the magazine cityscape march 2013

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MARCH 2013 I CITYSCAPE I 5

For over two decades, Maxim Holding has focused on different dynamic business ventures as per market needs as well as the establishment and development of luxury residential, commercial, entertainment and leisure projects. As one of Egypt’s first entrepreneurs and avid expert developers, we aim to contribute to the quality of life by seizing every potential opportunity in various sectors of the marketplace across countries, providing exceptional quality projects, products and services to the community, all whilst ensuring optimum customer satisfaction and return on investments.

What began in 1980 with the construction of Egypt’s first high-end fully-finished apartments and luxury residential buildings has evolved into a holding company that prides itself in developing an all-encompassing plan for all its projects, products and services, transforming the way people live, work and enjoy life.

Our subsidiaries are:• Maxim Real Estate Investment Specialized in developing high-end residential towers and communities.

• Maxim Commercial Centre Aims to bring memorable shopping and leisure experiences to the market, proudly introducing Maxim Mall, our flagship commercial project.

• Royal Maxim for Tourism Invests in building luxury hotels to serve our prestigious clients with a memorable experience.

• Maxim Tourism Establishment Showcases a range of various leisure and entertainment projects such as mini shopping malls, family entertainment destinations, bowling centers, restaurants and country clubs.

• Maxim Construction Industry Our own ready mix concrete plant, an aluminum panels factory and a cement blocks factory.

• Maxim Media Production Caters to intellectual and political programs as well as to documentaries that aim to raise awareness as well as enhance the general cultural standards of the Egyptian audience.

• Maxim Classics Focused on finding exquisite, different and unique collectable antiques such as vintage cars with plans to establish Egypt’s first private vintage automobile museum.

ADVERTORIAL

MAXIM HOLDING – PIONEERING DEVELOPERS AND INVESTORS SINCE 1980Transforming the way you live, work and experience life through innovative projects, products and services.

Maxim Mall – An exceptional shopping destinationLocated in New Cairo, in front of the American University of Cairo, Maxim Mall offers a hyper market, food court, international cafes and restaurants, a designer court featuring premium international brands, stores of various activities and movie theaters as well as the biggest kids and youth entertainment arcade in Egypt. Retail spaces range from 40m2 to 300 m2.

Kempinski Hotel Situated in a prime location in New Cairo, the luxurious Kempinski hotel encompasses over 200 guestrooms, 18 cabanas, 6 executive suites, 14 suites, 1 wedding suite and two lavish presidential suites. The hotel also includes rejuvenating beauty and fitness centers with

sauna, pool, Jacuzzi, steam rooms as well other SPA facilities. In addition, guests can enjoy outstanding meeting and conference facilities and an exquisite selection of restaurants.

Maxim Country Club Encompassing a total area of over 312,000 square meters, Maxim Country Club offers 304 stand alone residential villas, a mall, club house and an administrative building as well as beautifully

landscaped gardens.

Maxim Residence Maxim Residence includes 116 stand alone residential villas and twin houses, a commercial area and a mosque in addition to landscaped gardens. The project is spread over a total area of over 136,000 square meters.

Royal Maxim New Cairo Built over a total area of nearly 76,000 square meters, Royal Maxim New Cairo includes 42 stand alone residential villas set around the exclusive Kempinski hotel.

CURRENT REAL ESTATE PROJECTS

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6 I CITYSCAPE I MARCH 2013

CONTENTS

LATEST NEWS8 Regional news 26 Asia news 40 Europe news48 Americas news

MIDDLE EAST INSIGHT14 Jordan – A small country with great potential18 Iraq – Strengthening the national housing sector22 Morocco – North Africa’s gateway to Europe

ASIA INSIGHT28 Azerbaijan – A country reinvents itself32 Malaysia – South East Asia’s hotspot36 Hong Kong – Temporary cooling for the world’s ‘hottest’ property market

EUROPE INSIGHT43 European real estate in times of crisis – a special feature

AMERICAS INSIGHT50 Argentina – Opportunity despite crisis?

SPECIAL FOCUS54 Sub-Saharan Africa – A continent on the rise

REGULAR FEATURES60 Architecture: Infinity Tower, Dubai Marina64 Sustainability: KAPSARC, Riyadh, Saudi Arabia68 Retail: Retail real estate in today’s multichannel world

INDUSTRY PAGES70 Industry comment: Ryan Mahoney on the UAE mortgage cap71 A day in the life of…a retail leasing expert72 Movers & Shakers73 Cityscape Events

COVER STORYSUB-SAHARAN AFRICA

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DECEMBER 2012 I CITYSCAPE I 7

Project Director Simon Cole Editor Anna Amin Design Davis Mathai Advertising Adam Fox

Although every effort is made to ensure the accuracy of information contained in this magazine is correct, Cityscape cannot be held responsible for any errors or inaccuracies contained within the publication. All information contained in the magazine is under copyright to Cityscape and cannot be reproduced or transmitted in any form without first obtaining written permission from the publisher.

Partnership Enquiries: Simon Cole Tel: +971 (0) 4407 2640 Email: [email protected] Enquiries: Adam Fox Tel: +971 (0) 4408 2801 Email: [email protected] Enquiries: Anna Amin Tel: +971 (0) 4408 2898 Email: [email protected]

Cityscape Media, Informa Exhibitions, P.O. Box 28943, Dubai, UAEPublished by: Nicholas Publishing International FZ LLC

Welcome to our first quarterly edition

of the year. 2013 is going to be a big year for Cityscape media. Not only have we restructured our format to be more comprehensive and inclusive this year, but we are also in the process of launching our new Cityscape magazine online portal which will act as an exciting addition to our print and online versions and keep you

up-to-date with regular industry news, pungent short stories while offering exciting interactive features.

As it becomes clear how global economic challenges are reshaping the world’s investment climate and real estate environment, international investor focus is increasingly directed to emerging economies due to their immense growth potential. Hence, we have dedicated this issue’s cover story to sub-Saharan Africa, a region which has shown impressive growth since the turn of the millennium. Despite several inherent challenges, many sub-Saharan countries display the attributes of stability and global resources which offer good returns to investors. For our special report, we have selected the markets of Ghana, Nigeria, Kenya, Tanzania and Botswana and highlight some of the most lucrative opportunities these countries have to offer.

Turning to the Middle East, we take a look at Morocco, a Kingdom where an improved business climate and increased consumer demand are currently boosting the high-end real estate market. Further spurred by the government’s tourism expansion strategy, Morocco’s real estate market is set for extensive development over the coming years.

In Asia, Malaysia is coming to prominence among real estate investors, particularly to those from the Middle Eastern region. Steady real estate price growth, political stability, pro-business government policies and a well developed infrastructure all contribute to the emerging attractiveness of the South East Asian country.

In other global regions, governmental restrictions on the acquisition of US dollars in Argentina have caused a

slowdown in the country’s traditionally healthy property market. However, new alternatives with regards to property purchases are being found which might bring about a paradigmatic change in the country’s real estate market.

Over the past year and a half, Europe has of course been in the news constantly, mainly for its inability to find a way out of the lingering sovereign debt crisis. Logically, the continent’s real estate markets have been affected by the economic circumstances. But who has weathered the storm best, and why? Our special Europe feature on page 43 reveals some interesting insights.

In the retail world, so-called ‘multichannel retailing’ has become increasingly common and is revolutionising the way consumers shop. While this has raised concerns over the future demand and provision of real estate for retail use, experts say there is no need for concern as multichannel will complement and not compete with ‘bricks and mortar’ retailing over the next few years.

Last year has without doubt been an exciting year for Cityscape. With the local real estate market having shown strong signs of recovery and confidence returning to the market, we particularly look forward to our next four events.

Cityscape Jeddah will take place from 2-4 March at the Jeddah Centre for Forums and Events, Saudi Arabia, bringing together key industry decision makers and real estate professionals from Saudi Arabia and beyond.

On 28 March, Cityscape Egypt will open its doors for the second time in the Cairo International Convention Centre. With a growing local as well as international presence, the 4 day event is expected to be an even greater success than last year’s show.

Cityscape Abu Dhabi will be held from 16-18 April at the Abu Dhabi National Exhibition Centre, co-located with the ecoConstruct Expo 2013, the only event focusing on sustainable building solutions in the UAE. For details about all four events, please refer to the show previews towards the back of this issue.

Thank you for being part of our community.

Anna Amin Editor

Front cover design: LUCKY YOU! design® www.luckyyou-design.com

EDITOR’S LETTER



REGIONAL NEWS

Real estate investment and advisory firm Jones Lang LaSalle recently announced its ‘2013 Top Trends for UAE Real Estate’. Being published for the sixth consecutive year, this keynote research assesses and forecasts the major trends which could impact and shape the UAE real estate sector over the next twelve months.

Introducing the report Mr. Alan Robertson, CEO, Jones Lang LaSalle MENA, said: “With an increase of 65% in the number of transactions in 2012, the Dubai real estate sector will continue to shift up a gear in 2013, experiencing a broader based recovery on the back of continued economic growth. Abu Dhabi remains 18 to 24 months behind Dubai and the market is not expected to experience an upturn in 2013. The foundations are however being laid for a recovery from 2014, with a number of major infrastructure projects scheduled to start later this year.”

He added: “We also expect the real estate in both markets to benefit from increased economic activity between the UAE and East Asia, specifically China and South Korea, as well as sub Saharan Africa and Australia. We also look forward to the Expo 2020 announcement in November. Success will be a significant boost to the domestic real estate market, hence our continued support as an official bid supporter.”

In the 2013 report, Jones Lang LaSalle outlines the below key trends affecting the UAE real estate market this year:

1. Return of confidence to the Dubai market: Factors like the UAE’s economic growth, increased employment, Dubai’s safe haven status and improved price/rental performance have led to continued market confidence. With many real estate project announcements over the past six months, this increased market confidence has become more pronounced. The government is keen to create a more stable market environment as illustrated by the new mortgage caps from the UAE Central Bank.

2. Funding real estate development in 2013: Funding constraints will apply a natural brake on the pace of new development. Usual real estate financing routes such as off plan sales, IPO/bond issues or bank lending are already challenged. LTV ratio caps might also act as a deterrent as it will limit availability of mortgage finance to end users. In 2013, new development funding is likely to come from overseas cash purchasers and private money from other businesses.

3. Increased involvement from East Asia and the Global South: Increased real estate investment is expected from China and South Korea due to greater business cooperation with the UAE. Chinese involvement is particularly pronounced in the retail sector and is likely to continue in 2013 along with possible investments in the hotel and tourism sectors. There is also increasing interest from Sub Saharan Africa, particularly from oil rich countries like Angola and Nigeria.

4. Increased choice as supply levels remain significant: Buyers and tenants will have a multitude of choices in some sectors in 2013, with significant levels of new supply acting as a constraint on the overall performance of the UAE real estate sector, possibly offsetting the positive impact of improved market sentiment.

5. Operational and financial management: In 2013, there will be greater awareness of the importance of both the operational and financial aspects of property management. Operational issues are getting increased attention due to various factors like health/safety considerations, demanding occupiers, stringent legislations and adoption of best practices. On the other hand, financial issues are also becoming increasingly important as more focus is given towards greater transparency of operating costs. Best value approaches are likely to be more widely applied, rather than lowest cost options.

6. Sustainability: With continued progress in 2012, sustainability is expected to move into even greater focus in 2013. With Masdar and Estidama regulations, Abu Dhabi will continue to take the lead. Most sustainability initiatives in 2013 are likely to be micro and small scale as there is a general reluctance among owners to accept green leases. Evidence from overseas suggests sustainability is unlikely to be fully embraced until either government regulations force change or there is shift in local market perceptions about the financial viability of green buildings.

7. Government initiatives: The government will remain a major player influencing the UAE real estate market in 2013. Initiatives such as the UAE Central Bank mortgage cap, approval of the Dubai Urban Planning Framework and consolidation of real estate players in Abu Dhabi will better regulate or tighten control on market conditions. While initiatives such as regulation on housing allowances for Abu Dhabi government employees, announcement of major government back projects and AED 330 billion stimulus package in Abu Dhabi will stimulate demand and market performance.

Craig Plumb, Head of Research, Jones Lang LaSalle MENA commented: “2013 will see an increase in confidence and sentiment in the Dubai market generally. The market will experience a broader based recovery, with all sectors seeing some pockets of rental growth in 2013. Rents for selected prime office buildings are likely to increase for the first time since 2008, but this will not be true of all office properties in every location.

Further analysis suggests that Dubai has passed through the peak of its construction cycle so increased demand will continue to reduce over supply. A number of major projects have been announced in Dubai recently but these will take some time to come to fruition. In the meantime we would urge cautious optimism. Good projects with secure funding and tenant commitments will succeed, but we must avoid the over exuberance and oversupply seen before the global financial crisis.”

He concluded: “The relationship between landlords and tenants will continue to mature with the market seeing increased transparency in terms of operating costs and service charges. Both Dubai and Abu Dhabi Governments are also introducing initiates to better regulate or control market fluctuations which we generally welcome. Sustainability, property management, liquidity and reduction in the oversupply of inappropriate buildings will continue to drive and dominate the 2013 agenda.”

Jones Lang LaSalle unveils ‘2013 Top Trends for UAE Real Estate’


REGIONAL NEWS

Demand for high quality commercial and residential property continues to grow across Africa on the back of the continent’s sustained strong economic growth and rising wealth, according to Knight Frank’s newly released Africa Report 2013.

Africa is in the midst of a period of dynamic economic expansion, having averaged GDP growth of more than 5% per annum over the last decade. This strong growth is expected to continue and is creating wealthier populations, particularly in the largest and most rapidly growing urban centres. Africa’s ‘mega-cities’ such as Lagos, Nairobi, Accra, Lusaka and Dar es Salaam are increasingly becoming the drivers of its economic growth and, as a result, are attracting growing interest from occupiers, developers and investors.

In the retail sector, the increasing wealth and sophistication of African consumers is leading to rising demand for modern retail formats and western-style shopping centres. Countries such as Zambia, Ghana, Kenya and Nigeria have seen a wave of retail construction activity in recent years which has delivered the first generation of modern shopping malls to many major cities. The construction of further, and larger, shopping centres can be expected, as developers seek to meet the demand for high quality retail space from increased numbers of international retailers entering Sub-Saharan markets and major South African chains pursuing expansion plans elsewhere in the continent.

In the office sector, many key African cities have severe shortages of high quality space built to the specifications expected by international companies. This scarcity of supply has led to extremely high rents in some cities, particularly where there is strong demand for office space from international occupiers from the oil and gas sector. Indeed, prime office rents in Luanda and Lagos are amongst the highest in the world. In Luanda, recent construction completions have eased some of the pressure on the market and rents have become more affordable over the last twelve months but, even so, at USD 150 per sqm per month, prime rents remain well above the levels seen in leading global office markets such as London, New York and Hong Kong.

Oil companies and the banking sector are established sources of demand for office space in Africa, but it is also noteworthy that African economies are diversifying and non-

traditional sectors are emerging. The growth of mobile technology in Africa has been a particularly prominent phenomenon over the last decade. Africa’s technology boom is generating new sources of office market demand and the continent is now home to a number of growing technology clusters, such as ‘Silicon Savannah’ in Nairobi and ‘Silicon Lagoon’ in Lagos.

In the residential sector, the need for greater volumes of good quality housing is reflected in a number of ambitious new suburbs that are either under construction or planned by private property developers on the outskirts of existing large cities. Examples include the Eko Atlantic scheme on Victoria Island in Lagos, Tatu City in Nairobi and La Cité du Fleuve in Kinshasa. While all of these projects remain at very early stages, they may herald a wave of new large scale urban developments across Africa. The demand from offshore buyers for high quality residential accommodation has continued to increase in countries including Morocco, Kenya and South Africa.

Matthew Colbourne, Associate, Commercial Research, said: “Africa’s impressive economic progress is generating a growing need for the construction of good quality property in major cities across the continent. The rising wealth of Africa’s middle class is leading to demand for increasingly sophisticated retail formats and better quality residential property. Meanwhile, as overseas companies seek to expand into Africa’s growing markets, and as African-based companies grow themselves, there is a need for investment in the construction of high quality office buildings, which are currently in short supply in many African cities.”

Peter Welborn, Head of Africa, commented: “Property investors and developers looking for emerging market opportunities are increasing external investment in Africa, particularly as the growth markets of the last decade such as Asia Pacific and Central & Eastern Europe mature and the level of returns they offer begins to diminish. Many African countries remain challenging places in which to do business, but for those able to steer their way through African property markets, there is the promise of high returns and significant growth potential. Knight Frank continues to help investors navigate the rapids in over 40 of the continent’s most challenging environments.”

African property markets poised for strong growth


According to a recently issued report by Cluttons, certain areas of Abu Dhabi are defying the overall trend of declining rent prices and performing at an encouraging level.

Areas which have benefited from the recent development of good quality residential communities, such as Raha Beach, Raha Gardens, Al Reem Island, Saadiyat and Al Reef, have all demonstrated rental price increases over the last six months which appear set to continue throughout 2013.

The increases are linked to general market demand. This is being driven by an influx of people moving to Abu Dhabi from both Dubai and outside the region, as well as relocating within the city from older buildings, which lack equivalent facilities to the modern developments. The general standard of living and quality of build has improved in Abu Dhabi, which has also encouraged movement within the marketplace.

The recent decree that all government employees, as well as those who work for government-affiliated companies, must live within Abu Dhabi has helped fuel residential property demand. The Dubai to Abu Dhabi migration is expected to continue throughout 2013 as existing leases in Dubai expire. Indications are that tenants working across various sectors including the airline, construction, energy and professional services industries are moving to Abu Dhabi.

Average rents in Abu Dhabi have also become more affordable whilst Dubai rents have begun to rise, bringing the most sought-after areas of both cities closer together. For example, the

average rent of a two bedroom apartment in Dubai Marina is AED 125,000 (USD 34,000) per annum, while the average two bedroom apartment rent in Al Reem, Raha Beach and Saadiyat range from AED 105,000 – 145,000, dependent on quality. This has helped to encourage people to relocate to the capital.

Recent announcements on future developments, investment into infrastructure and real estate, and the Sorouh/Aldar merger have also helped bring confidence to the marketplace. There are many positive signs that, as long as Abu Dhabi continues to offer enough jobs and improved lifestyle, people will continue moving to the city.

Whilst further stock is expected to be brought to the market throughout 2013, Cluttons believes that high quality developments with good facilities will continue to be in high demand and experience rental increases.

The average two bed rent in older buildings on the island is currently AED 95,000 per annum, a 10% decrease over the past 12 months. The increased supply of new apartments is expected to put downward pressure on rents across the island as people choose to relocate to newer buildings.

Landlords in older buildings will be forced to further lower rents as vacancy increases, in order to secure a return on their investment. The redevelopment of older buildings will also be crucial to protect rents and reduce vacancy levels, if they are to compete with new stock entering the marketplace.

Cluttons in the Middle East reports optimistic signs of growth in the Abu Dhabi residential market

Anantara Hotels, Resorts & Spas, a leading developer and operator of luxury hotels, resorts and spas, has announced the expansion of its presence in the United Arab Emirates with the launch of its first hotel in Dubai. The Anantara Dubai Palm Jumeirah Resort & Spa is a five star resort on the crescent of Dubai’s iconic Palm Jumeirah, and will open in September 2013.

Partnering with Dubai-based owning company Seven Tides, the progressive hospitality and real estate developer, the luxurious new property is designed to reflect the brand’s Asian heritage and will bring Anantara’s experience and discovery-lead hospitality to the vibrant and continually expanding Dubai market.

Set amidst lush landscaping, the new resort and spa will offer a total of 293 guest rooms and suites clustered in units of four to eight to maximise privacy, with 130 guest rooms featuring direct access to 11,000 square metres of lagoon pools. The 12 Beach Villas, 18 Over Water Villas and three highly exclusive Royal Beach Villas give the resort an indulgent and exotic feel. Facilities will include a private beach, three natural lagoons, water sports, a shoreline infinity pool, an Anantara Spa sanctuary with 12 treatment rooms, a fitness studio and two tennis courts. An elaborate entertainment area will be accompanied by meeting rooms with state-of-the-art audiovisual equipment. A ballroom accommodating 300 people and the private beach will provide inspirational venues for events and weddings.

Six themed restaurants and bars include an all-day dining restaurant serving classic Middle Eastern and international cuisine, an Australian inspired grill, an Asian themed specialty restaurant, a beachfront Mediterranean restaurant, a lobby lounge

with a dedicated shisha deck, and poolside refreshments. For the ultimate in tailored private dining, Anantara’s signature ‘Dining by Design’ concept will invite guests to dine in a dream setting with a private chef and butler.

When it opens, Anantara Dubai Palm Jumeirah Resort & Spa will be a great complement to Anantara’s three existing properties in Abu Dhabi – Qasr Al Sarab Desert Resort by Anantara, which is positioned in the world’s largest uninterrupted sand desert, Desert Islands Resort & Spa by Anantara, located on Sir Bani Yas Island, and Eastern Mangroves Hotel & Spa in Abu Dhabi City. The new resort promotes the brand’s distinctive reputation for luxury discovery in the region, and also creates a landmark presence with such a strategic base in Dubai.

William E. Heinecke, Chairman and CEO of Minor International, the owning company of Anantara, commented: “We are excited to announce our first Anantara property in Dubai which is a significant milestone for Minor. This new resort strengthens our footprint in the key strategic market of the UAE and I am confident it will greatly contribute to our success there.”

Anantara set to launch in Dubai on the Palm in partnership with Seven Tides

REGIONAL NEWS


REGIONAL NEWS

Global property developer Emaar Properties PJSC has signed a new financing facility amounting to USD 500 million (approximately AED 1.835 billion) with a consortium of banks including Standard Chartered Bank, Emirates NBD Capital Limited and HSBC Bank PLC.

Underlining the financial strength and commitment of the company to undertake large scale projects, the new financing facility will be used for the development of Emaar Square, the second mixed-use development by Emaar in Turkey. The facility will be repaid in seven years.

Mohamed Alabbar, Chairman of Emaar Properties PJSC, said: “Having recorded strong financial performance in 2012, Emaar is focused on the on-schedule completion of our master-planned projects in key emerging markets and in Dubai. The new financing facility highlights Emaar’s ability to raise long-term finance and reiterates the strong market confidence in our development competencies and our ability to successfully deliver projects.”

He added: “With the current positive growth outlook of Emaar in all its key markets, we are exploring new opportunities to strengthen our project portfolio and create long term value for our stakeholders. Turkey is one of our key markets, where we have successfully handed over homes in the first phase of our first integrated community, Tuscan Valley, and we are now developing Emaar Square in Istanbul that will further contribute to the country’s socioeconomic growth.”

Emaar Square spans 73,000 square metres and offers luxury living in a stunning new urban neighbourhood. The development comprises over 1,000 luxury homes, a 180-room five star hotel, a wide range of leisure facilities, offices, and a world class shopping mall, the largest in Turkey. The Emaar Square Shopping Mall, a trophy asset within the development, will offer city dwellers a world class shopping and leisure destination.

Located in Büyükçekmece, Tuscan Valley introduced the concept of master planned communities to Istanbul, featuring villas, and the Tuscan Shopping Arcade, with 25 stores and approximately 3,700 square metres of rentable commercial space.

Emaar Properties signs USD 500 million financing facility to develop ‘Emaar Square’ in Turkey

Rental rates in Jordan were mostly unchanged year-on-year during 2012, compared with 2011, according to the recently released Q4 2012 report by property management company Asteco.

During 2012, apartment rental rates for one and two bedroom apartments remained unchanged whereas increased demand for three-bedroom units in areas such as Abdoun, Um-Othainah, Al-Rabiah, Der Ghabar and 4th Circle resulted in an average increase of 2%. 4th Circle remained the most sought after area, with a three-bedroom apartment costing JOD 16,500 (USD 23,300) per annum.

“The demand was predominantly coming from local residents as well as some expatriates looking for medium to large sized apartments in the range of 250 to 350 square metres,” said Hussein Safadi, General Manager, Asteco.

The government announced a new policy for energy sources including gas, solar, oil and electricity which caused increases in sectors such as transportation, construction and raw materials.

This had a direct effect on developers who were forced to review their pricing strategy which in turn resulted in apartment sales prices to increase by 10 and 11% in areas such as Der Ghabar and 4th Circle, while the rest of the market gained 5 to 7% on average, year-on-year to the end of 2012.

Average sales prices per square metre in Abdoun and 4th Circle were the most expensive at JOD 1,100, while Al-Rabiah remained the most economic at JOD 850 per square metre.

Low demand coupled with increasing supply has resulted in decreasing average office rental rates of 3% compared to the

previous quarter. Although there is some interest from local companies the annual average rate of decline in most areas ranged between 2 and 5%. The exceptions were Um-Othainah which saw average rental prices go up by 2% and Medina Monawarah where rents slipped 11% during 2012.

A stagnant office sales market has resulted in no change for sales prices, with the exception of Wadi Saqrah which witnessed an average sales price increase of 3% during 2012.

Jordan property makes modest gains in 2012

Welcome to AqabaAqaba is a fusion of history, nature, and city life surrounded by

picturesque mountains and blue sea.Enjoying year-round sunshine, Aqaba invites you to relax on

its beaches, partake in the exhilaration of its water sports and to explore the coral reefs of the Red Sea with its stunningly colourful marine life.

Around its quiet streets and between its modern structures, Aqaba holds special monuments with a rich history dating back to the Iron Age, continuing across ancient civilizations, from the Edomites, Nabateans, Romans and Byzantines to Muslims.

A blend of cultures and traditions and a long history as a trading center are reflected in the warm welcome the city extends to all visitors.

But that is not all; the striking desert landscape of Wadi Rum and the Nabatean city of Petra, one of the Seven World Wonders, are only a short drive away. Aqaba, with its excellent accommodation and entertainment options, is an ideal hub from which to explore these sites.

Aqaba – Red SeaAqaba offers sun-seekers and water sports lovers the perfect

beach holiday and a great deal more. Small and friendly, Aqaba is easy to get around and has a rich mix of history, culture, shopping and good food.

It invites its visitors to relax, to take their time to explore, enjoy its ancient past and modern facilities, its lively night life and quiet corners.

Aqaba’s accommodation ranges from luxury five-star to simple hotel and camping option, catering to every imaginable taste and budget.

Archaeological excavations are bringing to light ever more of Aqaba’s rich history, which can be tracked back as far as the Iron Age. Traces of the once extensive Byzantine town of Ayla, built about 400 A.D., still remain.

However, some of Aqaba’s biggest attractions are without doubt the beautiful coral reefs. Underwater life features some of the world›s most amazing scenery with a marine ecosystem of more than 140 species of corals and countless varieties of brightly coloured fish, some unique to the region.

Wadi RumA forty minute drive takes you to the magical desert

landscape and majestic mountains of Wadi Rum. Colour-shifting landforms, giant sandstone mountains,

towering plateaus, steep canyons, mushroom rocks and

perpetually moving sand dunes are just some of the elements of Wadi Rum’s splendour.

Get a taste of desert life. Stare at a dazzling panoply of stars in the desert night, ride a camel through winding canyons, climb mountains, sand surf on golden dunes or simply marvel at the stunning landscape in front of you.

PetraPetra is to Jordan what the Pyramids are to Egypt – a startling

testament to man’s engineering prowess. Petra, also known as the Rose City, is a must-see attraction of awe inspiring beauty. It is by far the most visited site in Jordan, and the only way to appreciate why is to see it for yourself.

Petra’s history goes back to prehistoric times, but it is most known for the Nabatean civilization that built it and flourished in its rock-cleft alleys around 500 BC. Nabateans, an ancient Arab people, established Petra as their capital around the 6th century BC. Petra soon became a center for spice, silk, and incense trades, controlling the routes that ran from southern Arabia on to Palmyra in the Syrian Desert. Today, Nabatean monuments reflect a cultural and artistic diversity that is owed to the times when Petra was an international trading hub.

Saraya AqabaSaraya Aqaba is located on the western side of the city of

Aqaba and built around a man-made lagoon. The USD 1 billion development will include five 5-star and 2 boutique hotels, a variety of residential offerings, a water and sports park in addition to numerous other entertainment options.

Tala BayTala Bay was developed in a distinctive architectural style

that blends Jordanian and regional architecture in a modern and friendly atmosphere. Another distinguishing feature of this single community resort is its 2-kilometre private sandy beach on the Red Sea, which offers wide selection of activities for the entire family.

At the heart of Tala Bay is the Marina Town, consisting of villas, apartments, duplexes, swimming pools, commercial centres, restaurants and more. Tala Bay also features a private Beach Club and four international hotels.

Madaen Al AqabaLocated Yamaniah Heights area in the southern beach of

Aqaba, Madaen Al Aqaba consists of the Seascape Residents and the Seastar Residents.

Seascape Residents is a group of 74 luxurious villas, nestled comfortably in a secure residential area between Aqaba’s magnificent mountain range and the blue waters of the red sea.

Seastar Residents is an exclusive gated community, consisting of town houses and apartments, most of which enjoy stunning sea views. The finest amenities include swimming pools, a gym, spa and a high-end retail area.

ASEZA’s vision for Aqaba as a prime tourist destination

ASEZA partners with Turkish AirlinesAs part of ASEZA’s continuous efforts to promote Aqaba as a world class leisure destination, an agreement has been reached with Turkish Airlines who will begin operating 3 regular weekly flights from Istanbul Ataturk to King Hussein International Airport from April 2013. The route will link Aqaba with Turkish Airlines’ extensive flight network of 96 destinations, which is now the 5th largest in the world and includes more countries than any other global airline.

Since the establishment of Aqaba Economic Zone (ASEZ) in 2001, there has been strong emphasis on realising Aqaba’s international tourism potential. To facilitate this, 50% of planned investments have been geared towards tourism.

ASEZ currently has several major tourism related real estate projects under construction which will add more than 5,000 hotels rooms as well as new tourism services such as golf courses, premium entertainment and MICE facilities to the zone.

Between 2005 and 2012, Aqaba has shown steady growth in overnight visitor numbers. It has achieved this by focusing its marketing on specific markets with charter tourism and cruise ships potentials. As a direct result, Aqaba received 1,100 charter flights for the year 2012 and 156 cruise ships since the last quarter of 2012 to date.

Bed nights increased from 820 thousand nights in 2008 and reached more than 1 million in 2012. At the same time, the number of tourist arrivals to Aqaba increased significantly, both from the MENA region and further afield, mainly from Scandinavia, UK, USA, France, Belgium, Holland Italy and Russia.

Some of ASEZ’s tourism projects include:

Marsa ZayedCovering an area of 3.2 million square metres, Marsa Zayed is

a mega mixed-use project, including a 2 kilometre waterfront and contains high-rise residential towers, retail, recreational, entertainment, business and financial districts as well as several hotels.

Several marinas will add to the current berthing capacity which will transform Aqaba into a premier yachting destination; in addition to a state-of-the-art cruise ship terminal, which will become one of Jordan›s touristic landmarks and a welcoming gateway to Aqaba.

Ayla OasisThe Ayla Oasis development aims to create 17 kilometres of

new coastline by developing a series of man-made lagoons open to the Gulf of Aqaba. Once completed, Ayla Oasis will feature a variety of hotels, residential communities, Jordan’s first international standard golf course and a town centre encompassing a marina, retail units, cafes, entertainment and recreational facilities.

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Jordan’s economy continues to grow at a steady pace, recording a GDP increase of 2.6% in the third quarter of 2012, says the Jordanian Department

of Statistics (DOS). Most sectors have shown positive

growth during Q3 2012, compared with the third quarter of 2011. According to DOS, the wholesale and retail industries, as well as the restaurants and hotel sector have achieved the highest growth rate by 8.2% in the third quarter of 2012, compared with the same period of 2011.

As an emerging market with promising growth potential, Jordan enjoys the third freest economy in west Asia and North Africa, and the 32nd freest worldwide (2013 Index of Economic Freedom, Wall Street Journal/Heritage Foundation).

The Kingdom has more free trade agreements than any other Arab country which are part of a series of significant economic reforms implemented by King Abdullah to attract foreign investment

and spur job creation. King Abdullah also embarked on an aggressive campaign to turn Jordan into a regional hub for information and communications technology (ICT), as well as a prominent tourism destination. In 2000, Jordan became a member of the World Trade Organisation.

Hussein Safadi, General Manager at Asteco Jordan, pointed out that over the last couple of years, Jordan has made significant efforts to attract foreign investors, particularly from the GCC region.

“The government has worked very hard over the last two years to attract GCC investors into the country’s economy, particularly into the power and oil resources sector, which is considered as the most important challenge to the country,” he said.

Commenting on the current state of Jordan’s real estate market, Safadi said:

“On the back of an improving political situation and good business environment,

we expect this year to be better than 2012. In addition, some of the major developers have recently corrected their financial models and are planning to re-mobilise.

Generally, the Jordanian real estate market is in a positive mood. Jordan has also proved to be the most stable country in the region recently given the surrounded circumstances.”

TourismTourism is one of the most important

sectors in the Jordanian economy. In 2010, it is estimated that tourism and services accounted for approximately 66% of the country’s GDP, real estate services firm CBRE says.

According to Jones Lang LaSalle, the Jordanian government is implementing a new tourism strategy that aims to attract tourists not just from the GCC but also from Turkey, Greece and the Scandinavian countries, as sources indicate that these segments represent high potential for

A SMALL COUNTRY WITH GREAT POTENTIALInternat ional interest in Jordan is growing with many GCC investors turn ing to the Kingdom as a promis ing new real estate market, recognis ing the potent ia l capi ta l ga ins to be made. From the coasta l town of Aqaba to the capi ta l Amman, the Kingdom has severa l large scale rea l estate pro jects under development.

JORDAN


JORDAN

Jordan’s tourism sector. Furthermore, the government has been

aggressively promoting the historical site of Petra after it was voted one of the new Seven World Wonders along with activities of the Dead Sea, enhancing the branding of the Jordanian territory not just within the region but also globally.

According to the Jordan Tourism Board, tourism revenues rose by 22% to USD 3.3 billion in the first six months of 2012 compared to USD 2.7 billion in the same period of 2011, highlighting the continued growth of the country.

Aqaba Special Economic Zone (ASEZ)With a mission to create a sound and

attractive business environment in Aqaba that will provide an operational base for firms seeking to expand markets, in 2001, the Aqaba Special Economic Zone (ASEZ) was launched. ASEZ is a duty-free, low tax multi-sector development zone encompassing the total Jordanian

coastline of 27 kilometres, the sea ports of Jordan, an international airport and the city of Aqaba with its current population of 115,000 people. The zone encompasses an area of 375 square kilometres and offers global investment opportunities ranging from tourism, recreational and professional services to multi-modal logistics, value added industries and manufacturing.

With tourism at its centrefold, ASEZ has currently several large scale real estate developments under its belt. The Aqaba Special Economic Zone Authority (ASEZA), the institution responsible for the management and development of ASEZ, says no less than 50% of the masterplan’s investment will take place in the tourism sector.

ASEZA’s vision was to attract USD 6 billion of investments by 2020. By 2008, ASEZ had already attracted 18 billion of committed investments, ASEZA said.

Within ASEZ, the Marsa Zayed development is the Kingdom’s largest

ever tourism and real estate project. Master developer is Al Maabar Jordan Investments Company, a subsidiary of UAE-based Al Maabar which is formed by Abu Dhabi’s largest real estate developers and investment vehicles Mubadala, Aldar Properties, Sorouh Real Estate, Al Qudra Holding, Reem Investments and Reem International.

Covering an area of 3.2 million square metres, Marsa Zayed is a mega mixed-use project, including a 2 kilometre waterfront with several marinas and contains high-rise residential towers, retail, recreational, entertainment, business and financial districts as well as several hotels. Phase 1 is expected to be completed by 2014.

Another mixed-use project within ASEZ is Saraya Aqaba, located on the western side of the city of Aqaba and built around a man-made lagoon. The USD 1 billion development will include a set of luxury hotels, a variety of residential offerings and a waterpark.

Marsa Zayed Cruise -Ship Treminal


The Ayla Oasis development aims to create 17 kilometres of new coastline by developing a series of man-made lagoons open to the Gulf of Aqaba. Once completed, Ayla Oasis will feature a variety of hotels, residential communities, Jordan’s first international standard golf course and a town centre encompassing a marina, retail units, cafes, entertainment and recreational facilities. Phase 1 of the project will be completed in 2014.

Other tourism related projects in ASEZ include Tala Bay, which will be home to a variety of luxury hotels, various residences, a marina, golf club and retail outlets.

AmmanHowever, current real estate development is not limited to

Jordan’s Red Sea coast. Amman, the largest city and capital of Jordan, also regarded as the business capital of the Levant, has several large scale construction projects underway such as the Al Abdali Urban Regeneration project, Amman’s new downtown, the Jordan Gate Towers and Taj Mall.

In December last year, UAE-based property developer DAMAC Properties has topped out its first development in Jordan. Located in the heart of Al Abdali, The Heights is a luxury 36-storey residential tower and will be the highest in the country when it is delivered later this year. DAMAC is also working alongside The Heights to deliver two other buildings; The Lofts is already passed the sixth floor and The Courtyard is past the fifth.

“We have experienced very strong interest from Jordanians, both in Amman and working abroad, as well as the international market. Only a very small number of apartments remain and we expect The Heights to have sold out before the end of the year,” commented Niall McLoughlin, Senior Vice President of DAMAC

Properties.

DAMAC added that many GCC investors are now turning to Jordan as a promising new real estate market, recognising the potential capital gains to be made.

Looking ahead, Asteco believes Jordan’s real estate market is on the right track to diversify its product further.

“We are optimistic to see more new developments in the future because Jordan’s economy is distinguished by a healthy environment and good potentials. Once the mega projects currently under construction are completed, this will positively reflected on the Jordanian economy in different sectors and also help to address the unemployment problem in the country,” Safadi concluded l

Saraya Aqaba

Aqaba

“We are optimistic to see more new developments in the future because Jordan’s economy is distinguished by a healthy environment and good potentials. ”

JORDAN


IRAQ

STRENGTHENING THE NATIONAL HOUSING SECTORFourteen months after the end of the American occupat ion of I raq, the country is in a rebui lding phase with construct ion having become a major dr iver of the local economy. Supported by the stabi l isat ion of the pol i t ical s i tuat ion and an improving securi ty level, the country is a safe place to invest for the next two decades, the Government says.


IRAQ

Nearly nine years after the start of the Second Gulf War in Iraq, the U.S. military ended its operations there in mid-December 2011. Over recent years, the country has been working hard to regain stability and boost the local

economy. According to the World Bank, an improving security environment and foreign investment into Iraq are helping to spur economic activity, particularly in the energy, construction, and retail sectors. As the country is in a rebuilding phase in the wake of the U.S. occupation, construction is now a major driver of the economy.

Still, Iraq’s largely state-run economy is dominated by the oil sector, which provides more than 90% of government revenue. For 2013, the World Bank has forecast a GDP growth rate of 12 percent, the highest in the region.

On the back of increasing oil production, GDP is expected to further grow over the next few years. When visiting Cityscape Global in Dubai in October last year, Muhammed Al Darraji, Iraqi Minister of Construction and Housing, said that Iraqi oil production is projected to more than double its share of global production by 2020.

Real estateAccording to UN-HABITAT, the United Nations agency for

human settlements, the Iraqi housing sector suffers from major deficiencies including widespread housing shortages, particularly in urban areas where over 70 percent of the population lives. Furthermore, acute infrastructure problems alongside deteriorating housing conditions have created the slum-like conditions experienced by nearly 58% of urban residents, says UN-HABITAT.

There is currently a shortfall of 2 million housing units for Iraq’s population, says the Housing Minister.

In an effort to address these issues, in 2011, the Iraqi Government implemented the Iraq National Housing Policy, which outlines objectives for building new homes, offers opportunities to international developers over the coming years and covers areas such as land management, housing production, housing finance, infrastructure for housing, housing management & maintenance, housing construction materials and informal housing.

At the end of last year, the government had 60,000 housing units under construction and is set to launch twelve further housing projects this year, Al Darraji stated.

The lack of available housing offers great opportunities to investors while more stable economic conditions and an improving security level are having a positive effect on the real estate market, experts say.

Ahmad Al-Emara, Operations Manager at Sama Al-Iraq Investment, an Iraqi investment company focusing on real estate, banking and construction, commented:

“There is no doubt that the Iraqi real estate market is tempting and developing dramatically, it has been expanded and grown in the last 4 years on the base of a sense of stability, both politically and economically.

The achievement in the security situation that was made in the past few years helped the market to attract local and international investors to launch major projects in the country.”

Demonstrating their confidence in the Iraqi real estate market, Dubai-based global property developer Emaar Properties has signed a Memorandum of Understanding with the Iraqi Ministry

“There is no doubt that the Iraqi real estate market is tempting and developing dramatically, it has been expanded and grown in the last 4 years on the base of a sense of stability, both politically and economically.The achievement in the security situation that was made in the past few years helped the market to attract local and international investors to launch major projects in the country.”


of Construction & Housing during Cityscape Global last year, to jointly develop residential, commercial and tourism development projects in Iraq.

Ahmad Al Matrooshi, Managing Director of Emaar Properties, said the company will develop housing and commercial projects in Iraq to help address the growing demand for housing, office space and retail real estate in the country.

“These in turn will meet the goals of the Iraqi National Development Plan to create new jobs and strengthen ancillary industries. Iraq is one of the promising emerging markets in the Middle East region, and our partnership with the Ministry of Construction & Housing complements our strategic goal to expand to key international markets,” Al Matrooshi said.

The joint projects to be developed by the Ministry and Emaar will be decided in due course based on the National Development Goal of Iraq.

ChallengesWith the economy projected to grow at 12 per cent this year,

the Ministry has great confidence in Iraq as a strong investment platform for projects in several key sectors including housing and infrastructure development.

While sharing this view, Al-Emara pointed out that current development should be accompanied by legislative changes that organise and facilitate the work of local and international companies in Iraq.

“We still need more packages of laws and governmental services that enable developers to start bigger, more sophisticated projects with international partners to face the demand in different sectors.

[We also need] a healthier banking system and above of all that corruption inside the state departments [ceases],” he said.

Al-Emara also identified the absence of new technologies and facilities alongside with an outdated banking system as major challenges that hinder the inflow of additional foreign direct investment and thus impede on Iraq’s growth.

“I can add one more challenge which is the difficulties that companies face in attracting professional and qualified human resources from outside Iraq,” he added.

According to the World Bank, other obstacles Iraq faces include a tenuous political system and concerns about security and societal stability, an outdated infrastructure and high unemployment.

“Unemployment remains a problem throughout the country. Encouraging private enterprise through deregulation would make it easier for both Iraqi citizens and foreign investors to start new businesses,” the World Bank stated.

Analysts say that if Iraq can overcome these challenges, it looms as one of the region’s most vibrant construction markets in the next decade.

Prospects for the futureGiven the government’s efforts to boost the country’s real estate

sector and the fact that an increasing number of international developers are looking to launch projects in the country, Al-Emara is positive about the further development of Iraq’s real estate market.

“I do expect that the country will become a more and more vital environment for [attracting major] projects which Iraq hasn’t seen for three decades now, based on the increase of the national income of Iraq and the high demand in the market,” he concluded l

“I do expect that the country will become a more and more vital environment for [attracting major] projects which Iraq hasn’t seen for three decades now, based on the increase of the national income of Iraq and the high demand in the market.”

IRAQ

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Developments for the Future


MOROCCO

NORTH AFRICA’S GATEWAY TO EUROPEIn the wake of the global f inancial crisis and polit ical turmoil that has shaken the Arab region since 2011, Morocco’s real estate market is holding up well. An improved business cl imate and increased consumer demand for high-end real estate are boosting the market while the government pursues an aggressive tourism expansion strategy.

Bab al Bahar, Rabat


MOROCCO

In spite of the uncertainties raised by the Arab Spring, Morocco showed resilient growth over the last two years, a trend expected to continue in 2013.

According to Jones Lang LaSalle, Morocco’s strengths lie in several facts which include its strategic geographical location not far from Europe, its young and relatively diversely well trained population and its strong GDP and economic growth with a population that has access to financing. Morocco also has strong banking and finance services less exposed to financial risks, the firm says.

Additionally, the country has a well-developed communication network and improving transport connections such as ONCF’s (Organisation National des Chemins de Fers) projects that improve train stations and permit the use of high speed trains, a first for Africa (JLL).

The Moroccan Government is also encouraging FDI through incentives such as a modified company taxation system (exemption for VAT and corporate tax for 5 years or more) in specific areas of Morocco for different economy sectors, JLL says.

Real estateIn the wake of the global financial crisis and political turmoil

that has shaken the Arab region since 2011, Morocco’s real estate market is holding up relatively well.

“Morocco’s real estate market is slowly recovering and government initiatives to attract foreign direct investments (FDI) to grow its tourism sector, combined with an improved business climate and increased consumer demand for high-end real estate are setting a fairly positive mood within the Moroccan real estate market,” commented Yousef Al Nowais, Managing Director of AL Maabar, a UAE-based developer who is currently constructing of a major mixed-use development in Rabat.

According to Al Nowais, continued economic growth, combined with the ease of doing business in a country filled with a rich culture and attractive duty free system, increasingly draws foreign

investors, developers and operators to Morocco’s real estate market, especially to the tourism related sector.

“Real estate and tourism go hand in hand in Morocco as the tourism sector is the second largest contributor to the country’s overall GDP. The increased attractiveness of Moroccan real estate as an investment is further supported by the government’s Vision 2020, which aims to double the country’s tourism sector, making Morocco one of the world’s top 20 tourism destinations in order to draw 20 million annual visitors to the country by 2020, while elevating the market positioning of its tourist market as a world-class destination that features internationally recognised brands,” Al Nowais further commented.

The positive mood is also reflected in the country’s housing market which has seen residential property prices rise by 1% during the year to Q2 2012, according to the real estate price indexes (REPI) constructed by Bank Al-Maghrib and the National Land Registry Office.

Gross rental yields in Morocco remain attractive based on a late 2011 report by real estate investment site Global Property Guide’s report. In Casablanca, apartments had an average yield of 7.7%, higher than the previous year’s 7.3% while apartments’ gross rental yields ranged from 6.8% to 8.6%.

Bab al BaharDeveloped by Bab Al Bahr Development Company (BBDC), a joint

venture between the UAE’s Al Maabar International Investment and Morocco’s Bouregreg Agency, Bab Al Bahr is major mixed-use development in Morocco’s capital Rabat, consisting of residential complexes, hotels, leisure areas, office spaces, shops and art galleries,

Said to compare to the likes of the Solidere project in Lebanon, Bab al Bahar is anticipated to set a new benchmark for the country’s mixed-use developments as it is expected to become the trendiest new downtown of Morocco.

“Bab Al Bahr was designed with the vision of building an

Bab al Bahar, Rabat


MOROCCO

integrated city that combines innovatively designed residential, commercial, hospitality and retail properties with the rich culture and history of Arabian-Andalusian architecture in the heart of the country’s capital,” Al Maabar’s MD commented.

“Strategically located where the Atlantic Ocean meets the Bouregreg River, Bab Al Bahr not only joins the two ancient cities of Rabat and Salé paying homage to historical heritage and contemporary glamour, but will also serve as the connecting ground for the residents, businesses and visitors of the new community that is continuing to flourish each day, bringing about the Renaissance or revival of Rabat,” Al Nowais further said.

The project spreads across 292,200 square meters, has a built-up area of 512,00 square metres and includes seven districts – Jewel, Cultural, Salé Wall, Arts, Service, Marina and Riverfront Districts – all built around the Central District that houses a library, office, residential buildings and a public park.

Morocco’s first tramway runs through the development which also showcases museums, art galleries, boutiques and the future Rabat Grand Theatre, which is being designed by Zaha Hadid, the internationally acclaimed London-based Iraqi architect who designed The Aquatic Centre to host the London Olympics 2012 and Dubai Opera House.

Bab al Bahr is expected to be completed by 2016.

Demand for top-end holiday accommodation risesWith Bab al Bahr, BBDC is introducing a new luxury lifestyle to

Morocco; the development will contain the country’s first Rotana hotel. Recently, there seems to be an increasing demand for high-end properties in Morocco, both tourism and residential related.

“Through our collaborative efforts with the Moroccan government, we are seeing increasing demand for high-end holiday accommodations in Rabat. Tourism has clearly been

designated as a national priority with the launch of Vision 2020 as Morocco strives to make its tourism sector a model of long-term sustainability,” Al Nowais said.

Al Maabar’s manager also mentioned that the increased demand for prestigious properties is a growing trend in Morocco, supported by the rapid sales of the company’s Marina and Riverfront properties.

“The Bab Al Bahr properties are attracting high-net worth individuals from Morocco as well as from across the Middle East and Africa who are seeking second homes and we are confident that demand for high-end holiday accommodations in Rabat will only continue to grow in the upcoming years as this port city has historically been a world-class cultural destination,” he explained.

RetailHowever, it is not just Morocco’s tourism and prime residential

sector that currently offers attractive opportunities to investors. According to Knight Frank’s 2011 Africa Report, Morocco’s retail market remains significantly undersupplied given the recent rise in consumer spending, thus offering numerous opportunities to investors looking to tap into the country’s promising retail potential.

“One of the more dynamic real estate markets in the MENA region, Morocco has been experiencing a surge of activity in both the real estate and retail real estate industries. The emergence of a middle class favours the development of modern retail markets such as the Morocco Mall, Mega Mall and Rabat Centre,” Al Nowais commented.

Opened in early December last year, the Morocco Mall, built on a 2 hectare site, is one of the largest shopping centres in North Africa and has over 280 retail stores. According to JLL, the successful opening generated over 1 million of visitors in 2 weeks and created jobs for around 6,000 people l

Bab al Bahar, Rabat

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THE ECONOMY IN 2013India’s GDP was revised downward consistently in the last

three quarters of 2012. In 2013, this trend will prevail – though the quantum of revision will be lower. The country’s economic environment will certainly improve in 2013, with a corresponding (though lagging) gain in momentum for real estate. The most tangible benefits of economic improvements on the Indian real estate space will be seen in the second half of 2013.

The average inflation rate (based on the wholesale price index, or WPI) moderated to 7.4% in Q3 2012. This can be seen as sensibly low when compared with the average CPI, which remained at 10.2%. As a result of the slight moderation in WPI inflation, the Reserve Bank of India started softening its cash reserve ratio to improve the credit situation. Further easing of liquidity with the prime objective of reviving the GDP is expected in the first half of 2013.

RESIDENTIAL REAL ESTATE IN 2013Residential property prices have breached affordability limits in

cities like Mumbai. Nevertheless, developers will have to factor in the ground realities of the business while debating the lowering of prices to catalyse sales in 2013. Obtaining the 57-odd permissions to begin construction of a project can take as much as two years. During this time, the cost of acquisition or even just holding the land for a project rises. Builders are already beset with the increased costs of license costs and cost of construction.

However, it became evident in 2012 that homes are not selling at the current price points, and developers do need to re-calibrate their bottom lines while still remaining viable as businesses. It is extremely doubtful that the previously offered freebies and other such incentives will prove to be much of a booster in the current environment. Since the only way to catalyse healthier sales at this point is offering buyers tangible financial relief, we are likely to see drastic trimming of frills in projects to make them more marketable from a pricing point of view, and innovative payment schemes.

Developers will also offer buyers attractive pre-launch benefits in a bid to accelerate sales momentum in the initial months following a launch. Developers with large-scale projects with a greater share of unsold inventory will be under greater pressure to offer discounts than those with smaller projects and limited inventories.

Although most of the cities of India will see an increase in residential launches in 2013, the southern cities of Bangalore and Chennai will witness a decline in launches as compared to 2012 YTD. It is important to note that these two cities recorded a historical high in terms of the number of launches during 2012.

To illustrate - Pune has recorded an average of close to 6,000 units per quarter over the past three years (2010–2012 YTD). This is more than twice the average quarterly launches recorded during the period 2007-2009. As a market that has grown too fast in such a short time, launches in Pune will be moderate in the near term.

COMMERCIAL REAL ESTATE IN 2013 The fact that the major cities of Mumbai, NCR-Delhi, Bangalore

and Chennai saw 72.5% of the total commercial space absorption in 2012 is a telling one, and indicates the forward path. These cities will grab the lion’s share of contribution in total commercial space absorption in 2013, certainly within the range of 74-76%.

In terms of commercial real estate investment potential, Mumbai, Bangalore and Delhi NCR will continue to be of highest interest to

big ticket investors focused on real estate in 2013. We also expect investor-driven demand to remain upbeat in Chennai, Hyderabad and Pune. Mumbai will see the highest share of commercial corporate property transactions from companies focused on their own occupancy needs. The Delhi NCR region will be more popular with high net-worth and institutional investors.

We expect 2013 to bring a larger-than-usual number of NRI investors into the commercial space arena. This is because NRIs are currently enthused by the prevailing exchange rate benefits and the fact that commercial real estate capital values are still 15-25% under their 2007-08 peak levels.

RETAIL REAL ESTATE IN 2013 In 2013, new organised retail project completions will increase

significantly (by 109% y-o-y). Chennai, Hyderabad, Kolkata and Pune will be among the major contributors to this increase, with a 53% share of the country’s overall mall supply for 2013. The primary reason is that a sizable amount of supply that was expected to reach completion in 2012 has been being pushed to 2013. Altogether, India’s major cities like Mumbai, NCR-Delhi, Bangalore, Chennai, Pune, Hyderabad and Kolkata will see the addition of close to 9.5 million square feet of mall space in 2013. Mumbai, NCR-Delhi, Bangalore and Chennai will together contribute 70% of the total retail space absorption. Other cities like Pune, Hyderabad and Kolkata will account for the remaining 30%.

The Government’s nod to FDI in multi-brand retail will be a major driving factor for increased activity in 2013. Since the policy opens the portals to major MNC retail brands in India, the organised retail sector will see a major transformation in terms of its overall contribution in the mid-term. This, in turn, will positively impact the absorption of retail space over the next 12–24 months. The absorption is forecast to touch 6.8 million square feet and 7.1 million square feet in 2013 and 2014 respectively.

That said, the benefits of the much-awaited FDI decision will not become fully evident in 2013, as it will take mall developers at least two years to incorporate the design elements and dimensions required to meet global standards. Mall developers are expecting a massive increase in demand for their projects in 2013; however, those whose shopping centres do not meet the requirements of international brands in terms of location, overall size, design, professionally managed operations will fail to see any action.

India real estate forecast for 2013Anuj Puri, Chairman & Country Head of Jones Lang LaSalle India, shares his view on Indian real estate for 2013.

ASIA NEWS


Luxury residential markets in major Mainland cities performed well during the fourth quarter of 2012, with both prices and rents rising steadily, according to Knight Frank’s recently released Greater China Property Market Report.

Sales volumes in Beijing and Shanghai dropped from the highs of previous quarters, while developers in Guangzhou and Shanghai were active in launching new luxury homes.

BeijingThe price of luxury homes in Beijing grew 2.1% quarter-on-

quarter, while monthly rents also posted steady increases, at 2.5%.As a result of the overall market recovery during 2012, home

prices could continue to grow moderately with steady investment returns in 2013, the report says. However, despite an expected increase in prices, a seasonal drop in sales in the first quarter of the year is forecast.

ShanghaiIn Shanghai, luxury prices increased 10.3% quarter-on-quarter,

while growth in luxury monthly rents slowed to 0.2%. Again, luxury sales are expected to decline in the first quarter of 2013.

Luxury homes in prime areas launched in the second half of 2012 were well favoured by buyers. Due to sustained demand in prime areas, luxury prices will maintain moderate growth in 2013.

GuangzhouSince the second half of 2012, Guangzhou›s luxury property

market has experienced a market upturn in both sales volume and prices. During the fourth quarter in 2012, luxury residential prices increased 9.4% compared to Q3, the biggest rise since 2011. The average luxury residential monthly rent grew a further 0.5% from the previous quarter, the highest level of the past three years.

Improved local consumer sentiment and continuous mainland Chinese visitors’ spending kept the Hong Kong retail property buoyant in Q4 2012, according to the recently released Colliers International Retail Market Research & Forecast Report.

From September to November 2012, Hong Kong Tourism Board’s statistics showed that there were a total of 12.2 million inbound visitors which represented a growth of 16.3% year-on-year (YoY), with 73% of the total coming from mainland China. This subsequently correlated to Hong Kong’s retail sales growth which remained vibrant, rising by 9.5% YoY in November 2012.

The report also highlighted that despite the global economic uncertainties, international retailers continued their expansion plans, albeit with a more cautious approach. Many new overseas brands remained keen on securing prime locations in Hong Kong to set up their flagship stores before continuing with expansion in China or the greater Asia in long run.

Case in point is the recent announcement of iconic brand Topshop’s opening in Hong Kong - a much awaited arrival – in Central. Even amid surging retail rents, the decision by the UK fashion brand to set shop in Hong Kong is a clear indication of the international retailer’s belief in Hong Kong’s potential in the long term.

In Hong Kong, Topshop will partner with LAB Concept, the new contemporary retail subsidiary of Lane Crawford. The highly anticipated store will occupy a prestigious corner site within Asia Standard Tower in Queen’s Road Central. With the expected opening in May 2013, the store will span two floors, including ground-floor level, of over 12,000 sq ft in total and enjoys prominent street frontage with international fashion labels in the neighborhood.

Helen Mak, Senior Director of Retail Services at Colliers International Hong Kong, who assisted Lane Crawford in securing this site, said: “Prime retail spaces in Hong Kong with such spacious size and significant street frontage is highly favoured by international retailers as they serve as a channel for image building in the local market as well as amongst visitors from the Asia region

including mainland China who have substantial spending power.”“Although there has been talks on a slowdown by the world’s

biggest high-end goods consumer, China is still very much a dominant player when it comes to luxury spending. Hong Kong is the perfect stepping stone for brands to establish themselves before venturing further to China,” she said.

With sustained demand from international retailers and the extreme lack of leasing retail property stock at prime shopping locations, retail rents continued to increase at the end of 2012. According to Colliers’ research, the average retail rent of street-level-shops on key street segments increased 1.4% quarter-on-quarter in Q4 2012, albeit at a milder rate than the previous quarter.

Simon Lo, Executive Director of Research & Advisory, Asia commented that retail property owners were less aggressive in their rental demands as the slower retail sales growth throughout 2012 curtailed retailers’ business profits and hindered their ability to pay soaring rents.

As the Hong Kong government’s restriction measures are in place in the residential market, a number of investors have changed to park their money in the commercial sector, which buoyed the sales activity of retail properties at the end of 2012.

The overall number of investment sales of retail units, which each valued HKD 10 million (USD 1.3 million) or above, surged by 105% QoQ in Q4 2012. Lo said that investors focused on second- and third-tier streets in core shopping areas, or looked for investment opportunities in non-core districts in Q4 2012, given the limited stock available for sale in prime shopping locations.

Looking ahead, Hong Kong’s retail market continues to see further growth potential with the support of the strong tourism performance, sustained demand from overseas retailers, an extreme lack of prime retail space, increasing household incoming and rising inflation. However, the uninspiring global economic conditions are likely to cause downside impact on the retail market. Thus, the average retail rent in Hong Kong is projected to increase 9% over the next 12 months, which is milder than the double-digit growth in 2012.

Demand drives mainland China luxury residential prices and rents up

Hong Kong retail rent projected to increase 9% in 2013

ASIA NEWS


AZERBAIJAN

BETWEEN HISTORY AND MODERNITY, A COUNTRY REINVENTS ITSELFHaving witnessed remarkable economic growth between 2006 and 2008, Azerbai jan today is posi t ion ing i tse l f as an outward looking country, p lac ing h igh importance on rea l estate development.

Baku White City


AZERBAIJAN

With the completion of the Baku-Tbilisi-Ceyhan Pipeline in 2005, the region’s second largest crude oil pipeline that runs from Azerbaijan to Turkey via Georgia (1,768 kilometres), Azerbaijan

has completed its post-Soviet transition into a major oil based economy. Between 2006 and 2008, the country witnessed extremely high economic growth, mainly due to large and growing oil exports but also because of the growth in other non-export sectors such as construction, banking and real estate.

Due to reduced oil output, in 2012 Azerbaijan’s economy grew at a low rate of 3.0% and is forecast to grow at 3.5% in 2013, says the Asian Development Bank (ADB). However, in the first half of 2012, growth in services, construction, and agriculture drove the non-oil economy up by 11.3%. Intensive construction in the first half of 2012 helped that subsector soar by 29.5% over the same period of 2011 (ADB).

According to global architecture and design firm Broadway Maylan, which has recently opened a permanent base in Baku, Azerbaijan’s construction sector has increased in size seven fold over the past decade, with significant increases in new housing provision, two major roads being built and the reconstruction and construction of the Black City under the Baku White City project.

Baku White CityBaku White City represents the largest urban development in

the Caucasus region; it is spread over an area of 221 hectares, will contain up to 18,000 commercial and residential units and will be able to accommodate about 50,000 people. The masterplan has been developed by renowned design firm Atkins while Foster + Partners and F+A Architects are also involved in the project.

The development’s masterplan aims to transform the former Black City into a brand new, high quality urban quarter, acting as a catalyst for the regeneration of the city and the wider region (the Black City is an urban development from the first oil boom and has played a major role in the oil industry, performing activities of refining, storage and transportation of ‘black gold’).

The project’s vision for Baku White City is to create a cohesive, carefully planned sustainable urban environment, offering a high quality of life for its residents as well as the opportunity to attract and promote investment, generate jobs and strengthen the city’s economy.

“Architectural diversity, ecological compatibility and a considered integration of the new development into the existing urban context of the city were identified as major themes in the forming of the project concept. The result is a project with fascinating architecture and investment opportunities that stimulates land restoration and construction activity, along with creating an attractive environment and infrastructure,” the project’s Press Service said.

Sustainability is paramount to Baku White City. The buildings, such as the Baku White City Office, are made using environmentally

Baku White City


friendly materials, while alternative energy solutions are also being employed.

“Construction of one of the project’s iconic office buildings has already begun. Designed by Atkins, Baku White City Office Building is a landmark, seen as an entrance to the project territory from the Nobel Avenue, forming a gateway of Baku White City. A development of international level, Baku White City Office Building features offices and other commercial areas. A beautiful plaza is planned in front of the building where the foundation stone of Baku White City is situated, and which will become a beginning of a vibrant promenade along the Nobel Avenue,” the Press Service commented.

The 10-storey building occupies a total area of 20,000 square meters, has 9 high-speed elevators and includes underground and guest parking for up to 365 cars. At its initial design stage, Baku White City Office Building became well known among architects on the international arena and was repeatedly nominated as ‘the Best Project of the Future’ at various international exhibitions.

Baku White City Office Building is the last in line of five buildings along the Street in the Green Hill District, which are currently being developed by local and foreign investors.

Baku White City is oriented towards attracting both local and foreign investments, and offers various opportunities in the residential, offices, retail, tourism, education and health sectors.

Other developmentsThe construction of high-end residential developments is also

currently advancing in the Azerbaijani capital. Later this year, Pasha Construction, in conjunction with Broadway Maylan and Mace International, will deliver the first tower of its Port Baku Residences scheme, one of the largest developments in the country. The major mixed-use scheme involves a total built-up area of 375,000 square metres comprising three 32-floor towers with 872 high-end residential apartments, three floors of 30,000 square metre commercial retail space and 2,000 car parking spaces over three levels of basement.

With a vision to design an iconic building that transforms Baku’s skyline and promotes the city’s historic identity, Azinko Development has asked HOK to design the Flame Towers, which are set to become the tallest skyscrapers in the country. Consisting of Grade A commercial office space as well as residential, hotel and retail offerings, Flame Towers covers an area of 243,500 square metres and is expected to be completed shortly.

As infrastructure plays a crucial part in real estate development, Azerbaijan is currently building a new terminal at the Heydar Aliyev International Airport, designed for the annual maintenance of about three million passengers, tripling the capacity of the airport. The country is also currently considering of building a 14 kilometre long bridge over Baku Bay, connecting both sides of Baku’s natural harbour.

UAE & AzerbaijanAzerbaijan is one of Dubai’s largest trade partners. According

to Hamad Buamim, Director General of the Dubai Chamber of Commerce and Industry, in 2011, Dubai’s non-oil trade with Azerbaijan was valued at AED 1.62 billion, almost doubling the trade between the two countries compared to 2010.

“We think this significant jump is the result of bilateral relations, improvements to the ease of doing business in Azerbaijan and enhanced trade flows between Dubai and Azerbaijan. Trade, agriculture and food processing, transportation and logistics, construction and infrastructure, tourism and hospitality, financial services and information and communication technology are important sectors for bilateral cooperation,” Buamim said.

During a meeting of the UAE-Azerbaijan Joint Economic Committee in December last year, the two countries signed a Memorandum of Understanding (MoU) to establish a joint Business Council while discussing the potential for extension of mutual trade and economic relations.

UAE Minister of Economy, Sultan Bin Saeed Al Mansoori, commented:

“The ties between our businesses and other organisations have created the ideal foundation for a fruitful commercial and trade relationship. We are moving together on a path of growth and prosperity. The UAE is keen to uphold the appropriate institutional framework to enhance economic ties with Azerbaijan through the Joint Economic Committee meetings which can help both sides understand the real requirements of investors.”

Economic challengesAlthough openness to global trade, recent tax reforms, and some

improvements in regulatory efficiency have aided Azerbaijan’s transition to a more market-based system, the country faces several challenges which impede on its economic growth and thus on the development of a more favourable real estate investment climate, analysts believe.

According to the 2013 Index of Economic Freedom, published by the Wall Street Journal and the Heritage Foundation, despite some improvement, property rights in the country are weak while the level of corruption continues to be substantial. Government regulations add to the costs of foreign investment, and monetary instability adds to uncertainty, the report states.

Analysts say that long-term prospects will depend on world oil prices, the location of new oil and gas pipelines in the region, and Azerbaijan›s ability to manage its energy wealth to promote sustainable growth in non-energy sectors of the economy and spur employment.

RETAIL IN AZERBAIJAN: A WINDOW OF OPPORTUNITY

New to AT Kearney’s Global Retail Development Index (GRDI) in 2013, Azerbaijan (ranked 17th) has low market saturation, high fragmentation, and few strong national players, making it a favourable environment for international players. Since 2007, the country has had 5 percent year-over-year real GDP growth. Consumer spending remains moderate, with roughly three-quarters of spending going to food; credit offerings and improved banking are leaving a positive impact on the retail sector.

Source: AT Kearney, GRDI 2013

AZERBAIJAN


MALAYSIA

SOUTH EAST ASIA’S HOTSPOT On the back of steady rea l estate pr ice growth, a wel l developed inf rastructure and a dynamic business landscape, Malays ia is current ly prov ing very at t ract ive to fore ign investors, especia l ly to those f rom the Middle Eastern region. Blessed with stunning natura l beauty, the country is sa id to offer prof i table opportuni t ies, part icu lar ly in the h igh-end tour ism sector.

Kuala Lumpur


MALAYSIA

When Malaysia became member of the Association of South East Asian Nations (ASEAN) in 1967, an organisation which aims to promote economic growth, social progress and cultural development

among its members, the country moved away from a predominantly mining and agricultural-based economy and began a transition towards a more multi-sector economy.

Consequently, since the 1980s, Malaysia has experienced rapid industrial growth and was increasingly regarded as a solid industrial base with high development potential by international firms.

In the late 1990s, Malaysia’s property market was hard hit by the Asian Financial Crisis that plunged many countries into deep recession. However, Malaysia’s economy recovered from the crisis sooner than neighbouring countries and real estate prices have climbed steadily since then, according to the Malaysian Institute of Estate Agents.

Today, the country’s real estate market is in a positive overall mood, despite global economic concerns and the upcoming general elections later this year, says Nabeel Hussain, Senior Vice President at CBRE Malaysia.

InvestmentIn line with strong economic and real estate price growth,

Malaysia’s property market currently proves attractive to overseas investors, particularly to those from the Middle Eastern region.

According to property investment company IP Global, Malaysia’s popularity with Middle Eastern investors has grown exponentially over the last two decades, due to proximity to the Middle East and the strong cultural and religious ties with the region. Kuala Lumpur also happens to be the global centre for Islamic finance, with 78% of Islamic bonds issued in 2011 underwritten by Malaysian banks, IP Global says.

“Malaysia offers an attractive combination of a friendly investment and foreign ownership regime, affordable property values, high standard of living, pleasant climate, and a diverse racial and social mix; that it is also predominantly Muslim is an added plus for Middle East investors,” Hussain of CBRE added.

Masood Al Awar, CEO of UAE-based real estate development and marketing company Tasweek, commented:

“For starters, Malaysia offers a strategic location right at the heart of South East Asia. Its market-oriented economy thrives off pro-business Government policies, political stability, and a well developed infrastructure. It also has a productive workforce which is young and educated and is considered the country’s greatest asset.

The dynamic business landscape has transformed Malaysia into one of the world’s top investment destinations for offshore manufacturing operations. More than 5,000 foreign companies from over 40 countries have set up operations in the country, with a number expanding and diversifying their operations, showing confidence in Malaysia’s business potential. Overall, Malaysia offers investors a buoyant business environment that has the right elements in place to spur growth and profitability.”

Al Awar also added that Malaysia is one of the most technologically developed countries amongst the ASEAN region’s industrialising nations, providing an excellent hub for investors to shape their future.

Demand for high-end properties highAccording to the November 2012 Kuala Lumpur market report

by CBRE, out of the nearly 58,189 condominiums and serviced residences in the capital valued at or above MYR 350 per square foot (USD 115), about 21% are considered ‘luxury.’

“Demand at the very top end of the market appears to still be strong, as evidenced by sales at projects such as Banyan Tree Signatures and St Regis Residences,” Hussain commented.

Newly launched or previewed high-end residential projects during Q3 2012 included the 335-unit Horizon Residences in Jalan Tun Razak, priced at USD 490 per square foot, and the 121-unit Serai in Bansgar, priced at USD 330 per square foot.

As a response to increasing demand for top-end residential property, Tasweek is currently constructing The Haven Lakeside Residences, a luxurious condominium development in Ipoh, a historic city located 200 kilometres north of Kuala Lumpur.

“Ipoh is a peaceful city with good infrastructure and a friendly community. Its property landscape is underdeveloped though; the condo lifestyle has not yet taken firm roots, for example. We wanted to be the first Middle Eastern real estate player to thoroughly explore this market,” Al Awar said.

The AED 220 million (USD 60 million) urban complex covers 13.8 acres of land with 497 units of luxury housing in addition to another 10 acres of private virgin land in Ipoh City. The entire project is expected to be finished this year.

TourismIn an effort to diversify the economy and make it less dependent

on exported goods, the Malaysian Government has pushed to

The Havean Lakeside Residences, Ipoh


increase tourism to the country. As a result, tourism has become one of Malaysia’s largest sources of income. Tourist arrivals have grown steadily over recent years; for 2011, Malaysia recorded 24.7 million tourist arrivals as opposed to just 5.5 million arrivals in 1998 (Tourist Development Corporation of Malaysia).

This scenario demonstrates an excellent base for tourism related real estate development and investment, Al Awar believes. In October last year, Tasweek entered into a joint venture with Casabrina Vacation Villas to develop, own, operate and market the luxury resort’s properties in the country’s western state of Pahang.

“After the Asian downturn, Malaysia’s real estate industry focused intensely on steady and firm growth. The country put in place strong fundamentals and a robust legislative framework to protect the sector and its investors. [On top of that], Malaysia has been able to successfully maintain a multi-ethnic, multicultural, and multilingual society that makes for an excellent tourism destination,” he commented.

“Gulf and Asian countries continue to be drawn to Malaysia’s superb tourism perks, which include affordable living and entertainment pricing and other unique features such as rich music and arts, savoury cuisine, and rainforest climate. Malaysia’s dramatic landscape framed by rugged mountains, slopes sweeping down to floodplains alive with forest flora and fauna, sandy beaches and scenic mangroves is a must see for the intrepid adventurer. The country has different geographies in 11 states and 2 federal territories that offer diversity and unlimited exploration,” Al Awar added.

Looking to a positive futureAccording to Paul Preston, Regional Director of IP Global, the

population growth and the government’s investment in the capital are what make Kuala Lumpur particularly interesting as a property investment option.

Throughout last year, the government was committed to spending USD 500 million on Kuala Lumpur development projects and is also looking to attract more multinationals to the city. According to IP Global, Malaysia’s population has increased 34% since 2000 and the Government aims to bring in 500,000 foreign white-collar workers to the capital by 2020.

CBRE also sees positive prospects for the Malaysian property market.

“Most sectors are still primarily driven by domestic demand, making them less susceptible to fluctuations in foreign demand; furthermore, Malaysia’s value proposition of a high quality of life, combined with reasonable operating costs and taxation rates, safety and security as well as developed educational/medical systems, make it an attractive location for expatriates,” Hussain concluded l

MALAYSIA

The Havean Lakeside Residences, Ipoh

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HONG KONG

TEMPORARY COOLING FOR THE WORLD’S ‘HOTTEST’ PROPERTY MARKET

The government recent ly int roduced t ightening measures on the property market which cont inue to suppress res ident ia l sa les volumes in Hong Kong, yet home pr ices have remained stable in what is now considered the wor ld’s most expensive c i ty. The res ident ia l curbing pol ic ies are a lso spurr ing the commercia l sector, wi th Hong Kong’s reta i l market prov id ing a part icu lar posi t ive out look.


HONG KONG

According to Savills’ Autumn 2012 World Cities Review on global residential price growth, Hong Kong topped the list with half year price growth of 7.4% [Jan – June 2012] and is now viewed as the world’s most expensive city, with

property values 82% ahead of second most expensive London. “Hong Kong has been the real winner so far this year. Mainstream

market recovery, supported by domestic buyers and a loosening of mortgage availability, helped to boost values to another all time high in June [2012],” the report said.

In late October last year, in an effort to cool the city’s notoriously pricey property market, the Government introduced the new Buyer’s Stamp Duty (BSD) and revised the Special Stamp Duty (SSD). The new BSD applies to non-local investors in the residential market, imposing an additional 15% stamp duty on purchased property.

Decline in residential salesSome experts initially worried that the government’s tightening

measures would not achieve the desired cooling effect on the residential market since in Hong Kong, demand far outstrips supply and plenty of buyers are willing to pay top prices.

However, this was not the case.“The tightening measures to cool the home buying frenzy have

had an immediate impact on the residential sector. Residential sales volume fell significantly by 62% between October and December 2012,” Joanne Lee, Manager of Research & Advisory at Colliers International in Hong Kong commented.

“Given that mainland buyers are more focused on high-end residential properties, the new BSD imposed on foreign purchasers further slowed demand on the luxury-end and started to curb prices,” she added.

On a monthly base comparison, sales volume of luxury properties fell substantially by 73.4% month-over-month in November 2012, Colliers’ Q4 2012 Hong Kong research report said.

“On the other hand, mass prices stayed relatively resilient, supported by pent-up and end-user demand, the still abundant liquidity globally, while lower interest rates support affordability. Generally speaking, mass residential prices will likely hover at current high levels. The purchase restriction will continue in 2013 in order to moderate the pace of price increase,” Lee further said.

According to Knight Frank’s January 2013 Hong Kong Monthly however, although the government’s tightening measures caused a decline in sales volume, prices remained stable. “Luxury residential prices remained stable [in December], while mass residential prices increased 1.2%,” the firm said. Over the year of 2012, Knight Frank reported overall price rises of 2.7% for the luxury market and 23% in the mass market.

Shift in investor buying patternsFollowing the introduction of new measures to curb the residential

sales market, Colliers observed a shift in investor buying patterns in the Hong Kong market.

“More investors park their money on non-residential properties. Consequently, the transaction volume in office, industrial and retail properties showed significant growth during Q4 2012. For example, the total value of office sales transactions with a total consideration of HKD 30 million (USD 3.9 million) or above increased 111% quarter-over-quarter. It is anticipated the shift in investor buying patterns will sustain in 2013,” the report commented.

Now that investors are diverting cash into commercial and industrial properties, prices are being pushed upward which will eventually put pressure on the property market again, Colliers said.

“Hong Kong has been the real winner so far this year. Mainstream market recovery, supported by domestic buyers and a loosening of mortgage availability, helped to boost values to another all time high in June [2012].”


HONG KONG

“Investors are concerned about prime assets in key markets becoming overpriced, thus the property outlook remains cautious,” Lee commented.

“Many investors are struggling to see attractive investment opportunities in the prime real estate market. As a result, they look for investment opportunities in non-core districts, which provide more possibilities for opportunistic returns,” she further said.

Healthy signs in the retail marketHong Kong’s retail sector is in a positive mood. According to

Colliers, thanks to a healthy labour market, local consumer sentiment improved during Q4 2012. In addition, the purchasing power of mainland tourists in Hong Kong continued to drive the city’s retail sales. According to Knight Frank, in November 2012 the retail sales value*climbed 9.5% year-on-year to reach a four month high of HKD 36.5 billion (USD 4.7 billion).

“Asia’s stronger economic growth means that consumer spending is continuing to increase throughout the region. China, where a growing domestic market and the rise of the middle class coincide with a change in government economic policy, will continue to support the Hong Kong retail market,” Lee commented.

“Spending by mainland visitors in Hong Kong has been driven by renewed confidence in their economy; both the number of inbound visitors and mainland visitors’ spending in Hong Kong will continue to soar,” she added.

In terms of retailer expansion, Knight Frank said that brisk

retail activity continues to encourage business expansion, with international retailers dominating prime retail space.

Colliers added that despite concerns over the global economy, in Q4 2012, new overseas brands still actively looked for prime locations in Hong Kong to set up their flagship stores before continuing with expansion into China or the greater Asia region.

In Q4 2012, limited supply of prime shopping premises, expanding inbound tourism and inflationary pressure also created a positive environment for the retail leasing market, Colliers said.

According to the firm, overall retail rents are expected to grow 9% in 2013. Knight Frank has an even more optimistic view on this year’s retail rental development: the firm expects rents in prime retail areas to increase by further 10 – 15%.

Future opportunitiesLooking ahead through the year, Colliers expects all property

sectors to see positive growth (in both rental and capital values), with the exception of the residential market. For commercial real estate, the firm suggests that rentals will increase between 4% and 7% year-over-year in 2013.

“Buying interest in the commercial sector will remain strong if tightening policy measures on the residential market are still in place. With limited buying options in core areas, investment opportunities in decentralised locations will attract strong attention, which in turn will push prices upwards,” Lee concluded.

*The retail sales value expresses the combined total value of retail sales in all sectors as per data provided by the Hong Kong Census and Statistics Department.


EUROPE NEWS

According to international real estate advisor Savills, the German commercial real estate market recorded the highest volume of investment transactions for the past five years at €25.31 billion ($34.04 billion) in 2012. This marks an 8.5% increase compared to an already strong 2011 and the firm attributes this largely to rising levels of foreign investment. International buyers accounted for 46% of the total investment volume in Germany in 2012, up from 31% in 2011, while investors from continental Europe were by far the most active, investing approximately €5.7 billion ($7.6 billion). The most active nationalities were Austria (€1.3bn), France (€1.3bn), Netherlands (€0.6) and Italy (€0.5).

The firm notes that turnover was also boosted by the sale of a number of large packages in the final quarter of 2012, including TLG’s commercial portfolio and 17 Karstadt properties worth €1.1 billion each including KaDeWe in Berlin. In addition, the office schemes Kranzler Eck in Berlin and the Welle in Frankfurt changed hands in transactions amounting to approximately €784 million in total.

Marcus Lemli, CEO of Savills Germany and head of European investment, says: “The German investment market was strong in 2012 with approximately €4.7 billion generated in December alone, which is almost as high as each of the first three quarters.

“More than ever Germany is seen as a safe haven by many foreign investors because it is one of the most stable European economies at the moment with above-average growth prospects in the medium term, high market liquidity and a moderate public debt ratio compared to most other Eurozone countries. Foreign buyers remain strongly committed to the market and are the main reason that the €25 billion mark was surpassed in 2012. These investors tend to focus on the major cities as they offer the necessary liquidity. We expect this international interest to continue to grow in 2013, particularly from sovereign wealth funds and public pension funds.”

Overall €12.9 billion was invested in the top six German markets of Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg and Munich according to Savills research, marking a 20% rise year-on-year (yoy). This increase is largely due to the rise in foreign investment with 52% (€6.7 billion) of the money invested in these markets in 2012 coming from abroad, compared with 35% (€3.7 billion) in 2011.

Broken down, in Berlin the firm records a total investment volume of just over €4.3 billion (+65% yoy) in 2012, ahead of Frankfurt and Munich, which achieved total transaction volumes of €2.9 billion (+14% yoy) and €2.8 billion (+38% yoy), respectively. In contrast in the remaining three key cities investment volumes decreased yoy by 22% in Hamburg, 15% in Düsseldorf and 11% in Cologne.

In terms of sectors specifics, all areas recorded a rise in activity in 2012 with the exception of retail. Savills research shows that €8.03 billion was invested in German office properties in 2012, marking a 9% increase yoy. Investment into logistics and industrial real estate increased by 51% to €1.66 billion, while €1.51 billion was invested in new developments sites (+47% yoy). Overall the retail sector recorded €9.17 billion of investment transactions, representing a decrease of 17% yoy. The firm attributes this decline to a lack of product rather than falling demand, particularly in regards to shopping centres. The remaining investment went into the hotel sector (€1 billion) as well as mixed-use, social welfare and leisure properties.

Matthias Pink, head of research at Savills Germany, commented: “Given the favourable market conditions we anticipate interest in German commercial real estate to remain strong in 2013. The prime sector demand will continue to exceed the available supply and more risk-embracing segments are likely to see increased transaction volumes as financing conditions are expected to gradually improve. Therefore, we forecast that transaction volumes in Germany will reach a similar level in 2013 to that achieved in the two preceding years.”

Foreign capital pushes German investment volume to highest in five years

According to Knight Frank’s ‘Prime Central London Report January 2013,’ prices in prime central London increased 0.4% in January.

Liam Bailey, Head of Global Research at Knight Frank, commented: “The rise in sales volumes which we saw at the end of 2012, following the publication of the draft Finance Bill and the clarification offered regarding £2m+ property taxation, has carried over into this year. Against an ongoing backdrop of domestic and global economic difficulties, property values in prime central London climbed a further 0.4% in January.

There is little doubt that the clarification provided by the Autumn Statement and draft Finance Bill has contributed to a rise in sales volumes – releasing the pent up demand seen between June and November 2012 as buyers adopted a ‘wait and see’ approach.”

The demand for luxury London homes from overseas buyers looking for a safe haven for their money, as well as a slice of London life, has helped drive price increases over the last few months, Knight Frank says. The drop in the value of sterling in recent months has made property an even more appealing investment.

“Escalating concerns over the UK economic outlook have increased the pressure on the pound over the last few months. As our research shows, while prices for prime central London property increased 0.5% since November, currency movements

mean that for euro-denominated buyers property values have actually declined by 4% in that time, making entry into the market more affordable for European buyers,” Bailey commented.

“The flipside of this, of course, is that euro-denominated buyers who purchased property late last year have seen the value of their investment fall in recent months. However, as the Eurozone crisis continues to drag on, the long-term appeal of owning property in a ‘safe haven’ such as London is unlikely to diminish,” he added.

According to research from Knight Frank’s latest London Review, South Kensington drew the largest number of international buyers as a percentage of sales in 2012, with Knightsbridge, Kensington, Hyde Park and Belgravia also attracting large international interest. Buyers from France and Italy were the most active Europeans in the market in 2012.

Knightsbridge remains the best performing region in terms of price growth, with a 1.5% rise in January. Notting Hill, which has seen prices steadily decline since September, reversed some of these losses with 0.8% price growth in January.

“Our outlook for 2013 remains unchanged – we expect to see no significant price movement in the prime central London property market this year, before more moderate price growth from 2014 onwards,” Bailey concluded.

Sterling’s slide boosts London property demand


EUROPE NEWS

According to Knight Frank’s recently released report titled ‘International Residential Investment in London,’ in 2012, overseas buyers purchased central London new-build property with a value of $3.4 billion, up 22% from $2.8 billion in 2011.

A total of 52 nationalities bought new-build property in central London last year. The most active overseas buyers (ranked by number of transactions) of central London new homes are from Singapore (23%), Hong Kong (16%), China (5%), Malaysia (4%) and Russia (3%), the report says.

UK buyers remain the largest nationality group, with a 27% market share. Furthermore, 33% of international investors buying off-plan do so to provide children attending London universities with a base in the city, Knight Frank says.

The firm identifies three major factors that have underpinned the appetite for property in London: first, the capital growth potential and opportunity for investment diversification; secondly, the advantageous currency differential for many nationalities; and thirdly, London’s continuing leadership in top-flight education.

The educational opportunities in London are particularly attractive for buyers from Asia, and their preference for new-build property has had an important impact on London, allowing developers to secure funding and maintain healthier construction levels in central London than in the rest of the UK.

Knight Frank expects the core overseas markets to retain their

appetite to buy in central London, and also expects domestic share of the market to rise from its current levels. It also forecasts increased investment activity from China, particularly if the restrictions on overseas capital transfer are eased. Turkey will continue to be a key buyer market: its economy has outperformed crisis-hit Western Europe and many of its citizens have existing business and family links with the UK. Indonesia is also a country to watch, Knight Frank says.

Neil Batty, head of International Project Marketing, Knight Frank, said: “Overseas investors will continue to play a vital role in the acquisition of prime central London new-build homes in 2013. They are attracted to London due to advantageous currency values, the opportunity to invest in a tangible asset with the prospect of long-term strong capital appreciation, and the recognition that London continues to offer world-leading educational and cultural facilities.”

Gráinne Gilmore, Head of UK residential research, commented: “International interest in London property is not a new phenomenon, but the economic and financial changes since 2007 have created a fresh model for overseas investment in new-build property. Agents report that the appetite for London property remains strong, and there is an increasing interest in London property from a widening range of overseas buyers, especially some emerging economies where economic growth has remained robust during the downturn.”

International investors spent $3.4 billion on central London new-build property in 2012

Thanks to stable demand for prime offices and low availability of such space, prime office rents have remained unchanged in central Stockholm at SEK 4,800 (USD 755) per sqm per year in Q4 2012, the latest DTZ Stockholm Office Report shows.

The firm forecasts prime rents to hold up due to lack of new supply, while rents for secondary space will suffer from downward pressure.

According to DTZ, 2012 is assumed to have been the bottom year in terms of economic expansion. At present, several indicators suggest that the economy may be on its way to turn around. According to consensus forecasts, the economy is expected to record an annual growth rate of 1.2% this year and 2.6% in 2014.

The labour market will most likely remain fragile this and next year. In 2013 the total employment is expected to record zero growth followed by 0.5% growth in 2014. The unemployment rate

is forecast to reach a peak at 8.2% in 2014 before slowly turning around.

Despite this outlook, Stockholm has not experienced any major decline in office demand, although the general sentiment in the market is muted and risk awareness is high. Demand seems to be driven mainly by the motive of cost cutting by increasing space efficiency.

The total supply pipeline for the next three years corresponds to 3.1% of the total existing office stock in Greater Stockholm. However, when subtracting offices that are taken off the market, the net new supply in 2013-2015 is lowered to 2.5% of the existing stock.

The vacancy rate in Greater Stockholm has begun to increase and is currently estimated at 11.2%. The vacancy rate in the CBD is limited to just over 4%.

Stockholm’s prime office rents holding up thanks to low supply

16 ~ 18 April 2013Abu Dhabi National Exhibition CentreT: + 971 4 336 5161 | F: + 971 4 3351891E: [email protected] | www.cityscape.org

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EUROPE

It is no news that the slowing economy has impeded the growth of real estate markets across the continent. Some counties, particularly those at the heart of the crisis such Greece, Italy, Spain, Portugal and Ireland, have been more affected than

others. On the other hand, strong economic growth in the CEE and some Nordic countries is currently reflecting positively on their respective real estate markets. All in all, despite economic challenges, experts are optimistic and predict gradual real estate recovery for Europe on the whole.

European economyDuring the course of last year, the European economic downturn

has deepened. The ongoing sovereign debt crisis has brought about higher unemployment, low wage growth and generally diminished growth prospects across Europe.

Despite this, GDP growth is forecast to be positive for the medium to longer term, with some cities expected to perform better than others.

“Central & Eastern European (CEE) cities, the Baltic capitals and Istanbul are forecast to show the strongest GDP growth over the next five years. Vilnius is forecast to show growth of 6.7%pa, followed by Kyiv, where growth of 5.5%pa is forecast. The Nordic cities of Helsinki and Stockholm are forecast to show slightly above average growth over the same time period, of 3.3%pa and 3.1%pa respectively,” the December 2012 DTZ European Retail Guide stated.

“On the other hand, the southern European cities of Milan, Lisbon and Rome, as well as Lille in France are forecast to significantly underperform the European average over the next five years, with growth below 1%pa forecast,” DTZ said.

European investment marketAccording to Knight Frank, European commercial property

investment volumes fell by around 20% in the first half of 2012 on a year-on-year basis. As economic uncertainties prevailed, Q3 2012 saw a further 3% decline from Q2 in commercial real estate investment activity, DTZ said.

However, despite the continued uncertainty in the Eurozone, total real estate investment activity rebounded sharply in Q4 2012, marking a 55% increase on Q3, DTZ’s Q4 2012 European Investment Market Update showed.

According to the report, the markets of the United Kingdom, Germany and France accounted for 67% of the capital invested in Europe. Furthermore, supported by strong domestic and regional investment in the shopping centre and office sectors, investment volumes in the Nordic countries witnessed a 20% increase on 2011.

“Despite the weakness of the economy, Europe remains attractive for a wide range of investors playing different strategies across markets and sectors. We expect investment volumes to remain stable in 2013 with a modest recovery in 2014,” DTZ said.

Looking ahead at the remainder of the year, Robert Stassen, Head of European Capital Markets Research at Jones Lang LaSalle, commented:

“Demand for prime will remain strong and will underpin strong showings in the major markets. Sentiment on financial and real estate markets have improved over the last few months, which should support investors to move up the risk curve.

Overall, we are positive about 2013 and expect a continuation of the positive trends of 2012.”

REAL ESTATEIN TIMESOF CRISISHow has the Eurozone cr is is affected rea l estate development across the cont inent? Has the d ist r ibut ion of ‘power’ changed in the wake of the cr is is and i f so, who are today’s top performers in the European market? In th is feature, we take a look at current market dynamics and analyse the per formance of major European rea l estate markets in the res ident ia l , off ice, reta i l and industr ia l sectors.

16 ~ 18 April 2013Abu Dhabi National Exhibition CentreT: + 971 4 336 5161 | F: + 971 4 3351891E: [email protected] | www.cityscape.org

For more information visit:www.cityscapeabudhabi.com/cs

Revealing The Future OfThe Capital’s Real Estate

Cityscape Abu Dhabi offers its participants the opportunity to gain an understanding of the progress on recent developments towards the Abu Dhabi 2030 vision, new regulations, and find sustainable investment opportunities.

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EUROPE

European Residential Sector: Housing markets generally bleak, positive news for some

With a deepening of the Eurozone crisis, house prices have fallen drastically in many markets, especially in the southern countries such as Greece and Spain, but also in the Netherlands and Denmark.

According to Knight Frank’s Q3 2012 Global House Price Index, on a global level, Europe was the only world region to see prices decline in the last year; European countries occupy the last twelve places on the index in terms of annual price growth. Greece is positioned at the bottom of the rankings, with an 11.7% decline in prices in the year to September 2012, and has now pushed Ireland off the bottom slot.

The Netherlands have experienced a 7.9% fall in house prices while Denmark’s house prices went down by 5.4%. Ireland by comparison, although occupying second to last slot in the rankings, has seen its rate of decline improve, up from -14.3% a year ago to -9.6%, the index says.

However, the sharp drop in house price in many of those countries is relative given the exceptional price growth these markets have experienced before the crisis, experts say.

“To put things in perspective, a number of the markets that have seen significant price falls in the global recession had experienced very large annual price increases for several years before the downturn, largely fuelled by easy availability of mortgages and a booming stock market,” Charles Weston-Baker, Head of International Residential at Savills commented.

On the other hand, countries such as Turkey and Switzerland have been holding up extremely well in terms of price growth.

“The Turkish market is largely driven by domestic demand, especially as people are moving to new earthquake-proof homes instead of unsafe old housing stock. It is also a cash-driven market,

as the proportion of mortgage funded purchases is low,” Weston-Baker explained.

“Switzerland stands out as the steadiest European residential market, as it is controlled and did not see the major pre-recession price hikes of other European markets.

Of the Eurozone markets, properties in the cities of the major economies have faired best. In terms of second homes, prices in the traditionally most sought-after locations such as the French Riviera and Alps weathered the financial storm,” he added.

Several Nordic countries have also performed positively; house prices have risen in Finland and Norway by 2.1% and 7% respectively during the year to Q3 2012, Knight Frank says.

Looking at residential real estate market recovery across Europe through 2013, Weston-Baker commented:

“The primary driver of recovery in the real estate sector will of course be general economic growth and a rising stock market.

Today, the urge of young people to own their own properties is stronger than ever. Given the availability of low-rate mortgages, growth is likely to spring from the bottom upwards as parents assist their children with mortgage deposits, realising that it is often cheaper to buy rather than rent.”

House price growth: top performers• Turkey, up 11.5% from Q3 2011• Austria, up 10.1% from Q3 2011• Norway, up 7.0% from Q3 2011

Source: Knight Frank Global House Price Index Q3 2012


European Office Markets: Low levels of new supply are helping to stabilise prime rents

At the end of the first half of 2012, the overall economic uncertainty was weighing heavily on business sentiment; take-up decreased by 4.2% year-on-year on average in the first half of 2012, the Savills Summer 2012 European Offices market report has claimed.

At the start of 2013, despite slight improvements in the global economic outlook, analysts remain cautious.

Dr Lee Elliott, Head of EMEA Research at Jones Lang LaSalle, commented:

“2013 as whole will be another challenging year. Economic fundamentals remain fragile despite many encouraging

signs on the political side to provide a sustainable solution to the Eurozone debt crisis. However, the US avoiding the fiscal cliff has helped to improve the general economic outlook.”

Naturally, the markets that sit at the heart of the Eurozone debt crisis such as Athens, Barcelona, Madrid, Lisbon and Dublin have been hit hardest by the current economic crisis and have experienced a slump in demand from office occupiers, the analyst said.

“Corporate agendas were focused on reducing costs and downsizing – both on staff and space. Landlords were often happy to agree to renegotiate contracts to keep buildings occupied, driving down net effective rents. These markets had also seen a constant increase in supply of new office space, which led to significant increases in vacancy rates,” Elliott commented.

However, Elliott also pointed out that the crisis has not been isolated to some markets, but has rather had a universal impact on the European office landscape.

“The core German markets, Paris or London were all hit by the crisis after the collapse of Lehman Brothers in 2009. The key difference has been the ability of these markets to rebound. Southern Europe has had to face up to the severe and ongoing impact of the debt crisis. Accordingly, office rents in the southern European markets have seen next to no rental growth since

2009,” Elliott added. However, although vacancy rates remain elevated on aggregate,

low levels of new supply over the last two years have served to stabilise rents and support growth in many markets, Elliott said.

Looking at performance for the remainder of the year, the analyst says Oslo, London and Moscow are expected to outperform their European neighbours.

“Oslo benefits from very low supply levels in core CBD areas while experiencing continued economic growth. Moscow continues to see staggering volumes of new supply but modern space in the preferred areas remains at a premium and this will translate into further rental growth given both strong domestic and foreign demand,” he said.

“In both the city and West End of London, occupiers from across the globe remain active seeking modern space. Overall there is a trend for occupiers to increasingly view office space as a strategic tool, to drive productivity and workplace change. The kind of space required for this – flexible, connected and sustainable – remains scarce and occupiers compete hard for it. This will lead to rental growth at the upper end of the market,” Elliott added.

Despite selected positive news, the expert also commented that since in many countries, unemployment rates are high and continue to increase, it will take some time before any recovery in economic growth will translate again into the labour markets and hence increase demand for office space.

Office top performers• Oslo: Strong economic growth, low supply in core areas • London: Scarcity of prime space drives rental growth• Moscow: Strong domestic and foreign demand drive rental growth

EUROPE


European Retail Markets: Prime locations continue to attract significant development

Not surprisingly, the uncertain economic climate of recent months along with public austerity measures have led to muted consumer spending in many European markets. Overall retail sales are unlikely to recover before the end of 2013, experts believe.

“Whilst retail sales growth is expected to be more positive for the medium to longer term, forecasts are still modest and big differences between regions are apparent. The European average for retail sales growth forecasts for 2012 - 2016 is 2%pa. Higher than average growth is expected in the Nordics, as well as the CEE countries. The strongest growth is forecast in Vilnius at 7.3%pa, followed by Riga at 6.4%pa.

In Lisbon, retail sales are forecast to fall by 1.2%pa, while in Milan they are forecast to drop by 0.3%pa,” the DTZ December 2012 European Retail Guide says.

According to DTZ, the economic slowdown, as well as growing difficulties in securing financing and governmental permits in many countries is limiting new shopping centre development. Consequently, demand for shopping centres is focused mainly on established schemes where retailers are still seeing opportunities, despite the challenging conditions, the firm says.

James Brown, Head of European Retail Research at Jones Lang LaSalle, commented:

“Retailers typically need a physical presence to trade and will therefore continue to take space in the right locations.

Multi-channel strategies and the impact of online will put pressure on some bricks and mortar, however we still see the physical channel remaining the dominant distribution channel overall.”

While prime locations are still attracting high interest, secondary centres, on the other hand, are experiencing falling demand and increasing vacancy, reinforcing polarisation in many markets, experts say.

“Demand for secondary space is polarised between tier 1, good secondary, and the rest. Best secondary will continue to provide key, profitable space for retailers and leisure operators, although the outlook for weaker secondary remains challenging and is likely to remain so for some time,” Brown explained.

Looking at future shopping centre development, Brown commented:

“Core established markets continue to attract international retailers, as do growth markets offering good opportunities.

In this regard the likes of London, Paris, Milan, Madrid, Rome and Munich continue to feature highly as attractive core markets to global brands, whilst Moscow, St Petersburg and Istanbul are examples of cities offering attractive growth.”

Since the core markets are already relatively well provided for in terms of shopping centre space, the future development wave is focussed on Russia and Turkey, the analyst said. With high growth prospects and strong demographics, Turkey is proving particularly attractive. Accompanied by a relative undersupply, shopping centre development in both Turkey and Russia is likely to continue for some time, Brown added.

“It won’t take long however, until sub-markets face saturation; in the meantime developers will enjoy the ride,” he concluded.

Retail Highlights• Highest retail sales growth for Nordic and CEE countries

• Strong demand for prime locations reinforces polarisation between tier 1 and secondary centres

• Russia and Turkey are the top growth markets with regards to shopping centre development

EUROPE


European Industrial Markets: Reduced take-up but resilient investment activity

The continued difficulties of the Eurozone have affected activity in all sectors of the economy, including those that drive demand for industrial and logistics property.

According to Knight Frank, sentiment among logistics and industrial occupiers has been subdued in the first half of 2012, leading to reduced leasing activity in many markets. Nonetheless, demand for space has still generally outstripped supply, as development activity has remained at a very low level, the firm commented.

According to Jones Lang LaSalle, full year take-up was down by 16% across Europe as a whole in 2012.

“As in previous years, Germany remained the strongest logistics occupier market despite a 21% decline on the record-breaking 2011. Around four million sqm of floorspace were taken up throughout the year, reflecting a market share of over 30% . In total volumes this was still around one million sqm higher than the floorspace taken up in the two next strongest traded markets – Russia and the Netherlands,” commented Alexandra Tornow, Associate Director, EMEA Logistics and Industrial Research at Jones Lang LaSalle.

“Russia came second for the third year running as the market continued to establish its modern logistics network. Around 1.5 million sqm were taken up throughout the year, marking a limited 9% decline on 2011.

The Netherlands with just under 1.5 million sqm completed the ‘top 3’ in 2012 followed by France with around 1.2 million sqm and the UK with 1.0 million sqm,” she added.

“Looking ahead, occupier demand will remain strong overall, driven in particular by increasing e-commerce and multichannel distribution, as well as continued expansion of organised retail formats across Eastern European markets.

In 2013, we expect rising take-up activity although total volumes are unlikely to match the 2011 record,” Tornow concluded.

Despite a weak economic outlook, logistics and industrial

investment remained fairly resilient throughout 2012; transaction activity accelerated in the final quarter of last year, pushing full-year volumes to EUR 8.6 billion (USD 11.6 billion), only 13% below the previous year, JLL observed.

“The core western European markets such as the UK, Germany and France, accounted for 70% of the total investment volume in 2012. This result was driven by rising activity in Germany (+44% to €1.6 billion) and France (+38% to €1.3 billion), which occurred thanks to a number of significant portfolio transactions,” commented Tom Waite, Associate Director European Capital Markets at Jones Lang LaSalle.

According to Waite, the UK remained the most liquid market in 2012 while Poland saw the most notable increase in volumes traded throughout last year. Q4 also marked a significant increase in investment volumes across the Nordic countries and the Netherlands.

“The robust trading volumes in Q4 show the strong appeal of the asset class. We see upside potential in 2013, with the possibility of an increase in portfolio, platform and JV deals with the structural shift in distribution networks evident in many European markets providing access to new core and core plus product,” JLL concluded.

Industrial take-up top performers• Germany, 4 million sqm, down 21% from 2011

• Russia, 1.5 million sqm, down 9% from 2011

• Netherlands, nearly 1.5 million sqm, up 2% from 2011

Source: Jones Lang LaSalle European Logistics & Industrial Report,

February 2013

EUROPE


AMERICAS NEWS

Despite sluggish economic growth, the U.S. commercial real estate market remained on a recovery path in Q4 2012, according to the latest analysis from CBRE Group, Inc.• The nation’s office markets withstood pressures from an

uneven economic recovery, federal budget uncertainties and natural disasters, with vacancy falling by 10 basis points (bps) to reach 15.4% in Q4 2012. • National industrial availability1 dropped 30 bps during Q4

2012 to 12.8%, representing the largest quarterly drop since the industrial sector recovery began in 2010. Industrial availability is now down 180 bps from its peak of 14.6% in Q3 2010.• The retail availability rate declined slightly to 12.8%, down 10 bps

compared to the previous quarter.• Demand for the nation’s apartment buildings remains healthy

with vacancy in Q4 2012 at 5%.“The broken record of slow but positive progress toward a real

estate recovery continues to repeat,” said Jon Southard, Managing Director of CBRE’s Econometric Advisors group. “The change of note from this persistent trend is the improvement in the industrial sector as shipments are increasing at a faster pace than employment.”

Office MarketFor all of 2012 the office vacancy rate declined by 60 bps indicating

that the office recovery remains on course. In the final quarter of the year, the vacancy rate fell in 38 markets, rose in 19 and remained unchanged in six. The suburbs once again outperformed downtown markets, with a quarterly decline of 20 bps, versus downtowns’ decline of 10 bps. The suburban vacancy rate ended the year at 17.1%, 70 bps lower than 2011’s year-end rate, while the downtown vacancy rate ended the year at 12.3%, which was 40 bps lower than year-end 2011.

Technology, software, and energy driven markets had the largest occupancy gains in 2012, with vacancy rates in San Jose, Austin, Boston and Houston falling by 200 bps or more. As in 2011, some housing-based or CANVFLAZ (California, Nevada, Florida & Arizona) markets were among the best performers last year, as tenants locked in low rents and expanded their office footprints. Vacancy rates in Phoenix, Miami, Orange County and Ventura fell by 150 bps or more in 2012.

“While the national office vacancy rate has fallen for the third consecutive year, it remains 300 bps above its pre-recession low of 12.4%,” said Mr. Southard. “After a strong start in 2012, job growth was disappointing and while the recent budget deal signed by Congress and the President to avoid the ‘fiscal cliff’2

might ease some near-term concerns, uncertainty surrounding continued negotiations on the federal debt ceiling and further government spending cuts will continue to pose near-term downside risks for commercial real estate. However, private sector hiring and confidence should accelerate if Washington DC is able to forge a long-term budget deal and concerns in Europe remain at bay, paving the way for stronger office-using job growth and absorption.”

Industrial MarketQ4 2012, with an availability rate of 12.8%, is the tenth consecutive

quarter in which industrial availability has declined. During the past two years, the industrial market has seen a slow but steady decline in availability, which has fallen from 14.6% in 2010. The recovery continues to be broad-based, with 40 markets posting declines,

16 showing an increase and five unchanged. Minneapolis continued to lead the decline in availability drop (-140 bps) followed by Detroit (-130 bps) and Salt Lake City (-120 bps). Chicago, the nation’s largest industrial market experienced an availability decline of 20 bps, while L.A., the nation’s second largest market was unchanged.

Retail MarketRetailers remain wary of taking on substantial amounts of new

space but the slow decline in availability continued with the rate falling to 12.8% in Q4 2012, down 30 bps compared to the rate one year ago. A majority of the retail markets recorded either flat or declining availability rates compared to one quarter ago. Some notable performers were Denver, Cincinnati, Fort Worth, Kansas City and Minneapolis; each of these markets recorded a decline of at or above 60 bps. On the other end of the spectrum, markets such as Tulsa, Long Island and Bakersfield recorded increases in availability rates of at or over 50 bps in the fourth quarter of 2012.

Apartment MarketThe pace of expansion in apartment fundamentals slowed, with

the vacancy rate falling 20 bps to 5% at year-end 2012. This is markedly below the decreases of 140 bps and 80 bps recorded in 2010 and 2011, respectively. While demand growth slowed during the quarter, the market remained tight by historical standards, with the four-quarter trailing average vacancy rate holding at 4.9%, or 40 bps below the long-term (20-year) norm. Compared to a year ago, vacancy rates declined in 35 of the 63 markets monitored. Markets with the biggest year-over-year declines in vacancy (more than 100 bps) included Birmingham, Jacksonville, Charlotte, Atlanta, Seattle, and Norfolk. Markets with the lowest vacancy rates (below 3.5%)) included Miami, Newark, Oakland, Pittsburgh, Minneapolis, Edison, Providence, Boston, and Ventura. Markets with the highest vacancy rates (above 8%) included Tucson, Memphis, Las Vegas, Jacksonville, and Greensboro.

Effective rent growth should remain strong and apartment fundamentals should continue to improve in 2013 as the economy further recovers. With effective rents now well above their pre-recession levels in most major markets, new apartment construction activity picked up in recent months and completions are likely to return to historical norms next year.

1 Availability is space that is actively being marketed and available for tenant build-

out within 12 months.

2 “Fiscal cliff” refers to the expiration of certain U.S. tax benefits and the automatic

reduction of certain U.S. government spending at the end of 2012 if the U.S. Congress

did not take any action to the contrary.

U.S. Commercial real estate continues recovery in Q4 2012


Despite slow growth prospects for the global economy, economic growth in emerging nations is expected to pick up.

In Brazil, despite a slowdown in manufacturing output, industrial real estate market grew quite significantly in 2012, the Q4 Industrial Marketbeat by Cushman & Wakefield said.

Brazil’s economy has continued to grow while domestic demand remains the economy’s main pillar; household spending is stimulated by easier credit, more jobs and a real increase in income. GDP growth for the year is expected to be 1%, 0.6 p.p. below expectations. GDP growth for the next four quarters (through Q3 2013) should reach 3.3%, the report said.

However, slow recovery in economic confidence reflects investments that are still only modest, impacting numerous areas, including the manufacturing industry. Manufacturing output went through a long period of problems, especially in the first half of the year, but remained unchanged between October and November. Year-over-year manufacturing output was up 2.3% in October 2012, turning around a 13 month period of negative growth. The good performance in the month of October helped taper off the decline in manufacturing output to -2.9% for the year.

According to the IBGE, much of the increased output in October was in extractive industries, machinery and equipment and automobiles. Manufacturing output also increased in the medial/hospital, optical and other instruments, food and basic metallurgy

sectors. Despite this recovery, manufacturing GDP this year will shrink by 0.29, compared to 1.58% growth in 2011, but is expected to turn around and grow 3.38% in 2013.

OutlookThe overall vacancy rate in the regions included in Cushman &

Wakefield’s survey (Pernambuco, São Paulo, Rio de Janeiro and Paraná) dropped for the third consecutive year, closing at 4.4% compared to 5.3% in 2011. On average, asking monthly leases for industrial spaces increased 3.1% compared to 2011, ending the year at R$ 16.20/sq. meter. If we look only at warehouse parks or condominiums, the average monthly lease increases to R$ 19.10/sq. meter of built area.

Last year’s highlightsThe slowdown in manufacturing output has not affected the

market for industrial real estate, which grew quite significantly in 2012. This is particularly true for so-called industrial warehouse parks or condominiums, where construction is actually booming. New deliveries of such properties grew four-fold compared to the previous year, amounting to 1.448 million sq. meters. Net absorption also beat a record, adding up to 1.426 million sq. meters in the four states: São Paulo, Rio de Janeiro, Paraná and Pernambuco.

According to Knight Frank’s latest Caribbean insight report, the Caribbean property market is experiencing a spike in inquiries from prospective buyers, especially from wealthy buyers from Russia, the CIS and Latin America.

With the number of high net worth individuals in Brazil and Russia forecast to rise by 59% and 76% between 2011 and 2016, their presence is likely to be increasingly evident on Caribbean shores.

More closely influenced by the US economy, than that of the Eurozone, improving US indicators in late 2012 are expected to act as a bellwether for the Caribbean in 2013, the report points out.

“Prime prices have fallen by 10% to 20% since the financial crisis but the rate of decline is slowing and we expect some markets to experience price growth in 2013,”it says.

“The Barbados Government’s move to loosen residency permit rules to attract high net worth individual investment in 2012 may be a trend we see replicated elsewhere in the region,” it adds.

Foreign buyers represent around 85% of luxury property purchases on the islands, with most activity confined to Grand Cayman, and most buying and seeking permanent residency. In 2012, Grand Cayman represented 18% of all Knight Frank Caribbean enquiries, up from 13% in 2011.

Wealthy buyers are attracted to the Cayman Islands as they are the world’s sixth largest banking centre and the number one hedge fund jurisdiction, demand from wealthy buyers with offices in New York and Miami is consistently strong as these cities are a

three hour and a one hour flight away respectively.The British Virgin Islands are also very popular and both the top

end of the market and the USD 3 million to USD 5 million bracket have been performing well.

Gustavia, Saint Jean, Gouverneur and Flamands continue to be the main focus for international buyers. Together, these areas in the north and west, account for around half of the island’s property sales with interest from French, Belgian, South American, and increasingly US buyers.

In Barbados demand strengthened in 2012, particularly from British, Italian and Canadian buyers. Favoured areas include Sandy Lane, Royal Westmoreland and waterfront property along the West Coast in areas such as Holetown, Gibbs Beach and Mullins Bay.

In 2012, nearly 50% of all of Knight Franks’s Caribbean enquiries related to Barbados. The island continues to appeal to a younger demographic than some of its Caribbean neighbours, many drawn to the relaxed lifestyle, and first class surfing.

“The combined effect of globalisation and the climate of austerity has led many wealthy investors to seek out the world’s best properties in the world’s best locations, in particular those that offer the most tax efficient environment and lowest transactional costs,” Knight Frank says.

“The Caribbean ticks all these boxes, and generally enjoys a backdrop of political stability, legal transparency, as well as increasing accessibility,” the report concluded.

Demand for Brazil’s industrial real estate grows

Wealthy buyers set eyes on Caribbean property

AMERICAS NEWS


ARGENTINA

OPPORTUNITY DESPITE CRISIS?Recent governmental currency controls have caused a slowdown in Argentina’s traditionally healthy property market. However, new alternatives are being found, causing a paradigmatic change in the country’s real estate market while surfacing new opportunities.


ARGENTINA

According to global real estate services company CBRE, the Buenos Aires real estate market has shown great resilience during the years after Argentina’s economic default in 2002; demand and market values have

recovered relatively rapidly for all major real estate sectors. “Particularly the residential and hotel markets gained momentum

during the recovery period; due to a lack of confidence in the local banking system, residential investment increased which fueled the development of a variety of residential condominium buildings, most of them targeted at the high end market. The tourism industry benefited from the significantly reduced local prices, making Argentina a more affordable vacation destination for an increased number of visitors. Rural land values have also experienced growth, primarily due to the increase of commodity prices at an international level,” the firm said.

Real estate todayAs opposed to many other real estate markets around the world,

the global financial crisis has not been the biggest challenge Argentina’s real estate market has faced in the recent past, says Diego Alchourron, Director of Global Corporate Services, CBRE Argentina.

“[In Argentina], local drawbacks have had a stronger impact. The real estate market was healthy and has remained so; as there is no financing in the Argentinean real estate market, the global crisis has had a relatively [mild] impact on the market at hand,” he commented.

Instead, it was local government measures in the form of currency controls that affected the market and had a strong impact on property sales in the country.

From October 31, 2011, President Cristina Fernández de Kirchner restricted the acquisition of US dollars, the commonly used currency for property sales in Argentina.

“This affected the market seriously since local buyers are used to buying and selling in USD. In Argentina, prices are given in dollars and payments are also made in dollars,” explained Adriana Massa, Sales Manager at Sotheby’s Argentina.

Alchourron further added:“US dollars have always been at the core of the Argentinean real

estate market as they have always been used as a measurement indicator; all transactions are denominated in US dollars. Therefore, the restriction in the purchase of foreign currency has dramatically slowed down the market.

However, new alternatives have been found which have brought about new opportunities. Argentina’s real estate market is now undergoing a paradigm shift; operations are starting to be done in Argentinean pesos, and some international companies are now beginning to purchase rather than rent premises as a means to safeguard their income and as a mechanism to hedge against a further devaluing peso.”

The expert also pointed out that even though positive signs have appeared as a consequence of these restrictions, it would take at least another year to reach an overall agreement to make most transactions in Argentinean pesos.

Over the course of last year, Argentina has also experienced repeated political challenges. According to polling company Management & Fit, President de Kirchner’s popularity dropped 30% in August 2012, as citizens are worried by the slowing economy, increased street crime and high inflation.

Residential marketDespite a big drop in real estate transactions in 2012, the Buenos

Aires property market has enjoyed strong price rises over the last


decade, with average Buenos Aires apartment prices rising by 143% from 2001 to 2011. This extraordinary increase in prices was a result of Argentina’s economic crisis of 2001 which saw the values of real estate drop to one third of its previous value, Alchourron explains. “Prices have since recovered and continue to rise, looking for a ceiling that has not yet been found,” he said.

“While some people made hasty decisions by selling their assets prematurely, others have been able to reap great benefits due to this impressive rise in prices. The prices will remain strong because there is still demand, but we don’t anticipate another dramatic increase in the price rates this time around,” Alchourron said.

According to the analyst, the high-end residential sector currently attracts the highest interest level from foreign investors, as its assets are less expensive when compared to other major cities in the world, Alchourron said.

“Buenos Aires is a cosmopolitan city and if you compare prices with other big cities in the world, the price per square metre is not so high,” Massa from Sotheby’s added.

The sales manager further said that while foreign buyers prefer mainly the city of Buenos Aires with regards to the purchase of high-end residential property, Patagonia and Mendoza are also emerging key regions for international investors. Mendoza in particular is experiencing rapid growth and receives high interest as one of South America’s most famous wine production areas, Massa said.

Office MarketAccording to CBRE, lease rates and condominium sales prices

have experienced an incredible recovery during the last years. Before Argentina’s economic default, prime lease rates averaged at USD 32 per square meter per month (at a time when the Argentine Peso was pegged to the US dollar 1:1). After the crash, they dropped to under USD 12.

“While other goods and services in Argentina continued to

maintain a relatively low peso value, prime lease rates in the waterfront submarkets (Catalinas, Plaza Roma, Puerto Madero), fuelled by strong demand and diminishing availability, increased to current levels of USD 25 to USD 35. Grade A space in other central locations and along the northern corridor now ranges from USD 18 to over USD 25,” the firm stated.

According to the Q3 2012 Buenos Aires Office Market Research by Colliers International, throughout the third quarter of 2012, almost 16,000 square metres of Grade A office supply entered the Buenos Aires market; supply is expected to increase over the coming years.

Alchourron mentioned that while the current pipeline could cover existing demand, demand will depend largely on Argentina´s economic situation.

“According to the government´s economic projections, Gross Domestic Product will increase from 2.4% to 4.5%, which should create an economic reactivation mainly based on mass consumption, therefore a growth in the absorption rate in the office sector is expected for the second quarter of 2013,” he said.

Argentina in 2013Looking ahead at the performance of the Argentinean market as

a whole, CBRE sees positive signs.“The market is expected to start recovering in the second

quarter of 2013, driven by the government´s policies which should emphasise domestic consumption. Despite the political situation, economic indicators show a more optimistic scenario than the one in 2012,” Alchourron commented.

“On one hand, the inability for international companies to wire money to their head offices may result in the acquisition of real estate assets. On the other hand, stronger economic activity may have a positive impact on the leasing market, especially in companies devoted to mass consumption both in the office and the industrial sector,” he concluded l

ARGENTINA


Historically perceived as a ‘dark’ continent by many international investors and corporations, Africa is increasingly being viewed as an emerging investment destination and crucial growth market, real estate

analysts say. According to Jones Lang LaSalle, this change in perceptions is evidenced by growing volumes of foreign capital investment and intra-regional trade, particularly in areas that were once marred by conflict and are now achieving sustainable growth.

According to Peter Welborn, Partner of global real estate consultancy firm Knight Frank, which has been operating in Africa since 1965, a series of factors contribute to these changing attitudes including Africa’s strong economic growth, the emergence of a growing middle class and more sophisticated consumer markets, increased urbanisation, favourable demographics (a young and growing population) and a general improvement in political stability across Africa.

“The diversification of African economies is also helping to change perceptions. Africa’s commodities and natural resources have long been an attraction to investors, but the growth of non-traditional industries such as the technology sector (particularly mobile phone technology) has caught much attention, helping to aid the image of Africa as a place of innovation and entrepreneurship,” Welborn commented.

Welborn also pointed out that change in Western views

on Africa in recent years is driven by the media, saying that it has become increasingly common to see reputable global publications running positive news stories instead of focusing on traditional concerns such as poverty.

“All of this is helping to draw the attention of western investors, particularly to Africa’s biggest and fastest-growing cities (e.g. Lagos, Nairobi, Accra, Luanda and Dar es Salaam) which increasingly have the critical mass to support a wide range of economic activities.

In the property sector, the growing wealth of Africa’s middle class is a major attraction, as it is leading to demand for more sophisticated retail formats and the construction of western-style shopping centres, as well as demand for better quality residential properties. Meanwhile, as overseas companies seek to expand into Africa’s growing markets, and as African-based companies grow themselves, there is a need for investment in the construction of better quality office buildings, which are currently in short supply in many African cities,” Welborn further commented.

For our special feature on Sub-Saharan Africa, we have selected a handful of countries on the basis of the positive opportunities they offer for international real estate investors in the near future, namely Ghana, Nigeria, Kenya, Tanzania and Botswana.

SPECIAL FOCUS

SUB-SAHARAN AFRICADespite pol i t ica l , economic and socia l chal lenges which vary f rom country to country, Afr ica on the whole offers promis ing opportuni t ies as many countr ies d isplay the att r ibutes of stabi l i ty and g lobal resources which offer good returns to investors. In our specia l report , we look at Ghana, Niger ia, Kenya, Tanzania and Botswana and h ighl ight what these countr ies have to offer in the near future.


According to the recently released 2013 Knight Frank Africa Report, Ghana’s stability combined with economic growth resulting from oil production, mining and cocoa output has led to an increase in property development

across several sectors. “There is strong end user demand for good product across retail,

residential and commercial property in the main cities in Ghana. Residential and office have been increasingly under the spotlight over the last 18 months, as demand has grown.

In terms of offices, ACTIS’s ‘One Airport Square’ has 18 months left until completion in Q3 2014 and the developers say that it is 45% pre-let,” Welborn commented.

As a result of an increasing demand for quality office space in Accra, rental growth has been significant over the past one to two years, rising from USD 30 per sqm/month to USD 45 per sqm/month (Knight Frank 2013 Africa Report).

“Accra Mall is said to have a 2-year waiting list of retailers and rents are increasing above the rate of inflation.

Residential projects such as Polo Heights that is nearing completion have been 100% sold off plan. The high profile ‘La

Beach Towers’ and ‘Villaggio’ that are currently under construction are also selling well off plan,” Welborn further commented.

“We see ‘middle market’ residential as a good development opportunity particularly as the current market is concentrating on high quality residential and commercial space. This potentially leaves a void for well-conceived, well-built and well located residential buildings that are affordable for the growing middle income earners,” he added.

However, the plethora of opportunities in the West African state is accompanied by an equal number of challenges.

Looking at some of the major issues investors have to deal with when considering investing in Ghanaian real estate, Welborn identifies the following:

“Land is leased to developers by the Government and Chiefs on varying lease lengths but rarely over 99 years and often for less than 50 years. Foreign companies can lease for a maximum of 55 years.

Land and building registry is often unclear and poorly documented; thus leading to land ownerships which are commonly being contested.”

He also pointed out that property investment management in Accra is slowly emerging while building management is poor. On top of that, the professional property sector is still emerging, leading to developers employing expensive expatriate staff, he says. When compared to the developed world, the quality of Ghanaian construction is poor in both existing buildings and buildings under construction.

Lastly, funding for property development remains one of the major hurdles developers face in Ghana, Welborn says, providing opportunities to forward fund developments and to secure investment product.

GHANA – WEST AFRICA’S HOTSPOT

Ghana HighlightslEconomic growth is spurring development activity across all real estate sectorslStrong demand for retail, residential and commercial propertylMiddle-market residential currently particularly attractive

UN Building, Accra

SPECIAL FOCUS


In Nigeria, the office sector remains strong, with headline rents in the commercial capital of Lagos amongst the highest in the world (Knight Frank 2013 Africa Report). According to the report, there is a substantial lack of quality office space in both Lagos

and Abuja. “There is the possibility for excellent returns within the office

sector due to the low supply of well managed and high quality space. This leads to some of the highest office rents in the world,” Welborn commented.

However, this situation might change once the Eko Atlantic City project is completed.

Eko Atlantic City is a 9 square kilometre development under construction, located south of the current CBD off Victoria Island. The project is considered to be the largest ongoing metropolitan reclamation scheme in the world.

“The Eko Atlantic scheme has the potential to have a monumental effect on Nigeria’s office supply market, aiming to provide hundreds of thousands of square meters of Grade A office space within an entirely new and first world city district,” Welborn commented.

“The developers behind the scheme, the Chagoury’s, have shown commitment to Nigeria over decades, having previously demonstrated an ability to create highly profitable and well maintained developments.

The potential effect on the market in terms of increasing supply cannot be overestimated over a 5 to 10 year horizon.

Land has already been reclaimed for Phase 1 of the 9 sq km scheme and work has commenced at basement level on mid-rise apartment buildings, with speculative office buildings potentially set to break ground within 12 to 24 months,” Welborn further said.

With regards to the industrial sector, Knight Frank observed that there is increasing interest from multinationals in investing in Nigeria, which is fuelling a kind of industrial renaissance. According to the firm’s 2013 Africa Report, world leading home goods, drinks and pharmaceutical companies such as Procter & Gamble, GSK, Nestle, Diageo and SAB-Miller are making large scale investments to provide new production facilities supplying the Nigerian market.

However Knight Frank also observed that development is held back by the chronic lack of generating capacity and power supply, which has led to the departure of major manufacturers in the past and which continues to act as a deterrent to new investors.

In addition to issues around infrastructure and energy supply, property maintenance is a major issue in the Nigerian real estate market.

“The maintenance culture of buildings is historically poor and potentially represents the key challenge to overcome. Buildings start becoming obsolete within a matter of years of being completed due to extremely poor maintenance from landlords, in a harsh tropical climate,” Welborn commented.

According to the expert, Nigeria currently offers interesting repositioning opportunities where structurally sound but dilapidated buildings could be refurbished.

NIGERIA – GREAT OPPORTUNITITES DESPITE CHALLENGES

Nigeria highlightslExcellent returns within the office sectorlEko Atlantic City likely to shift office sector dynamicslPotential opportunities in refurbishment projects

Lagos - Exxon Mobil Offices, VI

SPECIAL FOCUS


SPECIAL FOCUS

Kenya has historically been one of sub-Sahara’s more stable countries. The east African state scored 4th place in sub-Saharan Africa in Jones Lang LaSalle’s 2012 Real Estate Transparency Index, making it stand out as

comparatively transparent on a regional level. According to JLL, the country has a more solid legal and contractual framework and a higher degree of real estate market maturity than many of is west African counterparts.

Over recent years, Nairobi has been able to establish itself as the regional commercial hub of Sub-Saharan Africa.

“In the last 5 years, Kenya Airways, the national carrier, has opened up routes to central and west Africa. Many global corporates that have traditionally been based out of Johannesburg have realised that it makes commercial sense to base their regional hub in Nairobi, which now provides far better access to their sub-Saharan markets. Examples of new regional headquarters in Nairobi include Nestlé, Coca-Cola, Google, HP, Proctor & Gamble, Colgate and Palmolive etc.,” Welborn commented.

As a result of increased take-up by large corporates, Kenya’s office sector has moved from a position of oversupply to one of stability over the last 12 months, the Knight Frank 2013 Africa Report stated.

On the back of a lack of supply and growing demand from the middle classes, Kenya’s retail sector has continued to see a proliferation of decentralised urban shopping malls, both within Nairobi and in secondary cities, Knight Frank says. Occupancy

rates remain very high with good rental growth across the sector. “Traditionally retail was either on the ground floor of high-rise

office buildings in the CBD or in extremely downmarket local individual stores. As the decentralised mall concept has grown, local chains have developed and the growth has been self-sustaining. Demand for retail units in the new malls has escalated as the Kenyan consumer has embraced this new style of shopping, which has become a lifestyle event incorporating various forms of entertainment, dining, and other activities as well as simply shopping,” Welborn commented.

In the residential market, partly as a result of a shift away from the mortgage market, rental values have continued to climb, resulting in improving yields across the sector.

Looking at challenges potential investors in Kenya face, Welborn commented:

“The investment market is very immature, and there is no mechanism for the ‘unitisation’ of property at the moment so implementing an exit strategy on large developments such as shopping centres could become a challenge. The local currency, whilst stable in a regional context, would still be considered to be volatile in a global context and local interest rates are extremely high.”

KENYA – GATEWAY TO EAST AFRICA

Kenya Highlightsl Nairobi is East Africa’s commercial hubl Good opportunities in the shopping mall sectorl Improving yields in the residential sector

Miotoni Ridge, Karen, Nairobi


According to the 2013 African Economic Outlook report, a study jointly conducted by the African Development Bank, the OECD Development Centre, the United Nations Economic Commission for Africa and the United Nations

Development Programme, Tanzania’s economy is expected to remain buoyant with a GDP growth forecast of 7.1% in 2013 – well above the regional averages. Services, industry and construction continue to be the driving forces, the report says.

In addition to robust economic growth, Tanzania has also experienced recent public sector and banking reforms, as well as revamped and new legislative frameworks, which have helped increase private-sector growth and investment in Tanzania, benefitting the country’s real estate market.

“The Bank of Tanzania (BoT) has set up Tanzania Mortgage Refinance Company (TMRC) which amongst its roles is to lend to commercial banks in order to enable them to have mortgage finance in place for purchasers of residential properties to

obtain loans and subsequently purchase properties,” Welborn commented.

The expert also said that the country’s Social Security Regulatory Authority (SSRA) has directed that from 1st July 2013, all investments in real estate by pension funds will be done through private fund managers.

“Furthermore, through Public Private Partnerships (PPPs) the private sector should grow when undertaking real estate investment as it will enable them to partner with the pension funds.

The real estate market is likely to benefit positively as the up and coming middle classes are now able to afford property as a result of the sources of funds which are used to purchase or lease properties,” Welborn explained.

Both the retail and residential sectors are benefitting from the growth of Tanzania’s middle class. According to the Knight Frank 2013 Africa Report, Dar es Salaam’s retail market is poised for growth, particularly in upmarket residential areas.

In addition to the growing middle class, other factors that are driving the demand for modern retail development include the increase in the number of expatriates who are used to the international ‘shopping mall culture,’ Welborn says.

“Furthermore, with the growing economy, salaries are increasing and people are becoming more affluent. Trade liberalisation has increased the number and types of goods available for Tanzanians to purchase.

On the social side, going to retail malls is seen as an outing for the family which some tend to do over weekends and such outings are increasing,” he added.

“The best investment opportunities at present are in Dar es Salaam, particularly where affluent people reside in areas such as Oyster Bay, Msasani and Kinondoni. In the future, up and coming residential areas include Kigamboni and Boko,” Welborn concluded.

TANZANIA – GOLDEN DAYS FOR RETAIL DEVELOPMENT

Tanzania Highlightsl Regional economic top performerl Retail market poised for growthl Rising demand in prime residential real estate

Golden Jubilee Tower, Dar es Salaam

SPECIAL FOCUS


Compared to other African countries, Botswana has a high level of economic freedom and has transformed itself from one of the poorest countries in the world to a middle-income country.

Due to the discovery of diamonds, coupled with a stable political situation, Botswana has experienced unparallel economic growth levels over the last 35 years; the capital Gaborone today has a population of approximately 250,000, rising to in excess of 400,000 in the wider metropolitan area.

For the real estate market this means that in general, it has experienced stronger growth than many other African countries, although it has started from a lower base, Welborn says.

“Property values over this period have therefore risen faster than most other African countries. In addition, planning restrictions and constraints on foreigners being able to buy in tribal lands has contributed to the increase in rental and capital growth in all sectors of the property market. The growth has been sustained throughout the last decade unlike other African countries which have suffered from the global economic downturn,” the expert commented.

“Real estate has continued to show good returns due to the economic success of the country. Botswana is perceived as a country of good governance, with a real estate industry that is developing especially in centres such as Gaborone, at a faster pace than many of its capital counterparts across the continent.

It is therefore no coincidence that IPD has recently launched in the country, making it only the second African country along with South Africa to have an IPD index. The initial IPD index report produced in December 2012, showed a 20.9% total return on property, the second highest in the world.”

Despite the fact that the expat community has been shrinking over the last 10 years as more of their jobs have been taken by trained locals, there is still a significant level of development taking place and there are plans for further development in the future, Welborn says.

“A master plan is currently being created to help facilitate the development of an area of 500 hectares adjacent to the Gaborone International Airport, Botswana Innovation and Diamond Hubs. In addition, there is large scale development taking place in the new CBD and Fairgrounds locations of the city. Almost 90,000 sqm of office development was completed in 2012 in the new CBD and a further 30,000 is expected to come to the market in 2013,” he explained.

Nevertheless, the expert points out that Botswana still faces many challenges. “Economically, it is still dominated by the diamond industry, despite attempts to develop other forms of mining and different industries such as tourism.

In addition, the country suffers with being landlocked resulting in its dependence on imported goods and raw materials from South Africa. These obstacles have hindered the development of its capital as a major economic hub. Gaborone is therefore not a city that attracts large scale investment from multinationals, which are more likely to locate their regional headquarters to cities such as Johannesburg, Nairobi and Lagos,” Welborn explained.

Lastly, the low population density across the country has stifled economic growth outside the capital and Francistown (the main city in the north), resulting in an undeveloped property market in many rural areas, Welborn concluded.

BOTSWANA – HIGH RETURNS IN THE PROPERTY MARKET

Botswana Highlightsl Along with South Africa, Botswana is the only African country to have an IDP Indexl Property market offers extremely high returnsl Geographic location poses several challenges

Department of Taxes and Attorney General’s Chambers Building,

SPECIAL FOCUS


ARCHITECTURE WITH A TWISTLocated in Dubai ’s sought-af ter Mar ina d ist r ict , construct ion of the long-awaited Inf in i ty Tower wi l l f ina l ly be completed th is year, standing as an example of the ut i l isat ion of novel techniques that may come to be v iewed as the epi tome of ear ly 21st century archi tecture.

ARCHITECTURE


ARCHITECTURE

It has been a long wait for one of Dubai’s most stunning architectural projects. Often referred to as the ‘Twisty Tower’ by local residents, conversations about when the project will finally be completed have often resulted in endless discussions about

the state and fate of Dubai’s real estate market and its ability, or inability, to deliver those impressive architectural masterpieces the market has come to be known for worldwide.

Finally, the wait has come to an end as seven years after commencement, the Infinity Tower is expected to be officially completed later this year.

DesignDesigned by global architecture and design firm Skidmore,

Owings & Merrill (SOM), the tower includes luxury residential units, parking, and retail outlets. Its most distinctive and visually unique physical feature is its twisting, helix shape. Infinity rotates gradually through 90 degrees, yet maintains a consistent floor plate throughout its height. Its winding shape reveals a structure that helps shield its interior from the desert sun while its reinforced concrete structure is clad in metal panels and screens to provide additional shade from the intense heat, SOM says.

Ross Wimer, Design Director of the project, commented:“The twisted form of Infinity Tower originated from a desire

to maximise the tower’s potential views at all levels. The lower portion of the tower is oriented toward the exciting waterfront promenade of Dubai Marina, while the upper floors are rotated to face the Gulf.”

Wimer mentioned that in addition to the prime views of both the Marina and the Gulf, residents can enjoy unique floor-to-ceiling glass windows that are shielded from the sun by the tower’s aluminium clad concrete structure. Additional shading is provided from perforated aluminium screens that help diffuse sunlight.

On the inside, the structure of the tower has been designed so that all of the interior elements are orthogonal, with right angles and straight walls. “This insures that everything inside (furniture, kitchen appliances and bathroom fixtures) will fit, and that interior finishes can be installed efficiently,” the architect added.

“The twisted form of Infinity Tower originated from a desire to maximise the tower’s potential views at all levels. The lower portion of the tower is oriented toward the exciting waterfront promenade of Dubai Marina, while the upper floors are rotated to face the Gulf.”


Infinity Tower Facts

Architect: Skidmore, Owings & Merrill (SOM)Developer: Cayan Real Estate Investment & DevelopmentLocation: Dubai Marina, UAESite area: 3,026.50 square metresBuilding height: 307 metresFloors: 73Construction started: 2006Project completion: 2013

ChallengesNaturally, the realisation of a design of the calibre of Infinity

Tower’s ‘twist’ comes with several difficulties. “The key challenges involved engineering the tower so that it

would be economical to construct,” Wimer said.“We built a digital model to analyse the degree of twist so that

the structural premium was minimised. The structure steps and each floor have the same shape so that all of the concrete formwork is repeated. The forms were simply rotated around the cylindrical core about one degree at each level. The shafts for mechanical and plumbing services were arranged to run vertically so that their installation could be accomplished in a conventional way,” the architect explained.

During the tower’s construction period, very precise work was required to ensure that the concrete structure was properly built.

“The aluminium forms, used to repeatedly cast each of the floors, were carefully fabricated off site. Their position at each level was surveyed with a digital system that ensured accurate alignment since, at over 300 meters, even small errors could have accumulated to create eccentricity in the building shape,” Wimer explained.

“A series of mock-ups of the exterior cladding were used to test

the fit of the glass and aluminium panels. This modular system was precisely constructed in a controlled environment and sent to the site to be installed,” he added.

During the excavation stage in the spring of 2007, the foundation site of the project was completely flooded after a wall that held back the Dubai Marina water breached. Consequently, construction was on hold for a year and a half and only resumed in late 2008.

SOM’s visionFor SOM, great architecture comes from the belief that in

order for a building to endure, the exterior form must be a direct expression of its structural framework. Infinity Tower reflects the understanding that great architecture must be more than ‘skin deep,’ the firm says, which has also delivered the design of the world-famous Burj Khalifa in Dubai, the world’s tallest tower.

“SOM has a 75-year history and has designed over 10,000 projects. The qualities that define the projects that have had the most lasting influence are simplicity, structural clarity, environmental appropriateness, and careful detailing. The new projects we build aspire to have these characteristics and contribute to the continuing success of the firm,” Wimer concluded l

ARCHITECTURE


SUSTAINABILITY

KAPSARC is as an independent, non-profit institution that focuses on research in energy economics, policy, technology and the environment. The organisation has a multi-national research team with research areas

including global energy markets and economics, energy efficiency and productivity, energy and environmental technologies as well as carbon management.

Established by King Abdullah of Saudi Arabia as an element of the broader theme of reform in the region, the project’s mandate is to “push forward the insight and understanding of energy challenges and opportunities, both domestically and globally, and to advance the knowledge of efficient and sustainable energy production and consumption to create future value and prosperity for humanity.”

KAPSARC’s facilities consist of a research centre, conference facilities, an energy knowledge and data centre, as well as world-class residential community.

The residential component includes 10 community buildings (three apartment buildings with retail, library, dining hall, recreation centre, natatorium, mosque, supermarket and bowling alley), a 200-house residential community (including 11 house types) and four main utility buildings.

KAPSARC’s residential community is the first project outside of

North America and the largest residential project outside of the US to achieve ‘LEED® for Homes’ certification. Fifty-seven of the villas were awarded LEED for Homes Gold; the remaining villas will be certified in blocks as they reach completion.

Developed by the US Green Building Council (USGBC), LEED (Leadership in Energy and Environmental Design) consists of a range of rating systems for the design, construction and operation of high performance green buildings, homes and neighbourhoods. LEED for Homes is a consensus-developed, third party-verified, voluntary rating system which promotes the design and construction of high-performance green homes.

When the KAPSARC project was in its inception, LEED for Homes was not available outside the US, and it was only after many years of communication between HOK, the project’s architects, and the USGBC, that the LEED for Homes International Pilot Program was formed. KAPSARC is one of the first projects included in the LEED-Homes International Pilot Program.

Elements of sustainable designWhen it comes to green building, there are many different

elements that can make a building sustainable.In designing KAPSARC, Roger Schwabacher, Senior Associate


SuStainability

SETTING A BENCHMARK IN SUSTAINABLE RESIDENTIAL DESIGNThe King Abdul lah Petro leum Studies & Research Centre (KAPSARC) in Riyadh, Saudi Arabia, has achieved the f i rst LEED for Homes Cert i f icat ion outs ide of North Amer ica, mark ing i ts leadership in susta inable res ident ia l des ign in the Middle East.

and Project Architect at HOK, points out five major design elements the firm focused on: site design, water efficiency, energy, materials and indoor environmental quality.

“Site design includes items such as selecting sites that have access to public transportation, sites that can accommodate alternative transportation methods such as fuel efficient/electric vehicles, sites that protect or restore wildlife habitat and maximise open space, and sites that allow for proper storm water control,” Schwabacher explained.

Water efficiency is taken into account for both the landscaping and the building while optimising energy performance, using on-site renewable energy and testing the building’s systems after construction form integral parts of the buildings’ energy efficiency component, the architect further added.

With regards to materials, HOK focuses on using recycled and local materials on buildings and on minimising construction waste. Lastly, indoor environmental quality means using low-emitting materials, increasing ventilation and use of outdoor air, adding controllability of lighting and thermal systems, as well as providing access to natural daylight and views, Schwabacher pointed out.

“We applied these elements to all residential types, including the 59 apartments, 121 two- and three- bedroom townhouses, 17

three-bedroom homes, 35 four-bedroom homes, 8 four-bedroom Villas, 8 five-bedroom villas and 2 premier executive villas,” the architect said.

HOK’s sustainable design emphasis with KAPSARC also revolved around native and adaptive landscape materials and protection from erosion and abrasion. Furthermore, the 200 hectare site also incorporates a photovoltaic energy field and bio retention swales. The latter have both a functional purpose and are a visual statement in the community, Schwabacher says.

“The landscape features sculpted landform mounds and complimentary depressions. The land depressions are dynamic features that provide natural storm water drainage collection. Weaving between these mounds and in the depressions, permanent green bands will create a park-like environment to visitors and residents.

Along the edges, lush green buffers create a strong visual image as the central oasis for the community. For residences, these parks are a place for individuals and families to come and stroll through, or to sit on the benches that are tucked into the landscape. The mounds also provide a sense of separation from the arriving traffic for those inside. Meandering around certain mounds and collector basins, a hardscape material will be laid down for people to walk


SUSTAINABILITY

or ride their bikes on. Around the others, gravel and native arid grasses will support the drainage flow,” he said.

Benefits In reflecting upon the benefits of sustainable real estate

development, we first and foremost think about environmental protection. However besides that, green buildings also carry substantial benefits for their residents.

“Buildings that have the appropriate glazing, exterior envelopes and shading strategies will be more comfortable for the occupants,” Schwabacher commented.

Furthermore, “living in buildings that support KAPSARC’s mission – ‘to push forward the insight and understanding of energy challenges and opportunities and to advance the knowledge of efficient and sustainable energy production and consumption to create future value and prosperity for humanity’ – will be gratifying [to residents],” he added.

The architect also pointed out that benefits go beyond those for the residents of the buildings, and extend to the development of Saudi Arabia as a country.

“As an institution, Saudi Aramco [the world’s largest oil production company and the project’s developer] is interested in moving beyond the oil industry, and championing new business opportunities in the Kingdom. Sustainable design and construction is a major industry targeted. The KAPSARC project exposed a wide variety of Aramco employees and Saudi contractors to this industry and its unique standards,” Schwabacher commented.

Regional challengesThe challenges of developing sustainable real estate obviously

vary substantially from region to region as each global environment bears distinctive characteristics. In the case of Saudi

Arabia, Schwabacher identified a few examples. First of all, with water use being a key environmental issue for

the region, landscaping and irrigation posed an issue that required particular consideration in designing KAPSARC.

“To meet our water efficiency goals, the use of landscaping and irrigation had to be minimised in the desert environment. This was a particular challenge since our client wanted the development to appear lush and our design had large areas designated as parks. Solutions included the wide use of native plants and drought tolerant plants that require little irrigation, the combination of areas of rocks with areas of plants in the parks to minimise the planted areas, the use of a combination of raw water, reclaimed water from the mechanical systems and recycled waste water in the irrigation system (there will be a very large amount of condensate due to the large cooling loads) and a water-efficient drip irrigation system,” Schwabacher said.

He also added that in order to create a comfortable microclimate conducive to being outdoors, 100 percent of the project’s waste water is recycled and used to irrigate the common areas.

Due to the abundance of sunlight in the region, HOK developed strict guidelines for the performance of the exterior glazing, envelopes (thermal mass and insulation) and high-albedo roofs. Solar hot water systems were designed for all of the residences which are anticipated to provide roughly 80 percent of the annual domestic hot water loads.

Lastly, the quality of construction with a less skilled workforce also posed a major challenge for the design team, resulting in modified selections for exterior envelopes. In addition to this, “the availability of local materials was also a challenge – many of the materials we typically use in the US were not readily available and needed to be modified to keep on schedule,” Schwabacher concluded l

KAPSARC FactsProject Name: King Abdullah Petroleum Studies & Research Center (KAPSARC)Location: Riyadh, Saudi ArabiaDeveloper: Saudi AramcoProject Design: Hellmuth, Obata + Kassabaum (HOK)Size: 190,239 square metres of buildings 200-hectare siteCompletion date: June 2013

16-18 APRIL 2013ADNEC I ABU DHABI I UAE

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RETAIL

RETAIL REAL ESTATE IN TODAY’S MULTICHANNEL WORLDMult ichannel wi l l complement not compete with ‘br icks and mortar ’ reta i l ing over the next two years, a recent study by CBRE has found. Investment in new and ex ist ing stores is the number one pr ior i ty for internat ional reta i lers over the next two years, wi th the major i ty requi r ing a greater number of out lets and increased shop space because of the i r mul t ichannel st rategy.

Courtesy of: CBRE EMEA


RETAIL

Consumer expectations are driving a retail revolution, with customers seeking to interact with retailers via smartphones, computers and other channels as well as through the more ‘traditional’ store, a recent study

conducted by commercial real estate services firm CBRE shows.The so-called ‘multichannel retailing’ allows the consumer to

transact via a variety of connected channels such as in-store, online via a computer and via a mobile site or ‘app.’ According to CBRE, this is revolutionising the way consumers shop but has raised concerns over the future demand and provision of real estate for retail use.

In order to identify the current multichannel strategies of international retailers and their impact on physical stores, in June 2012, CBRE undertook a survey of 50 leading international retailers with a combined network exceeding 32,000 stores globally.

One of the key findings of the study was that although today, the majority of retailers (70%) see themselves primarily as ‘bricks and mortar’ retailers, in two year’s time a similar majority will have converted into fully integrated multichannel businesses.

On average, the surveyed retailers said that while today their online sales represent 5% of their total sales, they expect that this will increase to 10% in two years time.

In line with the trend of growing e-commerce, the majority of retailers aim to enhance their multichannel capability by offering mobile apps or smartphone enabled websites (77%) as well as kiosks in their stores (80%) within the next two years, the report found.

However, CBRE’s report also observed that while investment in multichannel is considered important, investment in new and existing stores remains the number one priority of retailers.

The future of the physical storeThe growth of online sales does not reduce in-store demand,

but enhances it, experts say. In domestic markets, retailers would need larger stores in strategically important locations. To create the best customer experience they would need larger trading areas, not smaller ones. I n t e r n a t i o n a l l y , retailers would want to increase both store numbers and space, with markets

like China and South America offering significant scope for expansion.

According to CBRE’s report, nearly half of the retailers surveyed will require larger stores as a result of their multichannel strategy. In addition, 60% of retailers said they will need more shop space across their total network as a result of their multichannel strategy in two years’ time.

E-commerce and its impact on German high streets

The fact that growing online sales do not impede on the growth of new retail stores is evident in the change of the retail structure of the prime shopping streets in one of Europe’s healthiest retail markets: Germany.

According to the Savills Autumn 2012 report titled ‘The impact of e-commerce on German high streets,’ in Germany, consumer confidence and retails sales have held up better than in most European countries. Online sales have seen strong growth levels, increasing by about 10% on average each year since 2007, the firm said.

Simultaneously, several retail sectors such as fashion, furniture and home design, beauty and health, leather goods and mobile phones have increased their presence on German prime shopping streets and have recorded more store openings than closures.

“Despite rising online retail sales, the importance of a high street presence remains significant for the major retail brands,” commented Julia Maurer, European Research Manager at Savills.

Savills expect that online sales will continue to rise in Germany while the profitability of the online portion of these multichannel retailers will support their ability to pay rents on the high street, as well as foster the rise of the high-street store as a showcase for brands.

The challenge of multichannel retailingWhen it comes to multichannel retailing, meeting consumer

expectations can be quite challenging due to the multitude of available channels, experts say. Customers now have multiple sources of information about products and prices, and retailers need to provide consistent messages across all channels, CBRE says.

According to the firm, resources are also a challenge, with the people and skills required for ‘direct to consumer’ being very different from traditional retail.

In this environment, a strong, authentic brand identity and excellent customer service will be key to the success of retailers going forward, CBRE concluded l




INDUSTRY COMMENT

The UAE property market has had its fair share of headlines, the most recent being the proposed mortgage cap by the Central Bank. The Bank stated that expat buyers must have 50% of the funds for their first property here and locals 80%. Their aim was to cool the market, but it served to heat up debate.

In the first instance, the market reacted with surprise. Indeed it was perceived that the biggest risk to the market was the Central Bank’s abrupt approach to regulatory measures without consultation. They are now reviewing a submission from the Banks Association, counter-proposing 80% maximum LTV for UAE nationals and 75% for the expatriates for the first house. In fact, some suspect the announcement to have been a strategic move, a flex of muscle to sober the market.

But the question remains: how would a mortgage cap affect the UAE market?

You may be surprised at the answer. The region has a high proportion of ‘cashed up’ buyers. Whether

it be from wealthy local investors or investors from unstable markets in the region (Iran, Syria, Egypt) and other feeder markets like Russia, cash is common in property transactions here. Should a steep mortgage cap be put in place, these investors will likely become the ‘cash cow’ of the industry. The market becomes theirs, and those who can’t get liquidity are left behind.

Who are those that are more tied up, unable to find 50% of their property payment? Likely it will be end users with steady jobs but little cash, usually seeking properties in the 2-5 million dirham range. This is not a great scenario and certainly this is the reason for the Bank Association’s petitioning.

Mortgage caps are not the only option to cool a market. However finding the right regulatory mix is tricky, as demonstrated in the Asia markets. In January, Singapore announced its seventh round of measures to cool the market. This includes additional stamp duty, LTV increases and lower Mortgage Servicing Ratio

(MSR) caps. Hong Kong Monetary Authority made second mortgages more restrictive, limited new mortgage periods to 30 years and also lowered the MSR cap to 40% in some cases. Malaysia applied a real property gains tax (RPGT) of up to 10% for properties disposed of within two years. The verdict is out on their effectiveness.

And what of the Dubai market? The truth is that Dubai is going to continue to be attractive

for property investment, and not just for the usual real estate rationales. Why?

The answers lie in population growth and regional instability.In 2012, the Arab Monetary fund (AMF) released figures from

new data sources showing UAE and Qatar had the world’s highest population growth rate - more than 10 per cent annually from 2000-2010. The Dubai Statistics Centre released just this month that the emirate›s population increased 5 per cent last year to 2.1 million. This underpins the Government agenda for the coming years: infrastructure, housing and development are still key needs going forward.

Regional instability, as the travel industry will attest, also leads to great demand. Just this month Reuters reported that as other destinations become risky, Dubai has benefited. Where travellers fear to tread, so too do property investors. That is, while instability continues to permeate the wider region, Dubai and the UAE are always going to be an enviable destination to raise families and start businesses. Indeed, the continuing compelling proposition of Dubai and the UAE is that is it a beacon of peace, safety and prosperity in an ever changing, complex, populated region. And everyone wants in.

Add to this the positives from the property industry; no property or income tax, solid infrastructure, and great property returns – and the opportunity for Dubai continues to looks golden. It is for this reason we welcome a mortgage cap, but at a more reasonable 80% LTV. This measure would steady the demand, keep investors heads cool but still be affordable for end users.

THE DEMAND TO LIVE, WORK AND PROSPER IN DUBAI CONTINUESRyan Mahoney, CEO of Better Homes, one of the UAE’s largest realtors, shares his viewpoint on the possible impact of the recently proposed 50% mortgage cap by the Central Bank.


INDUSTRY INSIGHT

How would you describe your role? As head of the retail leasing department my role is to ensure that

all retail developments of Nakheel (which includes Ibn Battuta Mall, the new Nakheel neighbourhood centres/community malls and the new Palm retail projects) are achieving the annually budgeted income per development and are being leased based on our strategic leasing plans. The key components in my role are to negotiate the highest achievable rental income while securing the top brands to generate the traffic required for the ‘achievable’ rental income. I am overseeing the leasing department and making sure everything is in place correctly while being involved in its daily responsibilities.

Could you give us a rundown of what is a typical day for you? I start with going to the gym at 6am, reaching the office at

7:45am and starting work at 8am with a cup of coffee. Half an hour later I have my daily leasing admin meeting to get the lease admin and finance updates and to make sure that all documents and cheques are in place. Then I start contacting retailers and meeting them to conclude offers and receive their money; after all it’s money that my job requires me to achieve. Our motto in the leasing department is money, money and money; there is no deal without a cheque in place which for us comes before the document.

What do you enjoy most in your job? I really enjoy meeting those beautiful retailers, listening to their

problems and their wishes; sometimes these encounters turn into a psychotherapy session and in the end we conclude a deal and everyone is happy. I really love exploring and learning about new brands and the whole science behind a successful business. Many retailers have stories of success that are so motivating and absolutely miraculous (sometimes it’s just ridiculous). I like exploring new F&B outlets, testing their foods, inspecting their kitchens and the technology they use and sometimes I even try to serve a customer just to get the feeling! I absolutely love the daily interaction with different retailers and getting their updates

on what’s happening in the market and what new brands they are getting on board.

What are the main skills your role requires? My main skill is finalising deals and maintaining good relationships

with the tenants. Furthermore, my role requires conceptualising, developing and creating a leasing strategy with a full study, review, recommended policies and procedures that will increase, improve and maximise the tenant occupancy in the retail development in addition to guaranteeing expected turnover to the tenants and desirable footfall traffic.

What would you describe as the major challenges in your role? The major challenge is shifting tenants from one space to another

to create a better tenancy mix. At Ibn Battuta Mall, we are shifting tenants that are misplaced into areas where they fit among the other brands, which is going to help them generate better income. Some brands are better off beside the HyperMarket while some others are better placed beside the big fashion anchors etc. For instance, one of the big fashion groups is undergoing a massive relocation plan; many shops from other retail companies are involved in the move. We have to make sure that the move is done in a timely manner and in a proper perfect sequence, so that as soon as a shop closes down, it is open in the other space. The shift that is happening this year may be the biggest Ibn Battuta Mall has ever experienced and would ultimately enhance the mall’s efficiency and increase its footfall. Egypt Court in Ibn Battuta Mall is now becoming better in terms of sales with the new brands that have opened and we are also expecting better overall sales with the new promising international brands that are going to open this year. They will be a big surprise to our loyal shoppers and a great addition to the mall.

If you weren’t a retail leasing expert, what would you be? Most probably a chef in an Italian restaurant in Amsterdam. Why

Holland? Because no one is going to question the authenticity of my pizzas I assume. Just kidding.. I would be a lawyer l

A DAY IN THE LIFE OF... A RETAIL LEASING EXPERT

Humaid Zayed Alnuaimi

Head of Leasing

Retailcorp Malls

Dubai, UAE


XXXX

accelerate JLL business growth across the Maghreb region.”Fabrice will report to Benoît du Passage on the JLL EMEA Management

Board. The JLL Maghreb office in Casablanca opened in 2007.

Chris Bond joins Macro UAE as Associate Director

Consultancy and facilities management company Macro in the UAE has strengthened its consultancy team with the addition of Associate Director Chris Bond. Chris is a Chartered Engineer with over 20 years Asset and Facilities Management experience and previously worked for Davis Langdon, Wasl and Serco in the Middle East.

Chris focuses on strategic solutions in FM service performance management, cost and life-cycle modelling as well as supply chain management and will deliver solutions and drive best practice.

Chris has worked in the UK and GCC region and has made valuable contributions to projects in the commercial, residential, cultural, educational, healthcare and PFI/PPP sectors. He has spent eight years in the UAE.

Cluttons in Bahrain announces expansion of its professional services team

Cluttons in Bahrain recently announced the expansion of its professional services team in response to anticipated growth in Bahrain’s property market, as it welcomed its newest member, Jon McGloin.

Jon, who is a member of the Royal Institution of Chartered Surveyors (RICS), joins the professional services team as valuation manager. He has a strong track record in consulting to both private and government backed developers and financial institutions across the region. Jon’s RICS accreditation further adds to the professional capacity of Cluttons and the team.

The professional services team is headed by Kristian Syson, a member of the RICS and a resident of Bahrain since 2007. The team also recently appointed Wissam Al Ghoussaini as senior consultant, to assist with valuation, tenant representation and research assignments across the northern Gulf region, and to work closely with existing team members, including Yousif Polardy, senior researcher in strategic consultancy and valuations. Yousif has been with Cluttons since 2009 and has worked across a number of real estate areas in the Kingdom with a special focus on commercial valuations in the GCC. His progression to senior researcher over the last four years is evidence of the firm’s long-term commitment to developing both local and expatriate staff and shaping their career trajectories.

Bin Majid Hotels announces new appointments

Bin Majid Hotels, one of the UAE’s leading hotel operators, last month announced the appointment of Juan Carlos Gonzalez Aguado as the new Director of Operations for Mangrove Hotel and Berk Ozkeresteci as the new Director of Food and Beverage for Bin Majid Hotels.

Mr. Carlos, a Spanish national has over 15 years of experience in

operations and commercial asset management and hotel consultancy. A graduate of Master in Business Administration, he held several leading positions such as Head of Hotels in Port Aventura, Spain, Operations Development Manager in Ibersol, Spain and also served as general manager of luxury hotels and resorts in Tunis and Dominican Republic within the prestigious and worldwide RIU Group.

As the new director of operations, Carlos’ role is to oversee the operations of all departments in the Mangrove Hotel to ensure all members of the team are dedicated and committed to their roles to provide the highest level of service and guest satisfaction. Carlos speaks English, French, German, Italian and Spanish, most of the languages spoken by the majority of the hotel guests.

Mr. Berk, the new group director of food and beverage for Bin Majid Hotels previously held various F&B management positions in USA, Istanbul, Antalya, Abu Dhabi and Fujairah. He has 13 years experience in the hospitality industry and worked in well-known global hotel brands such as Sheraton, Hyatt, Rotana, Kempinski and Rixos.

His role is to ensure that every guest has an exceptional experience whether it is in the restaurant, lobby lounge, coffee shop, in-room dining, banquets or at the pool bar. He will also focus on the engagement of all associates in the hotel and will make sure that the hotel provides the highest quality food and beverage at Bin Majid Hotels while increasing revenue.

Fabrice Leger appointed Managing Director for JLL Maghreb

Fabrice Leger has recently been appointed Managing Director of Jones Lang LaSalle Maghreb. This new role will see Fabrice assume responsibility for the JLL Maghreb business of 30 people, based in Casablanca.

Leger commented: “As well as growing international demand, local prime-office markets across Morocco, Algeria and Tunisia are also maturing

quickly. The potential for hotels and hospitality real estate advice is also apparent. We remain cautious about the current socio-economic situation but I am confident that the long-term future is bright and I am keen to

INDUSTRY NEWS

MOVERS & SHAKERS Each edition we profile a selection of real estate professionals who have recently taken on new positions across the MENA region. Read on to find out what your industry colleagues have been up to…


CITYSCAPE EVENTS

Building on the success of our previous events, the 4th Annual Cityscape Jeddah is introducing you to an exceptional event experience for 2013 with three different conferences catered to meet your specific interests and objectives. The purpose of the new format is to offer a great opportunity to share knowledge and strategies with your peers and to minimise your time out of the office, thereby maximising your time at Cityscape Jeddah.

Take this opportunity to meet the most active developers, investors, government officials, hoteliers, financiers, architects, designers and engineers in the Kingdom at one of the following three events.

Residential and Affordable Housing Summit, 2 March 2013

Powered by a rapidly growing population and an increasing number of expatriate workers relocating to Saudi Arabia, the demand for residential properties in the Kingdom has never been so high. To meet the surging housing demand, the Residential & Affordable Housing Summit discussions and presentations will focus on the latest opportunities and key strategies for future development and growth in the Kingdom’s residential real estate market.

Gagan Suri, VP, Head of Real Estate Asset Management, NCB Capital, KSA

Gagan started his career with Hyatt Hotels as Corporate Management Trainee at the Meridien in Toronto. Since having moved careers into real estate investment banking with Credit Suisse in 2001, he has worked on Wall Street and with leading financial institutions and transactions globally. Gagan holds an MBA from McMaster University in Canada.

At the summit, Gagan will examine effective PPP structures for the KSA housing sector and look at the availability of project financing for developers and funds. He will also discuss the securitisation of balance sheets and speak about RE Funds for KSA housing development, both public and private.

CITYSCAPE JEDDAH 20132 - 4 March, Jeddah Centre for Forums and Events, Saudi Arabia

Since its inception in 2009 and following the fantastic success of previous editions, Cityscape Jeddah is an essential component of the ongoing growth strategy of the Saudi Arabian real estate market.

To capitalise on this growth, the stage has been set for Cityscape Jeddah 2013 which will once again provide the premier platform for real estate professionals and organisations to meet, network and discuss development and investment opportunities in Jeddah, Saudi Arabia and beyond.

CITYSCAPE JEDDAH CONFERENCESHotel Investment and Development Summit,3 March 2013

With an average growth of 6% year-on-year on business and tourism visitors into the Kingdom, hotel development has emerged as one of the most attractive segments in real estate in Saudi Arabia for investors and developers. The Hotel Investment and Development Summit will examine strategies for securing project finance, different business models for luxury and budget hotels, asset management, hotel opportunities for religious tourism and how to maximise returns on your hotel investments.

Samer Sabra, VP Investment & Development, Riyada International Hotels & Resorts Co., KSA

Samer has over 13 years of experience in the real estate and hospitality sectors with a prime focus on the MENA region, assuming key positions in leading companies such as IFA Hotels and Resorts in Dubai, Injazzat Real Estate in Kuwait and Al Kharafi Group in Lebanon. He has a Master’s Degree in Finance and Investment from York University and a degree in Economics from the American University of Beirut.

At the summit, Samer will discuss the need for budget hotels in the Saudi market, the coming supply in this category versus 4-star and 5-star hotels and highlight why investors should focus on budget / 3-star hotels. He will also speak about Riyada’s development plans and other operators in the budget hotel segment.

World Architecture Congress, 4 March 2013Following the great success of the launch event last year in Riyadh, we

are delighted to bring you the second edition of the World Architecture Congress Saudi Arabia – the must attend event for architects, designers and engineers in the Kingdom. The conference will shed light on hot topics such as excellent masterplanning, sustainable design, innovation in design and materials, and improvement of the architecture on commercial and residential buildings whilst ensuring cultural identity.

Tarek El Khatib, Senior Partner, Zeidler Partnership Architects, Canada

Tarek El Khatib is an architect and artist with a broad experience in commercial, healthcare, cultural and residential projects. He is a senior partner at Zeidler Architects since 2002. Tarek has received several international design awards and holds a degree in architecture from the University of Toronto.

At the congress, Tarek will speak about Toronto’s residential high-rise trend, or ‘Manhattanization,’ which has resulted in a massive evolution of the city›s face. His talk will focus on the principles behind the design of successful high-rise urban form, such as community building, physical and socio-economic considerations and the creation of a healthy 24/7 city.


CITYSCAPE EVENTS

CITYSCAPE AWARDS FOR REAL ESTATE IN EGYPT28 March, Four Seasons at Nile Plaza Hotel, Cairo

The prestigious Cityscape Awards will celebrate those organisations which have demonstrated outstanding performance in the areas of development and architecture. A panel of highly respected local and international judges will select a short-list and the winners will be announced at a glittering awards ceremony and gala dinner.

PRE-SUMMIT RETAIL MASTERCLASS - 26 MARCH 2013Enhancing the shopping mall experience

With the fourth largest economy in the Arab world and a young population of nearly 84 million which is expected to double over the next 25 years, Egypt is clearly ripe with retail opportunity.

This half-day Masterclass is an unmatched opportunity for retailers, mall developers and operators to learn how to capitalise on the growing mega-mall trend in Egypt and to ensure footfall and profitability, provide you with the knowledge you need to gain a competitive edge in this booming market.

Now in its second year, the Egypt Real Estate Summit is the one and only meeting hub for the Egyptian and international real estate community, providing the ultimate platform to identify opportunities and create strategies for real estate sector growth and development in the country.

At the summit, our highly qualified expert speakers will cover a wide range of topics from market analysis to investment strategies, the mortgage industry, affordable housing and more. Below is a sneak preview to a couple of our sessions.

Christopher Seymour, Head of Property at EC Harris and Chairman of the Middle East Council for Offices, UAEChristopher has over 20 years experience in project and cost management, PFI/PPP, complex procurement, risk management and the delivery of

major commercial projects for developers and end users. He also plays a key role as chairman of the Middle East Council for Offices and he is also an active member of the Corporate Real Estate Network (CoreNet) and the RICS.

Speaking at the market analysis session, Christopher will look at the real demand from regional and international corporations for commercial office space designed to international quality standards. He will also point out key quality criteria considered by multinational companies in terms of tenant choice and discuss the challenges in the Egyptian market.

Sahar Nasr, Lead Financial Economist, Finance & Private Sector Development Coordinator, Egypt, the World BankIn her 15 years with the World Bank, Sahar has held various managerial positions and is now leading the main operation in MENA Region on enhancing

access to affordable housing for low- and middle-income groups. Sahar holds a PhD in Economics from Cairo University and is an Associate Professor of Economics at the American University in Cairo and at Future University in Egypt.

Participating in the panel discussion on informal and affordable housing, Sahar will highlight why it is critical that governments, the private sector and civil society intervene in the housing market through a wide range of policies that are intended to increase housing consumption by various groups while shedding light on the Egyptian Government’s proposed National Housing Strategy.

EGYPT REAL ESTATE SUMMIT 201327 – 28 March, InterContinental Cairo CityStars Hotel

CITYSCAPE EGYPT 2013 28 - 31 March, Cairo International Convention and Exhibition Centre

Cityscape Egypt is officially the largest real estate investment and development event in Egypt. A wide range of regional as well as international exhibitors from Egypt and abroad will once again showcase new and existing projects to an audience of private and institutional real estate investors, developers, architects, consultants and all other professionals involved in the design and construction of real estate.

This year’s event is nearly sold out and substantially bigger than last year’s show which, with over 10,000 participants, was already a resounding success. In addition to showcasing some of Egypt’s most prestigious real estate projects, a fast growing international presence will add to the appeal of this year’s show.


CITYSCAPE EVENTS

Hosted alongside Cityscape Abu Dhabi, ecoConstruct Expo 2013 will showcase the leading and most innovative sustainable building solutions available on the market, advancing the construction industry in its aim to build a more profitable future.

ecoConstruct Expo provides an opportunity for the region’s consultants, contractors and architects to source sustainable building and construction solutions, and is a platform for local and international suppliers to showcase their eco-friendly building and infrastructure products which also reduce costs, increase output and raise overall building efficiency.

It is the only event focusing on sustainable building solutions for the UAE.

A NEW STRUCTURE FOR OUR CONFERENCE SESSIONSWe have revamped our conference structure to be simpler and more inclusive. EcoConstruct Expo will now feature varied and practical seminar sessions from 16-18 April that are situated on the show floor and open to all exhibition guests. Themes will include sustainable architecture and design, the business case for green building and the regulatory environment in the GCC. This provides yet more reasons to walk the exhibition floors, meet with industry colleagues, and identify the optimal eco-friendly products, projects and prospective clients.

CITYSCAPE ABU DHABI 201316 - 18 April, Abu Dhabi National Exhibition Centre

Cityscape Abu Dhabi is the only annual meeting point for governmental authorities, key investors and developers, consultants, architects, designers and other real estate professionals to drive growth in Abu Dhabi’s real estate market.

Cityscape Abu Dhabi 2013 is where the future of Abu Dhabi’s masterplan and key developments are being revealed. With over 25,000 participants in attendance, Cityscape Abu Dhabi is an unmatched opportunity to build and maintain your presence in Abu Dhabi’s real estate market.

CITYSCAPE ABU DHABI RECEPTION

Cityscape Abu Dhabi will once again provide exceptional networking opportunities for real estate professionals and investors and will play host to a special reception evening. The prestigious event will allow invited guests to network and socialise in an informal environment alongside the exhibition.

Visit our website www.cityscapeabudhabi.com for further information.

ECOCONSTRUCT EXPO 201316 - 18 April, Abu Dhabi National Exhibition Centre


IN THE NEXT EDITION

ADVERTISINGInterested in advertising in Cityscape magazine?

Don’t miss out on this superb opportunity to position your brand in front of the region’s most active and influential real estate investors and developers. BOOK NOW and enjoy special EARLY BIRD RATES for our June and other forthcoming editions as well as for all our online products. Call us now on +971 (0)4 408 2801 or email [email protected] for more information.

CITYSCAPE MAGAZINE JUNE 2013Our next quarterly edition will once again offer the most up-to-date real estate market information, analysis, interviews and expert commentary from the Middle East and around the globe.

In addition to our regular features on architecture, retail and sustainability we cover some of the world’s most promising real estate investment markets while highlighting their lucrative opportunities.

The June edition will also provide a preview to the much anticipated Cityscape Qatar event to be held from 27 - 29 May 2013 at the Doha Exhibition Centre.

COMING SOON…CITYSCAPE MAGAZINE ONLINE PORTALWatch out for our soon to be launched brand new Cityscape magazine online portal. This will be an exciting addition to our existing print and online magazine versions with regularly updated industry news, pungent short stories and exciting interactive features.

SUBSCRIBE TODAY!!Subscribe to the Cityscape magazine today and receive advance copies of the MENA region’s only real estate investment and development publication hot off the press. Email [email protected] or call +971 (0) 44072528 to subscribe today.

NOVEMBER 2011

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FOCUS ON RIYADH SIX OF THE BEST

From Riyadh’s emerging financial district to a new

mixed-use development in the heart of Makkah, the

Kingdom’s landscape is being transformed. We take

a look at six of the projects making the headlines.

LAND OF OPPORTUNITY

A reported US$600 billion worth of investment

opportunity is up for grabs in the Kingdom between

now and 2020, with the country attracting

increasing interest, both at home and abroad.

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OCTOBER 2012

A Middle East perspective on global real estate

Invest in

Investment: A strong economy, stable financial system and

recent legal changes boost foreign property investment into

Turkey.

RetaIl: A growing middle class with increasing purchasing power

makes Turkey one of the most attractive markets for retailer

expansion.

touRIsm: Tourist arrivals are increasing and new locations

across the country become more popular; Turkey’s hotel sector

is booming.

InvEsTmEnT

A strong economy, stable financial system and recent legal

changes boost foreign property investment into Turkey.

RETaIl

A growing middle class with increasing purchasing power makes

Turkey one of the most attractive markets for retailer expansion.

TOuRIsm

Tourist arrivals are increasing and new locations across the country

become more popular; Turkey’s hotel sector is booming.

ThE nEw faCE Of CITysCapE – yOuR glOBal pROpERTy InvEsTmEnT magazInE

THE CITYSCAPE

ANNUAL REAL

ESTATE REVIEW

Our comprehensive

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Saudi Arabia and Turkey

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OUTLOOK 2013

Who are the winning

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We highlight this year’s

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DECEMBER 2012

SPECIAL

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INVEST IN RUSSIA

Investment overview

Tourism

Retail

Russia & the UAE

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Your Guide To Emerging Real Estate Markets

Event Calendar

Global 8~10 October 2013Dubai International Exhibition Centre, Dubai, UAE

Riyadh 8 ~ 10 December 2013 Riyadh International Exhibition Centre, Riyadh, Saudi Arabia

Qatar 27 ~ 29 May 2013 Doha International Exhibition Centre, Doha, Qatar

Egypt 28 ~ 31 March 2013 Cairo International Convention and Exhibition Centre, Cairo, Egypt

Abu Dhabi 16 ~ 18 April 2013 Abu Dhabi National Exhibition Centre, Abu Dhabi, UAE

Jeddah Centre for Forums and Events, Jeddah, Saudi Arabia

Jeddah 2 ~ 4 March 2013

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