Q2 2014

Abu Dhabi Real Estate

Market Overview
Q2 2013
Rental
Growth
Slowing
Rents
Falling
Rental
Growth
Accelerating
Rents
Bottoming
Out
Office Retail
Residential
Hotel*
Q2 2014
Rental
Growth
Slowing
Rents
Falling
Rental
Growth
Accelerating
Rents
Bottoming
Out
Office Retail
Residential
Hotel*
* Hotel clock reflects the movement of RevPAR
Note: The property clock illustrates where JLL estimates each prime market is within its individual rental cycle as at end of the relevant quarter
Source: JLL
Abu Dhabi Market Summary
Abu Dhabi Prime Rental Clock
The second quarter of 2014 continued to witness growth in the prime residential market and little
change in the office, retail and hospitality sectors.The Abu Dhabi market continues to be dominat-
ed by government related investment with short-term demand being fuelled by investment and job
growth from new major government backed construction projects (such as the Airport expansion,
Etihad Rail, Saadiyat Island museums and other major infrastructure, economic and social development
initiatives). A sustainable recovery also requires the government to continue to implement supply
controls as many developers are now re-looking at schemes that had been placed on hold following
the market downturn. While new supply is needed particularly of quality residential product, supply
controls are required to ensure the right product is prioritised in locations with existing infrastructure.
Rentals
3%
Sales
5%
residential
Apartment
Rentals
15%
Sales
28%
Q-o-Q (2BR)
Y-o-Y (2BR)
Market Summary
Around 1,750 units were completed in Reem Island, Danet Abu
Dhabi and Al Reef during Q2, bringing the total stock to around
240,000 units. Sales prices for residential units (apartments and
villas) increased for a sixth successive quarter, with a 7% in-
crease in Q2 2014, bringing the average increase during the first
half of 2014 to 17%.
Hot Topic
The recent removal of the rent cap has had a major impact on
rents in secondary buildings in Abu Dhabi as landlords have
taken the opportunity to increase previously below market rents
to be in line with current market levels. Rents also continued to
increase for prime residential units, with the average rent for a 2
bedroom apartment increasing by 3% during Q2 to AED150,000.
Abu Dhabi Residential Market Overview
residential
Villa
Rentals
3%
Sales
5%
Rentals
6%
Sales
27%
Q-o-Q (3BR)
Y-o-Y (3BR)
Abu Dhabi Residential Property Rent and Sale Growth
units
7K
H2 2014
units
7K
2015
units
11K
2016
units
240K
Q2 2014
units
236K
2013
units
206K
2012
units
194K
2011
Future Supply (20142016) Current Supply (20112014)
Residential Supply
Residential Performance
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Abu Dhabi Offce Market Overview
sq m (GLA)
130K
H2 2014
sq m (GLA)
232K
2015
sq m (GLA)
80K
2016
sq m (GLA)
2.5M
2011
sq m (GLA)
2.9M
sq m (GLA)
3.0M
2012
sq m (GLA)
3.1M
Q2 2014 2013
Future Supply (20142016) Current Supply (20112014)
Office Supply
Office Performance
Market Summary
There were no major new deliveries in the office market this
quarter, with the total stock remaining stable at 3.1 million sq m.
With an additional 130,000 sq m expected to enter the market
during 2014, there will be continued downward pressure on rents
for secondary space. Rents have remained unchanged in Q2
2014 averaging AED1,540 / sq m for prime and AED1,180 / sq m
for secondary space. The vacancy rate is currently at 30% and
is expected to increase as further deliveries take place in the
next two years.
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38% 30%
Q2 2013 Q2 2014
2014 / 2015
Outlook
Vacancy Rate Average Rents (per sq m)
AED 1,540 AED 1,540
2014 / 2015
Outlook
Q2 2013 Q2 2014
AED 1,200 AED 1,180
Q2 2013 Q2 2014
Grade A
Grade B
Hot Topic
The leasing of Abu Dhabis prime project, Sowwah Square,
remains largely on hold as the government progresses its
plans for the new financial free-zone, Global Marketplace, on
Al Maryah Island. While there remains demand for small units of
space from the private sector, most of the larger requirements
are from government related entities, many of which are con-
structing their own projects and are therefore unlikely to gener-
ate large-scale demand for private office projects.
Market Summary
Retail deliveries in the Nation Towers Galleria on the Corniche
and Al Marasy retail component in Al Bateen, resulted in an
additional 20,000 sqm of retail GLA being completed in Q2,
bringing the total retail stock to approximately 2.2 million sq
m GLA. Average line store retail rents for malls on Abu Dhabi
Island and for malls outside Abu Dhabi remained stable this
quarter at AED3,000 / sq m per annum and AED1,820 / sq m per
annum respectively.
Abu Dhabi Retail Market Overview
sq m (GLA)
418K
H2 2014
sq m (GLA)
42K
2015
sq m (GLA)
95K
2016
sq m (GLA)
2.2M
Q2 2014
sq m (GLA)
2.2M
2013
sq m (GLA)
1.8M
2012
sq m (GLA)
1.7M
2011
Future Supply (20142016) Current Supply (20112014)
Retail Supply
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Retail Performance
2% 2%
Q2 2013 Q2 2014
2014 / 2015
Outlook
Vacancy Rate Average Retail Rents (per sq m)
AED 2,887 AED 3,000
2014 / 2015
Outlook
Q2 2013 Q2 2014
AED 1,900 AED 1,820
Q2 2013 Q2 2014
AD Island
Off AD Island
Hot Topic
Over 400,000 sq m of retail GLA is expected to enter the market
by the end of 2014, dominated by the delivery of Yas Mall on
Yas Island. The Yas Mall will significantly improve Abu Dhabis
retail offering and will reduce the amount of retail spending that is
currently lost to Dubai. Recent announcements of new Super
Regional malls such as Sowwah Central, Saadiyat Mall / The
District and Reem Mall together with the planned Marina Mall
extension, will increase Abu Dhabis retail supply significantly in
2017 / 2018.
USD 161 USD 147
YT May 2014 YT May 2013
Source : STR Global
2014 / 2015
Outlook
Market Summary
The Abu Dhabi hotel sector continues to witness new comple-
tions, with the opening of Ramada and Southern Sun hotels
in Q2 2014. Occupancies increased to 77% (YT May). While
ADRs remain under pressure (decreasing by 8% in YT May 2014
compared to the same period in 2013), the hotel market has
started to recover and is set to experience improved perfor-
mance over the rest of 2014.
Occupancy Rate Average Daily Rate
Abu Dhabi Hotel Market Overview
Hotel Performance
Future Supply (20142017) Current Supply (20112014)
Hotel Supply
keys
1500
2017
keys
550
2016
keys
1,250
2015
keys
1,050
H2 2014
keys
19,450
Q2 2014
keys
18,150
2013
keys
15,700
2012
keys
13,987
2011
70% 77%
YT May 2014 YT May 2013
Source : STR Global
2014 / 2015
Outlook
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Hot Topic
There remains significant demand for long term hotel apart-
ments, with this sector comprising a major component of the
demand in areas such as Yas Island. The market is respond-
ing to this demand with a number of additional hotel apartments
expected to enter the market over the next 12 months, with the
opening of Capital Centre Arjaan, Adagio Al Bustan and Danat
Residences.
Defnitions and methodology
Completed building refers to a building that is handed over for immediate occupation. This data excludes labour
accommodation.
Residential performance data is based on asking prices from a basket of selected developments.
Office buildings are considered handed over once they are ready for tenant fit-outs.
Total supply excludes government owned and wholly occupied buildings (such as Abu Dhabi Municipality).
Average Grade A Office rents represent the average effective rents taken from a basket of selected buildings
defined as superior in the current 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.
Vacancy rate is based on estimated from the JLL Agency team.
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, as at the survey date.
Vacancy rate is based on estimates from the JLL Retail team, and represents the average rate across standard
in line unit shops at super regional & regional malls on Abu Dhabi Island.
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 JLL Hotels. Room supply includes all graded supply and excludes serviced apartments.
Hotel performance data is based on a monthly survey conducted by STR Global on a sample of international
standard midscale upscale hotels.
COPYRIGHT JONES LANG LASALLE IP, INC. 2014
This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either
in whole or in part, without the prior written consent of JLL IP, Inc. The information contained in this publication has been obtained from sources generally
regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of
any inaccuracies so that we may correct them. JLL does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting
from reliance on this publication.
jll-mena.com
David Dudley
Head of
Abu Dhabi Offce
david.dudley@eu.jll.com
Peter Stebbings
Head of Valuation Advisory
Abu Dhabi
peter.stebbings@eu.jll.com
Andrew Williamson
Head of Retail
MENA
andrew.williamson@eu.jll.com
Chiheb Ben-Mahmoud
Head of Hotels & Hospitality
MEA
chiheb.ben-mahmoud@eu.jll.com
Corinna Klaus
Senior Agent, Agency
Abu Dhabi
corinna.klaus@eu.jll.com
@JLLMENA youtube.com/joneslanglasalle linkedin.com/companies/jll joneslanglasalleblog.com/EMEAResearch
Abu Dhabi
Abu Dhabi Trade Centre Building
7th Floor, Offce No. 3
PO Box 36788
Tourist Club Area
Abu Dhabi, UAE
Tel: +971 2 443 7772
Fax: +971 2 443 7762
For questions and inquires about the Abu Dhabi real estate market, please contact:
Mai Hassan
Financial Analyst
Abu Dhabi
mai.hassan@eu.jll.com
Craig Plumb
Head of Research
MENA
craig.plumb@eu.jll.com
Dana Salbak
Senior Research Analyst
MENA
dana.salbak@eu.jll.com