
Al Maryah Island Shell and Core Grade A
-
Fitted Low High 140
170
Abu Dhabi MainIand Shell and Core
Fitted High Low
Grade A
-
85
110
Grade B
45
55
70
Grade C
30
35
60
Mussafah Shell and Core Grade B
35
Grade C
-
Fitted High Low 45 60 25
35 Source: Cavendish Maxwell
26
UAE PROPERTY MARKET REPORT
Retail Market Overview Through the year, developers such as Aldar Properties supported various real estate segments including retail through programmes worth AED 190 million. For the retail sector alone, initiatives worth AED 90 million were rolled out, aimed specifically at small and medium-sized enterprises (SMEs) and start-ups so that they can continue operations uninterrupted.
Among the new entertainment launches, the Hudayriyat Leisure and Entertainment District opened to the public in November. The destination offers a variety of food and beverage options and sporting facilities including a skate park, splash park, a permanent obstacles course, cycling tracks and courts for other sports.
Coinciding with the Dubai Shopping Festival was the launch of the inaugural Abu Dhabi Shopping Season. The event will run for nine weeks from 10 December 2020 to 14 February 2021 with participation from more than 3,500 retailers and over 20 malls. The winter event comes on the back of the emirateâ&#x20AC;&#x2122;s summer promotion, Unbox Amazing, which ran during July and August 2020, generating sales of over AED 2 billion. The recent move to open up the capital to international tourists in December is expected to further drive footfall to the Abu Dhabi Shopping Season.
Continuing with efforts to provide new and revitalised destinations, Abu Dhabi has kicked off the development of Phase 2 of the Mina Zayed renovation programme. Spread over three million sq m, the port-side community will be a residential and entertainment hub and will offer a new fish market, seasonal market and redeveloped plant souq. As part of the plans for the project, the Mina Plaza comprising four towers was demolished in 10 seconds through a controlled implosion in November.
27
COMMERCIAL
Q4 2O2O
Northern Emirates Office Market Overview Headline rents in Sharjah have mostly remained steady in 2020, largely due to innovative regulations and incentives that have helped ease the uncertainty brought on by the pandemic. The pandemic has in ways expedited innovation and support measures that were already underway for the benefit of new and existing businesses.
This competition aims to encourage small and medium enterprises and entrepreneurs in Ajman to permanently develop their ventures which the public can fully appreciate and nominate as the best projects during the year, leading to large-scale success for the emirate.
The emirate of Sharjah through the Sharjah FDI Office showcased opportunities in several key industrial sectors for Italian businesses through a webinar recently. Sectors included advanced health technology, agri-tech, the Internet of Things, advanced manufacturing, tourism, and the green economy, among others. Currently, there are 260 Italian companies registered in Sharjah.
The Best is part of the initiatives of the Taziz Programme which provides a range of consultancy, training and marketing services for business owners, encourages entrepreneurs by promoting government privileges allocated to them, and promotes entrepreneurship and economic awareness among youth.
The Ajman Department of Economic Development, in cooperation with Emirateâ&#x20AC;&#x2122;s Vision Media Network, launched a monthly initiative titled The Best until December 2021.
SHARJAH OFFICE RENTS Q4 2020 (AED/SQ FT) Abu Shagara/Al Qasemiah Shell and Core
Fitted
24 - 29
38 - 48
Corniche Area (Al Khan, Al Majaz) Shell and Core
Fitted
24 - 33
38 - 57
Al Taawun Road Shell and Core
Fitted
24 - 33
38 - 57
Industrial Area Shell and Core
Fitted
24 - 29
38 - 48 Source: Cavendish Maxwell
28
UAE PROPERTY MARKET REPORT
Retail Market Overview After Dubai and Abu Dhabi, Sharjah was the third emirate to announce its own retail festival with the second edition of Sharjah Shopping Promotions. The 59-day event running until 13 February 2021 is aimed at supporting Sharjahâ&#x20AC;&#x2122;s retail sector, increasing sales and rejuvenating markets after the COVID-19 pandemic. Some of the latest cultural additions to the emirate of Sharjah are the Khorfakkan Amphitheatre and The Waterfall. Spread over 17,650 sq m, the amphitheatre boasts a cooling system and can accommodate over 3,600 individuals. It is connected to The Waterfall, a man-made structure that is 45 m long and 11 m wide, overlooking the Khorfakkan Corniche. Other upcoming attractions include the Khorfakkan Square Park, which will stand on a 163,000 sq m area, in addition to several academic and service projects. Plans are currently underway for the Abu Al Kizan shoreline village located in the mountainous area in the south east of Khorfakkan city. The village constructions will be inspired by the Italian village of Riomaggiore and will include restaurants, shops, hotels and private residences, a marina, a yacht club and swimming pools. Another project is the Al Suhub Rest House, built in a circular shape and at 580 m above sea level. Apart from offering panoramic views of the city, the project will include water fountains, beaches, restaurants and other amenities. Sharjah also recently saw the addition of four new marketsâ&#x20AC;&#x201D;a Friday market that is inspired by the local heritage, a livestock and fish market in Al Bataih, and a fodder market in Al Madam.
29
COMMERCIAL
Q4 2O2O
30
UAE PROPERTY MARKET REPORT
Dubai Hospitality Market Overview As expected, 2020 was a tough year for the hospitality industry, with several hotels shuttering on a temporary or permanent basis. However, some others have used the pandemic as an opportunity to revisit and cut operating costs thereby improving margins not only for 2020 but beyond. As a result, they have successfully brought down the occupancy rate required to break-even, which is lower than the typical 40%. Going ahead, we expect small and mid-tier hotels to face difficulties if they continue to solely rely on room revenues without expanding their revenue streams. Also, with increased upcoming supply amid a slow revival in demand, ADR and occupancy levels will likely move lower in 2021. 2020 was the year of staycations as hotels looked to ramp up domestic tourism in the absence of overseas visitors. Hotels launched innovative campaigns at attractive prices including offering rates that included dining, free upgrades and free cancellations. Sheikh Mohammed bin Rashid Al Maktoum launched the first federal domestic tourism campaign titled ‘World’s Coolest Winter’. Spread over 45 days, the campaign aimed to highlight the varied attractions of the UAE and promote the country as a single united destination for tourism. According to government figures, the number of room nights sold to domestic visitors jumped from 2.74 million during May-October 2019 to 5.68 million in the same period in 2020, an increase of 107%.
Apart from reopening attractions that were initial closed during the peak of the pandemic, new attractions and properties have opened their doors to visitors. Dubai Safari Park, Palm West Beach and the Palm Fountain at Palm Jumeirah were some of the new attractions launched during Q4 2020. Riu Dubai, Nakheel’s 800-room joint venture with Spain’s RIU Hotels & Resorts was the first attraction to open at Deira Islands in 2020. While ramping up domestic tourism, Dubai has also launched initiatives for international travellers since opening up the borders on 7 July. The government has launched the ALSAADA Tourist Card which provides tourists discounts on dining, shopping, entertainment, health and beauty services. Tourists will receive the card free of charge on their arrival in Dubai and it will remain valid until the tourist leaves the emirate. After a landmark peace agreement was signed between the UAE and Israel in Q3 2020, the UAE has been quick to cater to Israeli and Jewish guests, opening up direct flights to Israel and offering kosher food across hotels and restaurants. More than 50,000 Israelis have already visited the UAE since the Abraham Accords peace agreement was signed in September, according to the country’s tourism minister. With the aim to further increase Dubai’s appeal among tourists, and attract repeat visitors, the Dubai government has announced new laws governing the timeshare industry to protect operators and investors of such properties. Timeshares allow for partial ownership of a property along with use for a certain period in the year. They are a more flexible and affordable option than purchasing a vacation home.
DUBAI HOTELS PERFORMANCE
700
90%
83%
600
80% 60%
56%
400
50%
300
40%
200 100
30% 395
497
596
2019
ADR (AED)
220
Occupancy
Rate
500
20%
2020
RevPAR (AED)
Occupancy
Source: STR Global
31
HOSPITALITY
Q4 2O2O
Dubai Upcomin
The World Portofino Hotel 480 Q1 | 2021
The World The Cote Dâ&#x20AC;&#x2122;Azur Hotel 900 Q1 | 2021
Palm Jumeirah
Royal Atlantis Resort & Resid 795 Q2 | 2021
Palm Jumeirah Mysk by Shaza 180 Q1 | 2021
Jumeirah Beach Residence Corinthia at Meydan Beach 300 Q1 | 2021
Dubai Marina Le Meridien Mina Siyahi Hotel (expansion) 326 Q4 | 2021
Dubai Theme Park Legoland Hotel 250 Q1 | 2021
32
UAE PROPERTY MARKET REPORT
Deira Islands Centara Resort
ng Supply
601 Q3 | 2021
Al Muraqqabat Khalidia Palace Hotel 311 Q1 | 2021
Port Saeed Al Khoory Hotel 258 Q1 | 2021
Port Saeed Hotel by Trust Holding Business Bay Ramee Grand Hotel
240 Q1 | 2021
265 Q1 | 2021
Al Jaddaf Marriott Cultural Village Hotel
Palm Jumeirah
dences
St. Regis hotel
190
Business Bay Sky Bay
290 Q1 | 2021
Q1 | 2021
150 Q1 | 2021
Palm Jumeirah Arenco H2 and H3 Resort Hotels
Business Bay Dorchester Hotel
1,216
245
Q1 | 2021
Q2 | 2021
Al Barsha Hansa Hotel 60 Q1 | 2021
Barsha Heights Premier Inn Hotel
Business Bay Kempinski Hotel 277 Q4 | 2021
International City Alzaroony Hotel
219 Q4 | 2021
232 Q1 | 2021
Jumeirah Village Circle Marriott JVC hotel 150 Q4 | 2021
Aykon City Aykon City Phase 1: Tower B 324
Al Furjan ECOS Hotel
Q3 | 2021
Al Furjan Hotel Building (Plot No. AFC006B)
321
172
Q1 | 2021
Q2 | 2021
No. of keys
Expected completion
Source: MEED
33
HOSPITALITY
Q4 2O2O
Abu Dhabi Hospitality Market Overview Abu Dhabi has been slower than Dubai in easing restrictions in an effort to keep the rate of infections low. However, occupancy in Abu Dhabi hotels for 2020 was on par with Dubai, data from STR Global shows. Beginning 31 December, Abu Dhabi was expected to ease entry rules for tourists from various international destinations while adhering to strict safety measures. To make it easier to enter the emirate, 18 new drive-through DPI testing centres were set up on the Abu Dhabi border. Earlier in December, the Abu Dhabi Emergency Crisis and Disasters Committee had started working with authorities to resume all economic, tourism, cultural and entertainment activities within the following two weeks. In a continuous effort to increase the appeal of Abu Dhabi for residents and tourists alike, Abu Dhabi Municipality has constructed four new pocket parks in Shakhbout City. Spread over a total area of 24,575 sq m the parks include childrenâ&#x20AC;&#x2122;s areas, barbeque spaces and seating areas.
34
UAE PROPERTY MARKET REPORT
ABU DHABI HOTELS PERFORMANCE
700
90%
86%
80%
600
60%
58%
50%
300
40%
200
30%
100
20%
Rate
400
559
659
331
177
10%
0 2019
Occupancy
500
2020
ADR (AED)
RevPAR (AED)
Occupancy
Source: STR Global
ABU DHABI UPCOMING SUPPLY
Yas Island Warner Bros Hotel 257 Q1 | 2021
Al Bateen InterContinental Grand Marina 184 Q4 | 2021
Yas Bay Double Tree By Hilton 641 Q1 | 2021
No. of keys
Expected completion
Source: MEED 35
HOSPITALITY
Q4 2O2O
Northern Emirates Hospitality Market Overview To effectively respond to the challenges created by the pandemic and to prepare for tourism and hospitality in a postCOVID-19 world, the northern emirates are taking various yet unified measures to benefit residents and visitors. Ras Al Khaimah offered complimentary COVID-19 PCR testing for international visitors at least until the end of 2020. With measures such as this, the emirate has been awarded the ‘Safeguard Assurance’ Label from Bureau Veritas and the World Travel and Tourism Council (WTTC) Safe Travels Stamp. For the second year in a row, the emirate has been recognised as the Gulf Tourism Capital, acknowledging its early and sustained action to curb the spread of COVID-19. Between June and August, Ras Al Khaimah ran the ‘Shortcation’ staycation campaign inviting domestic visitors to experience natural and cultural attractions. The campaign saw 15,000 room nights recorded during its first 12 weeks. Aimed at visitors and adventure enthusiasts, Ras Al Khaimah has launched new attractions including the first Bear Grylls Explorer Camp, which will also have accommodation from 2021, and the highest restaurant in the UAE, 1484 by Puro.
36
Ajman hotels joined Ras Al Khaimah in receiving the Bureau Veritas certification for adopting the highest safety protocols to protect guests and employees from the pandemic. In line with the Ajman Vision 2021 to build a happy society where members contribute to its development, Ajman Tourism Development Department launched the Jadara programme to help hospitality staff better serve people of determination. Sharjah has also recognised the potential held by youth tourism services in contributing to the growth of the tourism and hospitality sector. To improve the quality of services provided to the youth tourism sector, the Sharjah Commerce and Tourism Development Authority will manage, supervise and develop services of youth hostels located in the emirate while the Sharjah Archaeology Authority will oversee the maintenance and preservation of the facilities. Umm Al Quwain has opened its Mangrove Beach in Khor Al Yeefrah to visitors. The beach is the first of its kind in the emirate and aims to promote environmental tourism and highlight the importance of mangroves.
UAE PROPERTY MARKET REPORT
NORTHERN EMIRATES HOTELS PERFORMANCE
700
100%
600
90%
85%
80%
77%
400
70%
300
60%
200
Occupancy
Rate
500
50% 41% 37%
100 502
0
424
524
Ras Al Khaimah 2019
217
388
Ras Al Khaimah 2020
ADR (AED)
300
370
Fujairah+ 2019
RevPAR (AED)
40% 138
30%
Fujairah+ 2020 Occupancy
Source: STR Global
Northern Emirates Upcoming Supply
Al Marjan Island, Ras Al Khaimah Movenpick Hotel & Resort
Umm Al Quwain Vida Beach Resort
550
135
Q3 | 2021
Q4 | 2020
Mina Al Arab, Ras Al Khaimah InterContinental Mina Al Arab Resort
Al Aqah Beach, Fujairah Address Fujairah Resort
350
196
Q1 | 2021
Q1 | 2021
Mina Al Arab, Ras Al Khaimah Anantara Resort
Fujairah Palace Fujairah Resort
306
167
Q4 | 2021
Q1 | 2021
No. of keys
Expected completion
Source: Cavendish Maxwell and MEED
37
HOSPITALITY
Q4 2O2O
Dubai Industrial Market Overview Demand generally arises for better-quality standalone warehouses with European specifications that benefit from high eaves height, multiple loading bays and quality office content. Most of the upcoming supply does not meet these requirements as developers tend to save on construction costs and disregard these preferences. Meanwhile, supply continued to pile up of run down and older properties which are nearing the end of their natural life cycle and suffering from a lack of re-investment for upgrades. As a result, poor-quality property prices continued to fall while high-quality warehouses held their value despite the challenges brought on by COVID-19.
Dubai offers a diverse mix of industrial parks and zones that are suited to various requirements. As an example, Al Quoz is preferred by businesses that require a central location for the purpose of last-mile deliveries, retail and the like. National Industries Park (NIP) and Dubai Industrial City (DIC) are located further away from the city but benefit from newer properties with higher specifications. Dubai Investments Park (DIP) is a good option due to its location, infrastructure and as it offers multiple light industrial unit compounds at competitive prices. The onshore and free zone industrial market witnessed heavy activity over the past couple of quarters as COVID-19 impacted regional and global supply chains and increased reliance on e-commerce. Compared to Q2, there was increased demand for industrial units and warehouses from a range of sectors in Q3 and Q4 2020 showing signs of normality being restored. Significant interest came from foreign markets as global businesses tried to navigate the challenges brought on by the pandemic. Against this backdrop, Dubaiâ&#x20AC;&#x2122;s â&#x20AC;&#x2DC;open for businessâ&#x20AC;&#x2122; message has likely generated much interest and investment. Some requirements specific to Expo 2020 have also seen a revival during the past six months.
As many tenants have struggled through the months with business operations and rent payments, landlords have been flexible during lease renewals and are keen to drop headline rents to better reflect market realities. However, landlords who must pay land rents are under pressure themselves and expect to work together with tenants to ensure payments and overcome the situation. The last quarter saw some leading global businesses set up manufacturing units in the UAE. Pharmaceutical major Bayer Middle East announced the launch of its regional distribution centre in JAFZA that is estimated to more than halve the time taken for its products to reach the market. Chemicals company Sika commissioned a new production facility in Dubai, further expanding its manufacturing capacity in the UAE.
When compared to the last quarters of 2019 and even 2018, the volume of sales and leasing inquiries has increased, with take-up following in proportion, indicating genuine interest. Rents and sales prices are therefore stabilising in some cases, with the market likely having bottomed for assets with higher specifications. On the other hand, the oversupply of light industrial units persists, with prices expected to move lower by a further 5-10% in 2021.
The pandemic has expedited changes in various sectors including industrial and warehousing as technology becomes even more essential to ensure uninterrupted operations. Many companies will now have to invest in and adopt advanced technologies including automation and digitalisation to reduce labour-intensive processes and speedily fulfil the needs of more demanding customers.
While the pandemic has created opportunities for certain sectors such as e-commerce, others like exhibitions and event management have been distressed given muted event activity in 2020. Further, the pandemic has worsened challenges faced by lower grades of industrial units and warehouses, especially in the free zones.
WAREHOUSE RENTS IN DUBAI - Q4 2020
Rent (AED/sq ft)
Onshore
Free zone
45
50
40
40 30
30 20
15-25
20
20
30 20
20 10
10 0
16 35 Dubai Investments Park
23 45
18 27
15 25
Al Quoz
NIP
Dubai Industrial Park
Minimum
38
30
Maximum
16 25 JAFZA
Sub Lease Fee in %
22 30 Dubai South
0
4%
3%
1% 1% 1%
UAE PROPERTY MARKET REPORT
4% 5%
19% 5%
6%
32% 9%
ONSHORE WAREHOUSE ENQUIRIES BY SECTOR Q4 2020
14%
FREE ZONE WAREHOUSE ENQUIRIES BY SECTOR Q4 2020
9%
18%
15%
18%
18%
18%
General Manufacturing Services General Trading Construction Logistics and Distribution E-commerce Oil and Gas
Services Manufacturing General Logistics and Distribution General Trading Oil and Gas E-commerce Food and Beverage Engineering Learning and Development Cold store
Source: Cavendish Maxwell
NOTABLE INDUSTRIAL DEALS IN H2 2020 Location
Date
Built up Area (sq ft)
Price (AED)
Rent (AED)
Price per sq ft (AED)
Unit type
National Industries Park (NIP)
Nov 2020
230,000
27,000,000
-
117
Logistics
National Industries Park (NIP)
Dec 2020
71,000
-
1,500,000
21
Factory
Dubai Industrial City (DIC)
Nov 2020
110,000
15,250,000
-
138
Factory
Dubai Investments Park (DIP)
Sep 2020
25,500
-
660,000
26
Warehouse
Dubai Investments Park (DIP)
Oct 2020
22,800
-
525,000
23
Warehouse
JAFZA North
Nov 2020
72,118
5,800,000
-
80
Logistics Warehouse
JAFZA North
Nov 2020
21,632
3,300,000
-
152
Light Industrial Unit
39
INDUSTRIAL
Q4 2O2O
Abu Dhabi Industrial Market Overview A host of developments and announcements in the last quarter of 2020 have generated activity in Abu Dhabiâ&#x20AC;&#x2122;s industrial sector and will continue to do so going forward. Following the landmark peace agreement between the UAE and Israel in Q3 2020, both countries have begun exploring business opportunities. Khalifa Industrial Zone Abu Dhabi (KIZAD) has collaborated with Manufacturers Association of Israel to create a platform to enhance industrial, trade and technology infrastructure which will help both nations expand their production facilities, distribution channels and tap global markets. To fulfil key targets under the National Food Security Strategy 2051 and achieve self-sufficiency, the Abu Dhabi Department of Economic Development (ADDED), through the Industrial Development Bureau, identified eight new areas for investment within food industries covering the manufacturing of 18 basic food products. The investments will also promote activity and create new opportunities in the agricultural sector. Abu Dhabi Ports and healthcare procurement firm Rafed agreed to jointly launch the largest healthcare and medical supplies cold store distribution centre in the UAE. Abu Dhabi Ports will deliver a state-of-the-art warehouse and inventory management solution for upstream, midstream and downstream operations and will enable stakeholders to deliver
40
pharmaceuticals, medical equipment and consumables across the local and regional supply chains. Abu Dhabi Ports has also enhanced logistics capabilities for the storage and distribution of over 70 million COVID-19 vaccines at its dedicated 19,000 sq m temperature-controlled warehouse facility in KIZAD. With this capacity, the facility will cater to local and international demand for the vaccine. In a first, Al Ain-based Strata Manufacturing produced the first Boeing Dreamliner 787 tailfin built outside of the US. The parts will be installed on 787 fuselages at Boeingâ&#x20AC;&#x2122;s facility in South Carolina in early 2021. The companiesâ&#x20AC;&#x2122; collaboration began in 2011 when Boeing appointed Strata as a Tier 1 supplier to produce the parts for 777 and 787 airplanes. In the oil and gas sector, Abu Dhabi National Oil Company (ADNOC) announced that it would direct over AED 160 billion back into the UAE economy over the next five years following the approval of its capital expenditure plan by the Supreme Petroleum Council (SPC). ADNOC will boost in-country value (ICV) to the country through its ICV programme aimed at developing new local and international partnerships and opportunities for the private sector, fostering socio-economic growth, and creating job opportunities for Emiratis.
UAE PROPERTY MARKET REPORT
Northern Emirates Industrial Market Overview Considering difficult business conditions brought on by the pandemic, vacancy rates increased in Q4 2020 compared to previous months, exerting downward pressure on rents. Warehouse demand in some areas was higher than the others. Areas that remained popular were the Industrial Area, Sajaa Industrial area, and Hamriyah Free Zone in Sharjah; Al Jurf Industrial and Ajman Industrial areas in Ajman and Al Hamra Industrial Park in Ras Al Khaimah. In line with the UAE’s goal to promote sustainability and adopt the use of cleaner fuels, the Sharjah Cement Factory has collaborated with environmental, recycling and waste management company Bee’ah for the supply of alternative fuel from Bee’ah’s Solid Recovered Fuel (SRF) plant. Sharjah also continues to promote itself as a leading destination for foreign direct investment. Recently, the Invest in Sharjah body engaged with Austrian businesses and entrepreneurs operating in the key sectors of renewable energy, logistical services, smart cities solutions, and development of eco-friendly technology, highlighting various investment opportunities in the emirate. In keeping with the theme of sustainability, Ajman Free Zone has completed construction of over 70% of its AED 36-million eco-friendly zone project. The green zone will include new sustainable warehouses equipped with technology designed to lower electricity consumption, reduce carbon emissions and allow for the implementation of leading sustainability practices.
Zone of the Year Awards and received other honours for its pandemic support efforts and diversity initiatives. The free zone continues to offer helpful and timely offerings such as the Rakez BusinessWomen Package to support women entrepreneurs, and the Make, Manage, Move Your Products offering which helps save costs for manufacturers, traders and logistics providers. In further support for the SME sector, especially during the pandemic, the Umm Al Quwain Free Trade Zone (UAQ FTZ) offered its registered businesses free access to accounting software Zoho Books for a period of six months. The free zone has extended support to its over 7,000 investors through incentives including rental holidays, licence extensions and lower service fees to mitigate the impact of the pandemic. One of the most awaited projects that is expected to transform UAE’s trade and commerce on a regional and global level is the Etihad Rail project, currently at early stages of construction. Apart from connecting the northern emirate economies more closely with the capital and the business hub of Dubai, the project will also greatly help reduce the UAE’s carbon footprint.
Rent performance NORTHERN EMIRATES WAREHOUSE MARKET Average Lease Rate (AED per sq ft) Q4 2020
The Ras Al Khaimah Economic Zone (Rakez) was recognised as the best SME Free Zone of the Year at the fDi Global Free
Ajman
Sharjah
Ras Al Khaimah
12 - 25
15 - 30
12 - 25
Source: Cavendish Maxwell
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INDUSTRIAL
Q4 2O2O
A Word from our
Chief Economist
Julian Roche Chief Economist
Investors in real estate markets throughout the UAE have three good reasons to feel more optimistic about the year ahead than one year ago. First, Property Monitor data from Q4 has been encouraging throughout the emirates and across virtually all sectors, even from the hard-hit office sector, but especially from select residential developments which have achieved investorsâ&#x20AC;&#x2122; triple goals in respect of rents, capital values and liquidity. There is good reason from modelling the data to conclude that market trends going forward will be positive. Second, economists are welcoming the rays of light that are beginning to pierce the macro-economic gloom that pervaded last year. Based on a rise in usage of 6% from 2020 levels, the US Energy Information Administration represents a consensus of reputable forecasters in predicting an average value this year for Brent crude oil of $53/barrel1. Experience teaches that a tight dispersion of forecasts is correlated with a high confidence in the outcome. Cautious consensus optimism over the oil price is reinforced by the widespread conviction that the global economy will begin to recover, as structural economic adaption mechanisms finally start to work. Both the IMF2 and the World Bank3 predict a subdued recovery, with economic growth exceeding 4% in 2021, a view again close to other forecasts such as that of the Economist Intelligence Unit at 4.2%4. Historically, global growth of this magnitude has been associated with very positive real estate market conditions. Regionally, real estate investors may be
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encouraged into the UAE market in particular, not only because of the political stability that the EIU highlighted, but also by its relatively higher dependence on global economic conditions, mediated through foreign direct investment and trade, by comparison to other regional markets. Thirdly, real estate investors can in fact look back on a year that was not without success. Comparing capital values, equity shareholders in Dubai ended 2020 almost 10% lower than at the start of the year5, and the MSCI UAE Index declined by 7.44%.6 This can be directly compared with the value of residential real estate, which according to Property Monitor data fell by 4.4% in Dubai in 2020 and 7% in Abu Dhabi. Comparing dividends to rents is an even starker contrast: even the top echelon of UAE stocks returned only 4.2% dividends, while average gross yields on Dubai apartments stood at 6.5% and 5.2% for villas in 2020. Overall, therefore, as one would expect in a pandemic, real estate comfortably outperformed equities last year in Dubai, with a similar picture in the other emirates. Investors would also no doubt wish to take into consideration the significantly greater volatility in stock markets by comparison to real estate. These are three good macro-economic reasons for confidence in the UAE real estate market. At the more granular level of individual stocks compared to developments, moreover, as this report demonstrates, there are even greater potential disparities for investors to exploit.
1
US EIA (2021) Short-Term Energy Outlook. 12 January 2021. Available at: Short-Term Energy Outlook - U.S. Energy Information Administration (EIA) Retrieved 23 January 2021.
2
IMF (2021). World Economic Outlook Reports. Available at: https://www.imf.org/en/Publications/WEO Retrieved 23 January 2021.
3
World Bank (2021) Global Economic Prospects. Available at: https://www.worldbank.org/en/publication/global-economic-prospects Retrieved 23 January 2021.
4
EIU (2021) United Arab Emirates. Available at: https://country.eiu.com/united-arab-emirates Retrieved 23 January 2021.
5
DFM (2021) Historical Data. Available at: https://www.dfm.ae/market-data/historical-data# Retrieved 23 January 2021.
6
MSCI (2021) https://www.msci.com/documents/10199/015c1c67-1766-4de7-9329-54f4ca4c63fe Retrieved 23 January 2021.
Q4 2O2O
UAE PROPERTY MARKET REPORT
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Methodology Supply projections for residential projects are based on the Cavendish Maxwell Supply Tracker, which tracks supply in real time, including regular tracking of construction projects, new launches and delays. This is achieved through site inspections as well as regular feedback from developers, contractors, Cavendish Maxwellâ&#x20AC;&#x2122;s building consultancy team and related government entities. Residential sales prices and rents are derived from Property Monitor, the regionâ&#x20AC;&#x2122;s leading real estate intelligence platform and the only data source powered by RICS-accredited professionals, bringing unprecedented transparency and accuracy to local property markets. Property Monitor arrives at the average residential sales price per sq ft by incorporating signed contracts, registered transactions, valuations and listings.
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Q4 2O2O
UAE PROPERTY MARKET REPORT
Strategy and consulting Cavendish Maxwellâ&#x20AC;&#x2122;s strategy and consulting team has some of the regionâ&#x20AC;&#x2122;s most highly qualified data analysts with a wealth of international real estate advisory experience. We work closely with a broad portfolio of banks, property developers, government entities and private clients, providing authoritative, industry-specific research and advice to maximise portfolio performance. Our strategy and consulting expertise spans a variety of sectors including residential, office, hospitality, education and mixed-use developments, and our team draws on reliable proprietary data to allow for thorough and accurate analysis of trends and market fluctuations.
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Aditi Gouri, BCom, CFA Head of Strategy and Consulting +971 50 321 1781 aditi.gouri@cavendishmaxwell.com
Dubai 2205 Marina Plaza, Dubai Marina, P.O. Box 118624, Dubai, United Arab Emirates +971 4 453 9525
Sharjah 1801 Sarh Al Emarat Tower, Buhaira Corniche Street, P.O. Box 38583, Sharjah, United Arab Emirates +971 6 715 0444
Abu Dhabi 605 West Tower, Abu Dhabi Mall, Tourist Club Area, P.O. Box 126609, Abu Dhabi, United Arab Emirates +971 2 448 4677
Manama Office 906, Floor 9, West Tower, Bahrain World Trade Centre, P.O. Box 1829, Manama, Kingdom of Bahrain +973 1616 1448
Muscat Villa 836, Way 3012, Al Sarooj, P.O. Box 3438, Muscat Sultanate of Oman +968 99 44 5917
Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.
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