top trends for uae real estate in 2014

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T R

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trends Top for UAE

Real Estate in 2014

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Presentation Outline

Mega Trends

Influencing

UAE

Real Estate

in 2014

Implications

for Major

Markets Q & A

1 2 3 4

Review

Of

2013

Trends

6

trends Mega

Influencing UAE

Real Estate in 2014

7

Jones Lang LaSalle’s – Top Trends for 2013

Return of confidence impacts the Dubai market 01

Funding constraints will apply a natural brake to development activity 02

Increased involvement from Chinese and the Global South 03

Significant supply levels could offset improved sentiment 04

Greater attention to operating costs and property management 05

Sustainability – more talk than action 06

Government Initiatives will influence market conditions 07

Return of confidence impacts the Dubai market 01

Increased involvement from Chinese and the Global South 03

Greater attention to operating costs and property management 05

Government Initiatives will influence market conditions 07

Significant supply levels could offset improved sentiment 04

Sustainability – more talk than action 06

Funding constraints will apply a natural brake to development activity 02

Correct Partially correct Incorrect

8

Improving Macro Economic Climate

Brighter prospects for 2014

• Global Economic

Situation has improved

• Regional geopolitical

situation remains mixed

2.5

3

2.5

4

3.9

4.3

UAE outperforms global economy in 2013

Global

Middle East

UAE

Real GDP Growth (%)

9


Avoiding another bubble 1

More measured mega developments 2

Future directions of growth 3

Expo 2020. Limited impact in 2014 4

Varied approaches to finance real estate 5

Two speed investment market 6

Workplace transformation as corporate

activity increases 7

More hotel investment sales 8

Sustainability – From talk to action 9

Improved valuation and

measurement standards 10

10

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

50

100

150

200

250

300

350

400

Dec

-05

Jun-

06

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

% c

hang

e Y

-o-Y

Inde

x, J

an 2

003=

100

Dubai Residential Sale Price Index

Sale Price Index % change Y-o-Y

Worrying signs of over heating

Unsustainable price growth in

residential market

Increasing cost pressures / resource

constraints

Return of speculative activity

Land sales on generous

financial terms

Expo 2020 causing

irrational exuberance

1: Avoiding another bubble in Dubai – Smarter the 2nd time around

10

11

Differences this time around

Significant levels of new

supply

Larger projects are being

phased in line with demand

More caution from investors

Less reliance on pre-sales

and sub developers

Better regulations – aimed at

calming the market

1: Avoiding another bubble in Dubai – Smarter the 2nd time around

11

15

Dubai Canal – Meraas / RTA

Mohammad Bin Rashid City –

Emaar / DPG

Dubai Waterfront – Nakheel

Bluewaters (Meraas)

Habtoor City

Dubai World Central (DWC)

Dubai Trade Centre District (DTCD)

Dubai Design District (d3)

2: Return of mega projects - Dubai

15

16

Zayed City (Capital District)

UPC

Saadiyat Island / TDIC

Yas Island / Aldar

Masdar (Mubadala)

Al Maryah Island (Mubadala)

2: Return of mega projects – Abu Dhabi

16

17

Resumption of previously stalled projects

More awareness of need to phase projects in line with demand

More co-operation between master developers

Reduced role for sub developers

Improved regulations on pace of development

2: More measured mega projects – Key Messages

17

18

3: Future Growth : Dubai

1 Dubai Industrial City 3 JAFZA 5 JLT 7 Dubiotech 9 Dubai Maritime City 11 DAFZA 13 Academic City 15 Dubai World Central

2 TechnoPark 4 IMPZ 6 TECOM 8 DIFC 10 DHCC 12 Dubai Silicon Oasis 14 Dubai Outsource Zone

4

5 6

7

9

8

10

11

12

13 14

3

15

Free Zone

1

2

E311 Sheikh Zayed Road

E311 Sheikh Mohamed Bin Zayed Road

E311 Emirates Road

19




E311 Emirates Road

1 CBD 3 TECOM A & B 5 JLT

2 Business Bay 4 TECOM C 6 Jebel Ali

Commercial District

1

2

3

4

5

6

20


4 5

3 2

1

1 Business Bay 3 Mohamed Bin Rashed City 5 Dubai Land

2 Lagoons 4 Dubai World Central

High Priority

Low Priority



E311 Emirates Road

21


Infill – filling in the gaps South – towards

Abu Dhabi



E311 Emirates Road

22 Source: Jones Lang LaSalle

Saadiyat

Yas Island

Reem Island

Shams

Naimat

Raha Beach

Masdar

BMC

Arzanah

Rawdhat

Capital Centre

Danet

Al Reef

Saraya

Bateen Peninsulas

Hydra Village Mina Zaved

Lulu

Airport City

Capital District

Hudayriat

ICT

1 Horizontal + Vertical Development

Al Maryah

2 Master Planning and / or infrastructure stage

3: Future Growth : Abu Dhabi

23

Positive long term impact on UAE

Limited direct impact in 2014

Greatest benefit will be to the

hospitality, logistics and retail

sectors

4. Expo 2020 : Limited impact in 2014

Two potential problems will require

careful management in the short

term:

- Excessive price expectations

- Excessive potential new supply

23

24

Focus on equity rather than debt

Pre-sales remain important in residential market

Sale and leasebacks

Pre leases / build to suit

Limited use of IPO’s and bonds

Last mile financing

REIT’s

Banks remain cautious

5: Varied approaches to finance real estate

24

25

Limited Interest from Western

institutions

Constrained by lack of investment

grade product

More ME institutions looking in

Dubai Strategic relationships

Chinese investment in the Pearl

is Government backed means of

selling expertise

Increased interest from

debt investors

6: Two Speed Investment Market

26

26

6: Two Speed Investment Market

Strong interest from private

investors

DLD report transactions of AED162

billion in 2013

Sales to more than 120 nationalities

Most sales either land or individual

homes / units

26

27

Increasing Demand from Corporate

Occupiers

Overall market is improving – more

corporates now growing again

Mixed implications for the real estate

market

Continued two tier market

2014 will remain primarily a tenants

market, with no decline in excessive

overall vacancy

7: Workplace Transformation as Corporate Activity Increases

26

28

Key Drivers and business objectives

driving work place transformation:-

Reducing property costs

Improving business performance

Attracting and retaining staff

Merging of organizations

Consolidations

7: Workplace Transformation as Corporate Activity Increases

27

29

A larger number of operating hotels

Loan maturities

Current diversity of players

Specialization on core activities

(real estate developers vs hoteliers)

• Hotels perceived as ‘income

generating’ assets

• More professional asset

management places greater

emphasis on financial performance

8: More investment sales in hotel sector across UAE

28

30

9: Sustainability – From talk to action

Case study of U Bora Tower

• Energy savings of 15%

• Water reduction

• Waste reduction

Small scale / low capital cost

Payback of less than 3 years

Reduces service charges

Increases tenant appeal

29

31

Increased awareness of

importance of sustainability

Abu Dhabi continues to lead the

way

Dubai introduces new regulations

Emergence of a ‘sustainability premium’

More focus on small scale

initiatives that can be retrofitted

9: Sustainability – From talk to action

29

32

Measurement standards

10: Improved valuation & measurement standards

Could impact measured areas and

therefore values by 25%

Quote all projects in sq m rather than sq ft

Standard approach to convert BUA (supply

data) into GLA (demand).

Plans to introduce global measurement

standards

Variety of standards currently used in

UAE causes confusion and inhibits

transparency

30

33

10: Improved valuation & measurement standards

Better Quality - All Valuations will have to adhere to International Valuation

Standards

Better Transparency - Levels of openness and transparency laid down in IVS

Better Local Knowledge and skills - Valuers required to have expertise in both

the relevant asset class and geography.

Valuation standards

31

34

trends Mega

Implications

for Major Markets

35

Market Directions - Dubai - Prime Rental Clock

Q4 2012

Rental Growth

Slowing

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Retail

Residential

* Hotel

Office

*Hotel clock reflects the movement of RevPAR. Note: The property clock illustrates where Jones Lang LaSalle estimates each prime market is within its individual rental cycle as at end of the relevant quarter. Source: Jones Lang LaSalle

36


Q4 2013

Rental Growth

Slowing

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Retail

Residential

Office

* Hotel


37


Q4 2014

Rental Growth

Slowing

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Retail

Residential

Office

* Hotel


38

Market Directions - Abu Dhabi - Prime Rental Clock

Q4 2012

Rental Growth

Slowing

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Retail

Residential

* Hotel

Office

*Hotel clock reflects themovement of RevPAR. Note: The property clock illustrates where Jones Lang LaSalle estimates each prime market is within its individual rental cycle as at end of the relevant quarter. Source: Jones Lang LaSalle

39


Q4 2013

Rental Growth

Slowing

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Retail

Residential

Office * Hotel


40


Q4 2014

Rental Growth

Slowing

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Retail

Residential

Office * Hotel


46


Avoiding another bubble 1

More measured mega developments 2

Future directions of growth 3

Expo 2020. Limited impact in 2014 4

Varied approaches to finance real estate 5

Two speed investment market 6

Workplace transformation as corporate

activity increases 7

More hotel investment sales 8

Sustainability – From talk to action 9

Improved valuation and

measurement standards 10

47

Question and Answers

48

Alan Robertson

CEO, MENA [email protected]

David Dudley

Director of MENA

Operations

[email protected]

Chiheb Ben Mahmoud

Head of Hotels & Hospitality [email protected]

Graham Howat

Head of Asset & Property

Management

[email protected]

Andrew Rotteveel

Head of Project and

Development Services

[email protected]

Deepak Jain

Head of Strategic

Consulting

[email protected]

Gaurav Shivpuri

Head of Capital Markets

[email protected]

Fadi Moussalli

Regional Director – ICG

[email protected]

Craig Plumb

Head of Research

[email protected]

Simon Brand

Head of Valuation Advisory [email protected]

Dana Williamson

Head of Agency

[email protected]

Andrew Williamson

Head of Retail

[email protected]

49

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top trends for uae real estate in 2014

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