Q4 2014

Abu Dhabi Real Estate Market Overview

Abu Dhabi Market Summary Q4 2014 saw mixed performance across Abu Dhabi’s real estate markets. There was a short-term softening of the residential market. After two years of 25% annual growth, prime residential sales prices remained stable for the first time since Q1 2013 – due to the recent decline in oil prices, equities markets and investor sentiment. Residential rental growth continued (4% growth during Q4 2014), but is expected to reduce from double-digit to single-digit annual growth this year due to the expected slowdown in government spending. The Office market continues to recover, albeit slowly. Following the decline and subsequent stabilisation of rents since the market downturn, prime office rents achieved 5% quarterly growth for the second successive quarter as the supply-demand balance stabilises. The Hospitality and Retail market remained relatively stable during Q4. Hotel occupancies improving but ADRs remained under pressure. The retail market has seen significant new supply in Q4 (Yas Mall) and is now likely to remain stable pending the delivery of further super-regional malls in the medium term (2017/2018).

Abu Dhabi Prime Rental Clock Q4 2013

Q4 2014 Residential

Rental Growth Slowing

Rental Growth Accelerating

Rents Falling

Rents Bottoming Out

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Bottoming Out

Residential Office Retail Office

Hotel*

Hotel* Retail

* Hotel clock reflects the movement of RevPAR Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and economic conditions. Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods. Source: JLL

Abu Dhabi Office Market Overview Market Summary

Hot Topic

Total office stock reached approximately 3.1 million sq m GLA at the end of 2014, with the only delivery being Arjaan Rotana Capital Center adding 11,000 sq m during Q4.

Abu Dhabi Global Market (ADGM), Abu Dhabi’s new financial free zone has issued a set of consultation documents on the laws and regulations that will apply to businesses operating within the free zone.

Average Grade A office rents increased by 5% in Q4 2014 for the second successive quarter, reaching approximately AED 1,730 per sq m, whereas average Grade B office rents have remained stable for the last 5 quarters at AED 1,180 per sq m. With limited completions during Q4, the vacancy rate remained stable at 25% and is expected to remain at this level over the next 12 months given a general slowdown in supply and the significant proportion of near-term completions that is owner occupied or pre-committed.

Under these proposed regulations, the new free zone will be governed by English law. There are also new provisions for company regulations, licensing of activities, insolvency, employment and property. ADGM’s proposed property regulations also include new provisions for mortgages, ownership, conveyancing, strata title and escrow accounts pending implementation of Abu Dhabi’s proposed new real estate laws.

Office Supply Current Supply (2011–2014)

2.5M

sq m (GLA)

2011

2.9M

sq m (GLA)

2012

3.0M

sq m (GLA)

2013

Future Supply (2015–2016)

3.1M

360K

sq m (GLA)

80K

sq m (GLA)

sq m (GLA)

2015

2016

2014

Office Performance Vacancy Rate

39%

Q4 2013

Average Rents (per sq m) / Annual Change

25%

Q4 2014

Grade A

AED Grade B

2014 / 2015 Outlook

1,540

1,730

12%

Q4 2013

Q4 2014

Y-o-Y

1,180

1,180

Q4 2013

Q4 2014

2014 / 2015 Outlook COPYRIGHT © JONES LANG LASALLE IP, INC. 2015

0% Y-o-Y

Abu Dhabi Residential Market Overview Market Summary

Hot Topic

Around 1,600 units were added to the residential stock during Q4 with the delivery of the Burj Mohammed Bin Rashid within the World Trade Centre (WTC), along with various mixed-use schemes within Khalifa City A and Capital House in Capital Centre.

The residential market has witnessed strong growth over the last two years, averaging 25% prime sales growth in 2013 and 2014, with prime rents increasing 17% in 2013 and 11% in 2014.

These deliveries bring the total residential stock to approximately 243,000 units at the end of 2014. Sale prices for residential units (apartments and villas) remained stable during Q4 at approximately AED16,000 per sq m, while rents for prime 2 bedroom apartments increased by 4% to reach approximately AED 156,000 p.a.

The residential market softened this quarter with the stabilisation of prime sales prices, due to the decline in oil price, equity markets and investor sentiment. Residential rents are expected to continue to grow during 2015 but at a lower rate, as the reduced rate of government spending depresses demand. Nonetheless, availability remains low across all price points, particularly within quality schemes. While demand continues to grow, future supply levels are reducing, presenting a need for more housing.

Residential Supply Current Supply (2011–2014)

Future Supply (2015–2016)

194K

206K

236K

243K

10K

2011

2012

2013

2014

2015

units

units

units

units

units

11K units

2016

Residential ResidentialPerformance Performance Abu Dhabi Residential Property Rent and Sale Growth

Apartment residential

Sales

Rentals

0%

4%

Villa residential

Q-o-Q (2BR) Sales

18%

Rentals

11%

Y-o-Y (2BR)

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015

Sales

Rentals

0%

3%

Q-o-Q (3BR) Sales

Rentals

25%

12%

Y-o-Y (3BR)

Abu Dhabi Retail Market Overview Market Summary

Hot Topic

Approximately 326,000 sq m of retail space entered the market in Q4 2014 with the delivery of Abu Dhabi’s largest mall to date Yas Mall (235,000sq m), together with Capital Mall (MBZ) and Al Reef retail. These completions bring the total retail stock to approximately 2.5 million sq m GLA. No major deliveries are expected in 2015 or 2016, however, a number of super regional malls are currently scheduled to enter the market from 2017/2018 including Sowwah Central, Saadiyat District, Reem Mall, Marina Mall extension and potentially others, which will substantially increase Abu Dhabi’s retail supply. Average line store rents within well-located malls have remained stable at AED 3,000 per sq m p.a. (Abu Dhabi Island) and AED 1,860 per sq m p.a. (off Island). Vacancies remain minimal within established regional and super regional malls.

Yas Mall opened its doors to the public in November 2014 and was well received by both residents and visitors. As it stands, a high proportion of shops have opened, with others scheduled to open over the next 12 months. The delivery of Yas Mall is expected to enhance the quality of retail space in Abu Dhabi. National Real Estate Company from Kuwait has announced the development of Reem Mall within the Najmat area of Reem Island. Construction is planned to commence in 2015, with the mall expected to open in 2018. Al Tayer Group has announced that the first Macy’s department store outside of the US will open at Sowwah Central in 2018 along with the second Bloomingdales store in the UAE.

Retail Supply Current Supply (2011–2014)

1.7M

sq m (GLA)

2011

1.8M

sq m (GLA)

2012

2.2M

sq m (GLA)

2013

Future Supply (2015–2016)

2.5M

128K

sq m (GLA)

95K

sq m (GLA)

sq m (GLA)

2015

2014

2016

Retail Performance Vacancy Rate

2%

Q4 2013

Average Retail Rents (per sq m) /Annual Change

2%

Q4 2014

AED

AD Island

Off AD Island

2014 / 2015 Outlook

2,900

3,000

3%

Q4 2013

Q4 2014

Y-o-Y

1,900

1,860

-2%

Q4 2013

Q4 2014

Y-o-Y

2014 / 2015 Outlook COPYRIGHT © JONES LANG LASALLE IP, INC. 2015

Abu Dhabi Hotel Market Overview Market Summary

Hot Topic

The last quarter of 2014 saw the opening of the luxury Zaya Nurai Island resort with its 55 rooms and the Courtyard by Marriott in World Trade Centre comprising 195 rooms. Additionally, the Danat hotel on the Corniche area was rebranded as a Holiday Inn with 257 rooms.

According to ADTCA, approximately 2.8 million guests visited the Emirate between January and October 2014, an increase of 20% above the same period in 2013.

Approximately 1,550 rooms were added to the Abu Dhabi hospitality market in 2014, representing an increase of 8% in overall hotel supply, with some projects being delayed to 2015. Additional hotels expected to open in 2015 include the Millennium Bab Al Qasr and the 430-room Grand Hyatt.

Occupancy levels have continued to increase in 2014 after strong growth throughout 2013. YT November occupancy increased by 6% compared to the same period in 2013 to 73%. While occupancy has increased, ADRs have been under pressure, declining 4.7%. With an additional 3,150 rooms due for completion in 2015, ADR and occupancy rates are expected to remain stable or decline marginally.

Hotel Supply Current Supply (2011–2014)

13,987 keys

2011

15,700 keys

18,150

2012

keys

2013

Future Supply (2015–2017)

19,700

3,150

2014

2015

keys

1,200

keys

keys

2016

950 keys

2017

Hotel Performance Occupancy Rate

67% YT Nov 2013

Average Daily Rate/Annual Change

73% YT Nov 2014

USD

2014 / 2015 Outlook

148

141

-5%

YT Nov 2013

YT Nov 2014

Y-o-Y

2014 / 2015 Outlook

Source : STR Global

Source : STR Global

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015

Definitions and methodology Interpretation of market positions: 6 o’clock indicates a turning point towards rental growth. At this position, we believe the market has reached its lowest point and the next movement in rents is likely to be upwards. 9 o’clock indicates the market has reached the rental growth peak, while rents may continue to increase over coming quarters the market is heading towards a period of rental stabilisation. 12 o’clock indicates a turning point towards a market consolidation / slowdown. At this position, the market has no further rental growth potential left in the current cycle, with the next move likely to be downwards. 3 o’ clock indicates the market has reached its point of fastest decline. While rents may continue to decline for some time, the rate of decrease is expected to slow as the market moves towards a period of rental stabilisation.

Completed residential 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 estimates from the JLL Agency team. It represents the average rate across all buildings in the supply sheet.

Retail space is considered handed over once it is open and operational. Classification of Retail Centers is based upon the ULI definition and based on their GLA: • Super Regional Malls have a GLA of above 90,000 sq m • Regional Malls have a GLA of 30,000 - 90,000 sq m • Community Malls have a GLA of 10,000 - 30,000 sq m • Neighborhood Malls have a GLA of 3,000 - 10,000 sq m • Convenience Malls have a GLA of less than 3,000 sq m 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.

Abu Dhabi Abu Dhabi Trade Centre Building 7th Floor, Office 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: David Dudley Regional Director / Head of Abu Dhabi Office [email protected]

Peter Stebbings Head of Valuation Advisory Abu Dhabi [email protected]

Chiheb Ben-Mahmoud Head of Hotels & Hospitality MEA [email protected]

Andrew Williamson Head of Retail MENA [email protected]

Craig Plumb Head of Research MENA [email protected]

Andreas Skiadopoulos Manager – Strategic Consulting Abu Dhabi [email protected]

Mai Hassan Financial Analyst - Strategic Consulting Abu Dhabi [email protected]

@JLLMENA

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Corinna Klaus Senior Agent, Agency Abu Dhabi [email protected]

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jll-mena.com COPYRIGHT © JONES LANG LASALLE IP, INC. 2015 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.