Executive Summary

A price analysis of serviced/hotel apartments reveals that they trade at a significant premium compared to the standard residential units. In the

ready space in Downtown and Dubai Marina, they trade nearly double to their non-serviced counterparts. However, in Palm Jumeirah they have

only a 38% premium. In the off-plan space can witness that developers have already factored some portion of the premium in the launch prices.

For example in both Creek Harbor and The Hills the serviced/hotel apartment component was launched at a premium of 50-60%.

A community-wise analysis reveals that in Downtown, ready units trade at a premium compared to their off-plan counterparts, where as in

Business Bay the reverse has transpired. This indicates that in Business Bay, the quality of serviced apartments is generally increasing with better

brand names now coming in. In Palm Jumeirah we can witness that the ready serviced apartments trade at a discount by an average of 20%. We

opine reason for the premium in off-plan units are the rental guarantees and extended payment plans offered by developers, and that these

guarantees have for the most part been baked into the launch prices of the projects.

A supply analysis reveals there are approximately 15,000 freehold completed serviced units in the emirate, with an expected 30,000 units to enter

the market over the next 5 years. The expected surge in the serviced apartment space reflects the optimism regarding tourism numbers, and is in

line with the increase in hotels throughout the city as well. Government Related Entity (GRE) developers account for 34% of existing stock in the

serviced/hotel apartment space, and this number is expected to further reduce to 19% by 2021, implying that GRE developers will focus on the

upper end of the market in all likelihood.

The Address is the flagship brand of Emaar’s hospitality brand and is one of the most prestigious hotels in the UAE. A price analysis of the Address

hotels in downtown against the community index reveals that the former has outperformed by more than a factor of 3 in the case of the Address

Lake Hotel and in the case of Address Blvd a factor of 7. Within the Address portfolio there is a 30% discount for the off-plan projects compared to

ready, implying that as the projects come closer to completion we can expect a uptick in pricing. This is what traditional real estate models predict,

and what has been observed for the most part empirically in comparable builds.

Contents

01

03

02

04A look in the Supply

DynamicsA Closer look into Emaar’s

Address

The Premiums of Serviced

to Standard Units

Off-Plan vs Ready in the

Serviced Apartment Space

The Premiums of Serviced to Standard Units

“Above all else, show the data”

Edward R. Tufte

Premiums of Serviced Apartments: Ready Space

Ready Space: Premiums of Serviced Apartments to the Standard Apartments

Source: REIDN

A price analysis of serviced/hotel apartments reveals that they trade at a significant premium compared to the standard residential units.

In the ready space in Downtown and Dubai Marina they trade nearly double to their non-serviced counterparts. However, in Palm

Jumeirah they have only a 38% premium. The lower premiums witnessed in Palm Jumeirah may be a result of a confluence of factors,

including but not limited to the fact that there is a steady pipeline of off plan projects that will likely pivot prices higher.

Premiums of Serviced Apartments to the Standard Apartments

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Downtown Marina Palm Jumeirah

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.Serviced Apartments .Standard Apartments

Premiums of Serviced Apartments: Off-Plan Space

Off-Plan Space: Premiums of Serviced Apartments to the Standard Apartments

Source: REIDN

In the off-plan space we can witness that developers have already factored some portion of the premium in the launch prices. For

example in both Creek Harbor and The Hills the serviced/hotel apartment component was launched at a premium of 50-60%. The high

level of demand that has been witnessed nonetheless has been due to the strong brand power of the Address and Vida Brands of Emaar,

along with the expectation of a general surge in tourism that are expected to make these investments higher yielding than their

residential counterparts in the medium to long term.

Off-Plan Space: Premiums of Serviced Apartments to the Standard Apartments

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Off-Plan vs Ready in the Serviced Apartment Space

“Risk comes from not knowing what you’re doing.”

Warren Buffet

Downtown & Business Bay: Ready vs Off-Plan Serviced/Hotel Apartments

Downtown: Ready vs Off-Plan Serviced/Hotel Apartments

Source: REIDN

An analysis of Downtown serviced/hotel apartments reveals that ready units trade at a premium compared to their off-plan

counterparts, where as in Business Bay the reverse has transpired. This indicates that in Business Bay, the quality of serviced apartments

is generally increasing (with better brand names now coming in), whereas in Downtown, the off plan segment has traded at a discount,

predominantly reflecting the opportunity cost of rental yields relative to their ready counterparts.

Business Bay: Ready vs Off-Plan Serviced/Hotel Apartments

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AramaniResidence

TheAddress

BLVD

TheAddress

Dubai Mall

TheAddress

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TheAddress

ResidenceFountain

View

TheAddress

ResidenceSky View

VidaResidenceDubai Mall

VidaResidenceDowntown

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Palm Jumeirah & Dubai Marina: Ready vs Off-Plan Serviced/Hotel Apartments

Palm Jumeirah: Ready vs Off-Plan Serviced/Hotel Apartments

Source: REIDN

In Palm Jumeirah we can witness that the ready serviced apartments trade at a discount by an average of 20%. We opine reason for the

premium in off-plan units are the rental guarantees and extended payment plans offered by developers, and that these guarantees have

for the most part been baked into the launch prices of the projects. In the Marina, there are only a handful of off plan projects that are

left, and for the most part they are at a discount to the ready benchmark index.

Dubai Marina: Ready vs Off-Plan Serviced/Hotel Apartments

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V HoldingsHotel

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Azizi Mina Royal Bay Palm Tower W Hotels DukesOceana

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Dubai MarinaAddress

Address JumeirahGate

Vida ResidencesDubai Marina

The One Jumeirah Living

Ready Off-PlanReady Off-Plan

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A look in the Supply Dynamics

“The value of an idea lies in the using of it”

Thomas A. Edison

A look in the Supply Dynamics of Serviced Apartments

Supply of Serviced/Hotel Apartments Stock

Source: REIDN

The above graph reveals the completed and expected units of supply coming in the serviced/hotel apartment space. There are

approximately 15,000 freehold completed units in the emirate, with an expected 30,000 units to enter the market over the next 5 years.

The expected surge in the serviced apartment space reflects the optimism regarding tourism numbers, and is in line with the increase in

hotels throughout the city as well. Supply numbers may shift as developers adjust pipeline depending on market conditions; it is likely

however that the actualization rates in the serviced space will be much higher than in the residential space, given the quality of projects,

and the stage of completion that a number of these projects are currently at.

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2003 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Ready Off-Plan

Government vs Private Sector Developers in the Serviced Apartment Space

Government vs Private Sector Developers: Completed Serviced Units

Source: REIDN

Government Related Entity (GRE) developers account for 34% of existing stock in the serviced/hotel apartment space, and this number is

expected to further reduce to 19% by 2021, as Private Sector developers take on the baton. Such a tilt is natural in Dubai’s real estate

landscape, and signifies that the former will presumably dominate the upper echelon of the market segment, leaving the private sector

to cater to the mid income segment predominantly. This trend has already started to transpire in various communities across Dubai; we

expect this trend to continue.

Government vs Private Sector Developers: Under Construction Serviced Units

GSD PrivateGSD Private

A closer look into the Address

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

George Soros

0%

20%

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Address Blvd Downtown Ready Index

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Address Lake Hotel Downtown Ready

Price Performance of Serviced Apartments

The Address Lake City vs Downtown Ready Index (2006-2017)

Source: REIDN

The Address is the flagship brand of Emaar’s hospitality brand and is one of the most prestigious hotels in the UAE. A price analysis of the

Address hotels in downtown against the community index reveals that the former has outperformed by more than a factor of 3 in the

case of the Address Lake Hotel and in the case of Address Blvd a factor of 7. This outperformance historically has been due to higher

occupancy ratios that these landmark properties have achieved; on a city wide basis, it is likely this relative outperformance will be

considerably narrower going forward.

The Address Blvd vs Downtown Ready Index (2013-2017)

Launched 2013Completed 2017

Launched 2006Completed 2008

A Closer look into Emaar’s Address

The Address: Ready Vs Off-Plan Prices

Source: REIDN

The above graph gives an overview of the pricing of the Address portfolio across Dubai in both the ready and off-plan space. On average

there is a 30% discount for the off-plan projects compared to ready, implying that as the projects come closer to completion we can

expect a uptick in pricing. This is what traditional real estate models predict, and what has been observed for the most part empirically in

comparable builds.

0

500

1,000

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The Address BLVD The AddressDubai Mall

The Address Lake Dubai MarinaAddress

The AddressResidence

Fountain View

The AddressResidence Sky

View

The AddressJumeirah Gate

Address HarbourPoint

Conclusions

The Premiums of Serviced to Standard Units Off-Plan vs Ready in the Serviced Apartment Space

Government Related Entity

(GRE) developers account for

34% of existing stock in the

serviced/hotel apartment

space, and this number is

expected to further reduce to

19% by 2021,

A Look into Supply Dynamics A Closer Look into the Address

A price analysis of

serviced/hotel apartments

reveals that they trade at a

significant premium

compared to the standard

residential units

A price analysis of standard units to serviced apartments

reveals that the latter trades at a premium of 40-90% across

various communities in the ready space (Palm Jumeirah,

Downtown and Dubai Marina).

Whereas in the off-plan space we can witness that developers

have already factored some portion of the premium in the

launch prices. The serviced/hotel apartments in Creek Harbor

and The Hills trade at premium in the range of 50-60% to their

standard counterparts.

A price analysis of the Address hotels in downtown against the

community index reveals that the former has outperformed. For

example the Address Lake Hotel has appreciated by 136%, whereas in

the in same time period the index has risen only 38%. Similarly in the

case of Address Blvd investors have experience capital gains of 80%,

whereas the index has risen only 10%.

Within the Address portfolio, we can witness that on average there is a

30% discount for the off-plan projects compared to ready, implying that

as the projects come closer to completion we can expect a uptick in

pricing.

An analysis of Downtown serviced/hotel apartments reveals that

ready units trade at a premium compared to their off-plan

counterparts, where as in Business Bay the reverse has transpired. This

indicates that in Business Bay, the quality of serviced apartments is

generally increasing with better brand names now coming in.

In Palm Jumeirah we can witness that the ready serviced apartments

trade at a discount by an average of 20%. We opine reason for the

premium in off-plan units are the rental guarantees and extended

payment plans offered by developers, and that these guarantees have

for the most part been baked into the launch prices of the projects.

Over the next 5 years it is expected that the serviced

apartment/hotel stock is to double. The expected surge in the

serviced apartment space reflects the optimism regarding

tourism numbers, and is in line with the increase in hotels

throughout the city as well.

Government Related Entity (GRE) developers account for 34%

of existing stock in the serviced/hotel apartment space, and

this number is expected to further reduce to 19% by 2021.

GCP believes in in-depth planning and discipline as a

mechanism to identify and exploit market discrepancy

and capitalize on diversified revenue streams.

Our purpose is to manage, direct, and create wealth for

our clients.

GCP is the author for these research reports

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