Professional Documents
Culture Documents
Q3 2013
Drake & Scull has been awarded a AED 415 million contract for the mechanical, electrical and plumbing (MEP) work for the Louvre museum.
TDIC has also announced the sale of a 91,000 sqm land plot on Saadiyat Island to Bin Otaiba Investment Group for the development of a five-star luxury resort. The project comprises 366 hotel rooms and beach villas, scheduled for completion in late 2015.
Abu Dhabi is seeking to attract more telecommunication companies through an agreement with the Telecommunication Regulatory Authority to streamline the procedure for gaining commercial licences.
The new financial freezone at Al Maryah Island known as Abu Dhabi Global Marketplace has continued to develop its legal framework to provide an enhanced regulatory regime, comparable with other major global financial hubs.
Abu Dhabi has become the worlds first city to house two St. Regis hotels, with the opening of its new property at Nation Towers on the Corniche in Q3.
Q3 2013
Rents Falling
Rents Falling
Retail
Residential
Office
Hotel *
*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
Office supply
Abu Dhabis office stock remained unchanged with no major deliveries in Q3 2013. However, an additional 143,000 sqm of office GLA is expected to enter the market by the end of 2013. Several major projects are scheduled to be handed over before the year end, including Capital Tower at Capital Centre, the Landmark Tower on the Corniche and others potentially. However, it is possible that some of these projects will experience further delays due to a combination of construction overruns, contractual issues and delays in obtaining final development approvals.
As much as 967,000 sqm of office GLA could enter the market by the end of 2015, increasing the total office stock to approximately 3.9 million sqm. This new supply is primarily within masterplanned areas but also includes major corporate HQs such as ADNOC.
Leasing of the office buildings on Al Maryah Island within Sowwah Square are currently on hold while the freezone legislation is finalised.
510 143
2,877
2,953
3,096
3,606
2012
2013
2014
2015
ADIB HQ
Landmark Tower
Awaiting handover
Office demand
Government-backed entities remain the principal source of demand. Many government organisations have committed to purpose built headquarters, with other major HQ buildings in the pipeline for banks and government-backed corporates such as ADIB HQ and ADNOC, whereas others have leased space in private developments such as Finance House at Capital Centre and Nation Towers on the Corniche.
There remains limited demand from the private sector, with most requirements for relatively small areas of between 300 sqm and 400 sqm. The lack of fitted out options in this size range is proving a real inhibitor to transactions. While there is limited demand from new entrants, many companies already located in Abu Dhabi are now moving to newer buildings. This flight to quality will place further pressure on secondary office buildings that will struggle with the oversupply of new office buildings and will consequently face declining rentals. Approximately 64% of current occupied office space is occupied by local companies, mostly financial firms and government related entities.
64%
30%
International
Regional
Local
6%
Tenants are clearly in a strong negotiating position, which is likely to strengthen even further as supply increases over the remainder of 2013. This dynamic is expected to drive secondary rents down even further, while Grade A rents appear to have stabilised.
4,000 Average Rents (AED/sqm) 3,500 3,000 2,500 2,000 1,500 1,000
3,800
3,190 3,000
2,800 2,800 2,500 2,200 2,200 2,000 1,900 1,850 1,750 1,700 1,700 1,600 1,540 1,540 1,540 1,540 1,540
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013
* Average Grade A Effective rents Source: Jones Lang LaSalle, Q3 2013
Level
2.95 million sqm
Comment / Outlook
The majority of existing office space is Grade B and Grade C.
The proportion of Grade A office space is increasing significantly as new stock is delivered to the market. Vacancy rate remained unchanged this quarter but is expected to rise further as new supply is added over the next 12 months.
967,000 sqm
38%
Grade A rents have remained stable for the last five quarters and are expected to remain stable.
Grade B rents remained stable this quarter but are expected to decrease further.
10
Residential supply
Approximately 2,700 residential units were delivered in Abu Dhabi during Q3. The majority of these units were within Rawdhat and Danet on Airport Road, Al Reef Downtown, Mangrove Place on Reem Island, Al Falah and the Khor Al Raha apartments at Al Raha Beach. These deliveries bring the total residential stock to approximately 213,000 units.
An additional 4,000 units are scheduled to be delivered to the market by the end of 2013. These include additional apartments in Rawdhat and Danet on Airport Road, Al Bustan Complex on 29th Street, the Landmark Tower on Corniche, the Gate Towers on Reem Island and Al Reef Downtown in Al Reef. As with other projects, the completion of many of these schemes may be delayed.
There are also a number of units scheduled for handover by the end of 2013 within National Housing communities including Al Falah and Watani developments.
Although a large proportion of the residential pipeline announced prior to 2008 has since been delayed, the aggregate supply could still reach 254,000 units by the end of 2015. The majority of this additional supply is located within masterplanned areas such as Reem Island, Saadiyat Island, Danet, Saraya and Rawdhat.
23
206
213
217
240
Apartment 67%
42%
2013
2014
2015
Note: Including Units scheduled for completion in Q4 2013 Source: Jones Lang LaSalle, 2013
12
Landmark Tower
Al Bustan Complex
13
Q1 2011
Q3 2011
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q2 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
*Asking prices Source: Jones Lang LaSalle, Q3 2013 Note: Sales prices pertain to Investment Areas only.
Q3 2013
14
188
150
145
140
140
135
135
126
121
120
120
130
130
130
Q3 2010
Q4 2012
Q1 2013
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q2 2013
Q3 2013
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Level
213,000 units
Comment / Outlook
Good quality residential stock is set to increase further with the delivery of the Landmark Tower and additional units within Saadiyat Beach Residences. Concentrated within master developments such as Rawdhat, Danet, Reem Island and Saadiyat Island in addition to sizeable National housing developments. Rents for prime apartments remained stable this quarter, while rents for poorer quality properties continued to fall. Sale prices for 2 bedroom apartments continued to increase in selective projects, particularly in investment areas, albeit not market wide. Rents for 3 bed villas remained stable this quarter and are expected to remain relatively stable in most locations
41,000 units
16
Retail supply
As of Q3 2013, total retail space across the Abu Dhabi metropolitan area stands at approximately 1.89 million sqm.
Retail stock increased by around 112,000 sqm in Q3 2013 with the delivery of The Galleria at Sowwah Square on Al Maryah Island, The Collection at the St.Regis on Saadiyat Island and Deerfields Townsquare in Bahia. Further deliveries are scheduled for Q4 2013 with approximately 143,000 sqm of retail GLA expected to enter the market by the end of 2013. This includes World Trade Centre Mall which opened on October 23rd at Central Market and Capital Mall in Building Materials City.
In addition to these new malls, a number of retail centres within mixed-use developments are expected to enter the market by the end of 2013. These include units within Al Reef Community and the Eastern Mangroves Promenade.
By the end of 2015, total retail space across Abu Dhabi is expected to reach around 2.6 million sqm of GLA with the delivery of major malls such as Yas Mall, Saadiyat Mall, Sowwah Central and Reem Mall.
2012
Source: Jones Lang LaSalle, Q3 2013
2013
2014
2015
18
Capital Mall
Nation Towers
19
Retail performance
A continuous growth in retail spending (derived from both the While there are a number of large malls in the supply pipeline, the resident population and higher tourist levels), is supporting demand majority are expected to materialise between 2017 and 2018. This for additional retail space in Abu Dhabi. additional supply could however cause rents to soften in the short to medium term as developers compete to secure the best retailers. Average rents in retail centres on Abu Dhabi Island have remained stable this quarter at AED 2,887 / sqm per annum, average rents of retail centres outside Abu Dhabi Island have also remained unchanged at AED 1,900 / sqm per annum this quarter. Vacancies remain minimal within established centres on Abu Dhabi Island, such as Marina Mall and Abu Dhabi Mall. Vacancies are much higher in newly completed centres, with some opening with significant levels of vacant space.
3,000
60,000 to 180,000
*Average retail rents for line shops in regional and super regional malls on Abu Dhabi Island Source: Jones Lang LaSalle, Q3 2013
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013
20
500 - 1,500
2,500
Level
1.89 million sqm
Comment / Outlook
The proportion of high quality retail is increasing as a percentage of total GLA.
There is a significant number of retail projects expected to open by the end of 2015, although some delays are expected. Malls on Abu Dhabi Island have very high occupancy rates which are expected to decrease in line with new supply. Rents are expected to remain stable in the short term but decrease due to increased competition from new high quality malls in 2015.
678,000 sqm
2%
Average rents have remained stable this quarter outside of Abu Dhabi Island and are expected to stabilise at current levels.
21
Hotel supply
The third quarter of 2013 witnessed the opening of St. Regis Abu Dhabi on the Corniche, providing almost 300 additional rooms. This adds to the extensive new supply seen in recent years, with more than 1,700 rooms added in the first three quarters of 2013.
Number of Rooms
3,300 1,850
The third quarter also saw the opening of the Eastern Mangroves Suites, which added 88 hotel apartments. Two major projects, the Novotel and the Premier Inn Abu Dhabi Airport, are still expected to open by the end of 2013. Despite delays and cancellations of projects, around 5,700 additional rooms are scheduled to enter the Abu Dhabi market by the end of 2015. The recent oversupply situation has resulted in limited recent announcements of new hotel projects. Overall supply is expected to reach about 23,100 rooms by the end of 2015, representing a CAGR of 15% from 2013 levels
600
17,350
17,950
19,800
2015F
23
24
Trading performance
Abu Dhabi hotels recorded a 16% increase in revenue and a 10% increase in guest arrivals between January and June 2013, compared to the same period of 2012. However, the benefit of increased visitor arrivals has again been offset by significant increases in supply.
The hotel market now appears to be stabilising, with occupancy levels increasing 6 percentage points to 64% in the year to August 2013. Average daily rates have continued to remain under pressure, declining by 2% as hotels have relied on significant discounting to push up occupancy levels.
750
ADR (AED)
58%
64%
60%
500
40%
250
20%
Due to the positive growth in occupancies, RevPAR levels in the year to August 2013 have experienced an increase of 9% compared to the same period in 2012. While tourism in Abu Dhabi continues to be driven by the corporate and MICE (Meetings, Incentives, Conferencing, Exhibitions) segments, efforts are being made to diversify tourism demand by focusing on the leisure segment. Developments include multiple museums and leisure entertainment venues on Saadiyat Island and Yas Island together with the expansion of the airport.
25
17,350 keys
5,750 keys
Remaining quality hotel openings expected in 2013 include the Novotel & Premier Inn Abu Dhabi Airport. Supply pipeline has experienced a reduction, with multiple project delays.
64%
Occupancy levels have witnessed a notable increase during YTD 2013 period, owing to a much improved performance in the months of FebruaryAugust, with only a slight dip in July during Ramadan.
ADR levels continued to contract, declining by 2% in YT August 2013 compared to the same period in 2012. The negative growth in ADR was offset by the substantial increase in occupancy, resulting in a year-overyear RevPAR increase of 9%.
AED 520
26
Office:
Office buildings are considered handed over once they are ready for tenant fit-outs.
Retail:
Retail space is considered handed over once it is open and operational. Classification of Retail Centres is based upon the ULI definition as published in Retail Development, 4th Edition published by ULI. Prime Rent Shopping Centre represents the top open market net rent that could be expected for a notional standard line unit shop situated in a specified shopping centre - preferred in a inner city location -, as at the survey date (normally at the end of each quarter period).
Average Grade A Office rents represent the average effective rents taken from a basket of selected buildings defined as superior in the current market. The Average Rent reflects values captured in occupational leases that is standard for the local market. It is an effective rent that accounts for rent free periods only (and not the financial impact of any other tenant incentive/s) and excludes service charges and local taxes.
Hotels:
Hotels are considered handed over once they are open and operational. Hotel room supply is based on existing supply figures provided by ADTCA as well as future hotel development data tracked by Jones Lang LaSalle Hotels. Room supply includes all graded supply and excludes serviced apartments.
Hotel performance data is based on monthly survey conducted by STR Global on a sample of international standard midscale upscale hotels.
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Contacts:
David Dudley Head of Abu Dhabi Office david.dudley@jll.com Barry McGettigan Senior Agent, Agency Abu Dhabi barry.mcgettigan@jll.com Peter Stebbings Head of Valuation Advisory Abu Dhabi peter.stebbings@jll.com Craig Plumb Head of Research MENA craig.plumb@jll.com Chiheb Ben-Mahmoud Head of Hotels & Hospitality MENA chiheb.ben-mahmoud@jll.com Dunia Joulani Senior Analyst Abu Dhabi dunia.joulani@jll.com Andrew Williamson Head of Retail MENA andrew.williamson@jll.com Mai Hassan Research Assistant Abu Dhabi mai.hassan@jll.com
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