Cluttons_Dubai Property Apr 2012

7/31/2019 Cluttons_Dubai Property Apr 2012

http://slidepdf.com/reader/full/cluttonsdubai-property-apr-2012 1/4


http://slidepdf.com/reader/full/cluttonsdubai-property-apr-2012 2/4cluttons.com/dubai

Cluttons Dubai property market update - April 2012

Industrial Q1 o 2012 has seen a number o requirements emerge rom light

industrial and logistic occupiers seeking onshore ‘build to suit’ developments. One o the

reasons behind this increased activity originates rom the lack o better quality buildings

that are o interest to international companies. The short supply o existing acilities,particularly in the over 50,000 sq t range, has led to a stabilisation o rent on average to

28 AED per sq t or the acilities that are being oered.

Investors continue to have a strongappetite or well let, high qualitylogistics and warehouse acilitiesTraditional industrial areas in Dubai such as Al Quoz and Ras Al Khor have

maintained strong demand or larger warehousing units (c. 40,000 – 80,000 sq t)

and in addition, we have seen interest or large plots o land to be used or open

storage and build to suit developments. Domestic businesses avour these areas

when compared to newer industrial locations, which is reected in rental levels.

Demand has also continued to be driven by the GCC petrochemical industry and its

suppliers in the oil and gas sectors, as the price o oil continues to remain high. Another

sector where Cluttons have witnessed strong interest is the automotive industry.

Demand rom automotive occupiers or land suggests that operators are having to

upsize their acilities in order to cater to the strong demand arising rom consumers.

More modern industrial areas, such as Dubai Industrial City have seen their popularity

grow, as occupancy has increased by 40-50% over the past two years. Furthermore,

industrial land transactions have seen a 75% increase since 2010 with large occupiers

choosing DIC over competing industrial areas. This take up is driven by the relatively

good value propositions available rom the landlords. On average, Dubai’s industrial

rental levels have reduced since Q1 2011 rom 21 AED to 17 AED per sq t in the small

terraced unit market where supply rom schemes in Dubai Investments Park and Dubai

Industrial City have introduced large amounts o new stock.

Facilities achieving the higher levels o rent in the UAE have occupier led design

points as well as high build quality matching the standards set in more developed

markets. Pre let rents in areas such as Jebel Ali Free Zone (JAFZA) are currently

transacting on average at 35 AED per sq t. JAFZA warehouses o this specifcation

are also achieving sale prices o around 190 AED per sq t whereas the lower

specifcation, older acilities are achieving around 130 AED per sq t. Land is

leasing in this area between 2 – 4 AED per sq t per annum. In addition, Q1

2012 has also witnessed reports o open land plots trading at 5 AED per sq t or

prominent, Sheikh Zayed Road acing plots in JAFZA.

Investors continue to have a strong appetite or well let, high quality logistics and

warehouse acilities. However, investment opportunities in this class are limited

due to a shortage o stock. As a result, yields are hardening and we oresee

transactions to dip below 9% in 2012 as landlords continue to be more selective

with investment propositions.

Rental rates (2010-11)

DIP Class 1

JAFZA Class 2

JAFZA Cla ss 1 Al Quo z C la ss 1 Al Qu oz Cla ss 2

DIP Class 2 Jebel Ali Ind Class 2

Q 4 2 0 0 9

Q 1 2 0 1 0

Q 2 2 0 1 0

Q 3 2 0 1 0

Q 4 2 0 1 0

Q 1 2 0 1 1

Q 2 2 0 1 1

Q 3 2 0 1 1

Q 4 2 0 1 1

Q 1 2 0 1 2

50

45

40

35

30

25

20

15

10

5

0 A E D p e r s q f t

Capital rates (2010-11)

Al Quoz Dubai Investment Park JAFZA

Q 4 2 0 0 9

Q 1 2 0 1 0

Q 2 2 0 1 0

Q 3 2 0 1 0

Q 4 2 0 1 0

Q 1 2 0 1 1

Q 2 2 0 1 1

Q 3 2 0 1 1

Q 4 2 0 1 1

Q 1 2 0 1 2

300

250

200

150

100

50





Ofce Q1 2012 appears to have continued in the same trend set in the

previous quarter with regards to the Dubai commercial market. The ofce sector

still remains very competitive due to the large over supply o stock on the market.

With total ofce stock in Dubai touching on 60 million sq t and an additional

10 million sq t predicted to be been brought to the market by the end o 2012,

vacancy rates have remained high at an average o 40% across the city.

Oce rents beginning to stabilisein prime commercial areas o thecityWe have however started to see rents leveling out ater prolonged

downward pressure experienced throughout 2010 and 2011. Average

quoting rents or prime developments in the city have remained stable

over the past 3 months, however areas with poorer quality oice space in

secondary locations are still experiencing declines. This is mainly caused

by poor demand and private landlords reducing rents in order to attract

tenants and reduce voids.

Despite the excess o supply and the consequences o ragmented ownership,

there still remains a relatively short supply o good quality buildings or corporate

occupiers with major requirements. Single landlord owned buildings still remain

an essential requirement or larger corporate occupiers, but in prime areas there is

a lack o supply that can accommodate larger requirements.

In terms o development going orward, Government initiatives such as Tayseer

and Tanmia have been put in place with an aim to restart work on previously

stalled projects. There remains however an increased recognition by Government

agencies to reduce the uture supply pipeline. Due to the lack o good quality

stock there is an improved appetite or prime situated development sites,

however bank lending on new commercial developments is still extremely

limited.

Businesses and occupiers are still ocused on reducing operating costs, o which

rent is one. We have continued to see trends o established companies taking

advantage o lowering rents and moving to other competing buildings around

the Emirate. In addition, potential occupiers have a greater appreciation o

sustainable green initiatives which again has proved successul in reducing

operating costs.

Dubai’s retail market experienced a supply slow down in 2011. However, the recent

announcements o extensions to Dubai Mall, Ibn Battuta Mall and Dragon Mart

as well as the restart o the once stalled Mall o Arabia, have helped demonstrate

that retail supply is once again a ocus. The retail market is also experiencing

a growth in smaller community shopping centres designed to support local

residences.

r e s e a r c hr

Prime ofce rents

April 2012

T E C O M ( A

& B )

( F r e e z o n e )

T E C O M ( A

& B )

( N o n F r e e z o n e )

J L T

S Z R

D e i r a

B u r D u b a i

D I F C

D I F C ( P r i v a t e l y

o w n e d )

B a r s h a &

T e c o m C

D S O A

E m a a r S q u a r e

B u s i n n e s B a y

250

225

200

175

150

125

100

75

50

25

0 A E D p e r s q f t p e r a n n u m

TECOM (A&B)

JLT

SZR

Deira

Bur Dubai

DIFC

Barsha & TECOM C

Business Bay

DSOA

Emaar Square

100

35

90

65

65

250

40

60

30

170

100

40

90

70

70

250

40

65

30

180

0

12.5

0

7

7

0

0

7.7

0

5.5

2011 Q1 2012 % change

Ofce rents (AED per sq t pa)



r e s e a r c hr


Dubai contacts

Steven Morgan, MRICS Ronald Hinchey, FRICS Jonathan Fothergill, MRICS Lesley Preston

Head o UAE Head o Proessional Services Head o Valuation Head o Property Management

+971 4334 8585 +971 4334 8585 +971 4334 8585 +971 4334 8585

[email protected] [email protected] [email protected] [email protected]

Whilst every eort has been made to ensure the accuracy o the data and other material in this report, Cluttons LLC does not accept any liability (whetherin contract, tort or otherwise) to any person or any loss or damage suered as a result o any errors or omissions. The inormation, opinions and orecastsset out herein should not be relied upon to replace proessional advice on specifc matters and no responsibility or loss occasioned to any person acting,or reraining rom acting, as a result o any material in this publication can be accepted by Cluttons LLC.

© 2012 Cluttons LLC

Residential The Dubai residential market has shown stability and in certain

locations positive movements over the past 6 months. The resonance o the ‘Arab Spring’

continued to help the Emirate maintain its adopted title o a ‘sae haven’ or individuals who wished

to redistribute their unds into less troubled economies. Residential sale transactions, as expected or

the time o year, saw a natural increase in January and February particularly in the villa market.

Villa stock in Dubai has seenoptimistic value gainsThe villa market in Dubai proves the most improved residential asset type over the past 12 months

and we oresee this trend enduring through 2012 and into 2013. Recent activity has been aided

by mortgage lenders who continue to ght or market share, oering more attractive rates to

credit worthy clients purchasing particular stock. As well as oering mortgage rates or as low as

3.5%, banks are slashing arrangement ees and timescales to process approvals in an attempt to

attract the limited market available. This said, we wait to see the level o activity as we move closer

to the summer months, which historically have proved quieter times over the past 3 years.

The resuracing o the residential mortgage markets by a number o key lenders has

continued to aid condence in certain locations and developments. The release o stock in

Jumeirah Islands or example has actually caused values to increase in the development by

5.2% rom Q3 2011. This is mainly due to lack o unding on o plan developments which

suddenly become available or nance, thereore increasing the development’s purchaser

pool. Other villa stock in Dubai has seen optimistic value gains, the best perorming o these

is the Emirates Living developments o The Lakes, up 7.2% rom Q3 2011, The Meadows,

up 6.4% rom Q3 2011 and The Springs, again up 6.4% rom Q3 2011. Villa developments

such as Jumeirah Village or Green Community have proved less desirable locations and have

consequently seen values drop 2.5 % down rom Q3 2011.

Values o apartments in less desirable locations have continued to be eroded by the oversupply

and poor property management. Areas such as Discovery Gardens and International City have

allen -7.8% and -5.6% respectively rom Q3 2011. The resilience o the higher end o the

market has remained strong over the past 5 months however and positive growth since Q3

2011 in locations such as Burj District also known as Downtown Dubai (5.3%), The Greens

(4.8%), The Views (5.2%) and certain higher end developments in Dubai Marina (1.35%).

We oresee the remaining 9 months o 2012 to mirror the market movements o Q4 2011

and Q1 2012, solidiying a robust market that is based on demand undamentals ratherthan investor sentiment bubbles.

Average villa sales rates (2011-12)

high end villas

low range villas mid range villas

O c t 2 0 1 1

N o v 2 0 1 1

D e c 2 0 1 1

J a n 2 0 1 2

F e b 2 0 1 2

M a r 2 0 1 2

1200

1000

900

800

700

600

500

400

300

200

100


Average apartment sales rates (2011-12)

high end apartments (excluding Burj Khalia)low end apartments mid range apartments

O c t 2 0 1 1

N o v 2 0 1 1

D e c 2 0 1 1

J a n 2 0 1 2

F e b 2 0 1 2

M a r 2 0 1 2

1200

1000

900

800

700

600

500

400

300

200

100


Middle East ofces

Dubai +971 4334 [email protected]

Bahrain +973 1756 [email protected]

Saudi Arabia +973 1756 [email protected]

Abu Dhabi +971 56 174 [email protected]

Sharjah +971 6572 [email protected]

Documents

Cluttons_Dubai Property Apr 2012