Q2 2014

Dubai Real Estate Market Overview

Dubai Market Summary The Dubai real estate market maintained its positive performance in Q2 2014. Although the residential sector saw prices and rents increase across most areas, there are signs that the rate of growth is slowing down with Q2 seeing a marked slowdown in the volume of residential sales, particularly in respect of existing villas. While the retail and hotel sectors continue to experience growth, recovery in the office sector remains patchy, constrained by the large level of supply and high vacancy rates, that are placing pressure on overall rental values.

Dubai Prime Rental Clock Q2 2013

Residential Hotel*

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Bottoming Out

Retail

Office Q2 2014

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Bottoming Out

Residential Hotel* Retail

Office * 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

Dubai Residential Market Overview Market Summary

Hot Topic

Although the residential sector saw prices and rents increase across most areas, the rate of growth has started to slow from that seen earlier in the year. Average sale prices grew by 6% in Q2, down from 10% in the previous quarter. With signs of reduced sales activity (particularly in the secondary villa market), it is likely that asking prices in this sector will decline further in coming months. Sales volumes have declined in all sectors recently, with data from the Dubai Land Department showing villa sales in May 2014 down by almost 50% on the same month in 2013.

With the residential sector witnessing continued demand from investors, the market has witnessed a number of new project launches and announcements. Contracts have been awarded for around USD5.4 billion of residential projects over the first half of 2014, while other new projects remain at the announcement or launch stage with no construction work yet occurring. A common theme across many of these projects is an emphasis on sustainability and energy saving features, in line with the recent decision of the Dubai Government to extend its green building codes and regulations to all new real estate projects.

Residential Supply

Current Supply (2011–2014)

Future Supply (2014–2016)

342K

355K

365K

372K

15K

17K

8K

2011

2012

2013

Q2 2014

H2 2014

2015

2016

units

units

units

units

units

units

units

Residential Performance Dubai Residential Property Rent and Sale Indices

Apartment residential

Sales

Rentals

7%

4%

Villa residential

Q-o-Q Sales

Source : REIDIN

Sales

23%

27%

Y-o-Y

4%

Rentals

1%

Q-o-Q Rentals

40%

Sales

Source : REIDIN

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

Y-o-Y

Rentals

11%

Dubai Office Market Overview Market Summary

Hot Topic

While continued economic growth has improved sentiment and generated demand for commercial space, the high level of both current vacancy and future supply continue to constrain the market. The Dubai office market operates as a number of quite different submarkets, based upon location, tenure (strata or single ownership), licence structure (freezone / onshore) and quality. While overall market vacancies remain high (25%), there are pockets of shortage that have resulted in major occupiers seeking to have new space built for their requirements rather than occupy sub optimal space in existing buildings.

With vacancy rates falling in preferred locations / buildings, there is likely to be upward pressure on rental levels in selected locations over the second half of 2014. An indicator of this trend is the decision by TECOM to revise its rentals for both existing and new tenants to reflect continued demand and the low vacancies within TECOM owned premises in Internet City / Media City. TECOM have replaced their previous rental matrix with a standard rate of AED155 per sq ft, plus service charges of AED30 per sq ft, with these rates now applying to leases of all sizes.

Office Supply

Current Supply (2011–2014)

6.3M

6.9M

7.3M

Future Supply (2014–2016)

7.4M

0.5M

0.7M

0.3M

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

2011

2012

2013

Q2 2014

H2 2014

2015

2016

Office Performance Prime CBD Rents (per sq m)

Vacancy Rate

31%

Q2 2013

25%

Q2 2014

AED 1,720 Q2 2013

AED 1,860

2014 / 2015 Outlook

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

Q2 2014

Dubai Retail Market Overview Market Summary

Hot Topic

With limited additions to stock and continued interest from retailers, rents in the best performing super regional malls have increased by as much as 12% over Q2. Increases have been more modest in smaller centres and secondary malls but the retail sector has benefitted from higher spending from both tourists and local residents.

Confidence in the retail market is reflected in the announcement of the Mall of the World, a planned new mall around twice the size of the Dubai Mall, on Sheik Zayed Road immediately opposite the existing Mall of the Emirates. This announcement recognises the importance of tourism spending on the Dubai retail market, with plans for up to 100 new hotels to be linked to the new mall within a massive air conditioned dome.

Retail Supply

Future Supply (2014–2016)

Current Supply (2011–2014)

2.7M

2.8M

2.9M

2.9M

31K

214K

251K

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

sq m (GLA)

2011

2012

2013

Q2 2014

H2 2014

2015

2016

Retail Performance Average Retail Rents (per sq m)

Vacancy Rate

13%

Q2 2013

8%

Q2 2014

Primary

AED 5,000

AED 7,700

Secondary

AED 1,725

AED 2,360

2014 / 2015 Outlook

Q2 2013

Q2 2013

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

Q2 2014

Q2 2014

Dubai Hotel Market Overview Market Summary

Hot Topic

Despite the completion of around 1,500 additional rooms in Q2, the Dubai hotel market continues to grow, recording the highest RevPAR levels since 2008. Average occupancies remained relatively stable at around 85% during the year to May 2014, with room rates increasing by 3% to USD276 making Dubai one of the stongest performing hotel markets globally.

The major news within the hotel market has been the proposal to develop additional hotel supply in the vicinity of the proposed Mall of the World in the Umm Sequeim area. This area already has an existing cluster of beachside hotels operated by the Jumeirah Group, with the new plan envisaging a major expansion of this cluster rather than the development of a new cluster of hotels (Bawadi) within the Dubailand area as previously envisaged.

Hotel Supply

Current Supply (2011–2014)

Future Supply (2014–2017)

53,400 57,000 60,150 62,600

1,800

2,400

8,000

4,900

H2 2014

2015

2016

2017

keys

keys

keys

keys

2011

2012

2013

Q2 2014

keys

keys

keys

keys

Hotel Performance

Average Daily Rate

Occupancy Rate

85%

YT May 2013

85%

YT May 2014

USD 267 YT May 2013

USD 276 YT May 2014

2014 / 2015 Outlook

2014 / 2015 Outlook

Source : STR Global

Source : STR Global

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

Definitions and methodology The supply and stock data is based on our quarterly survey of 37 sub markets, starting from 2009. This data excludes labour accommodation and local Emirati housing supply. Completed building refers to a building that is handed over for immediate occupation. Residential performance data is based on the REIDIN monthly index. REIDIN.com Dubai Residential Property Price Indices (RPPIs) use monthly sample of offered/asked listing price data and land registry price data (transaction data). Index series are set at 100 starting at the beginning of each data set.

The supply data is based on our quarterly survey of 20 sub-markets, starting from 2009. Completed building refers to a building that is handed over for immediate occupation. Central Business District includes DIFC, DTCD, Sheikh Zayed Road, Burj Khalifa Downtown. Prime Office Rent represents the top open-market net rent (exclusive of service charge) for a new lease that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date. Data relates to headline rents, exclusive of incentives. Vacancy rate is based on estimates from the JLL Agency team.

Classification of Retail Centres 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 • Neighbourhood Malls have a GLA of 3,000 - 10,000 sq m • Convenience Malls have a GLA of less than 3,000 sq m Primary Malls are the good performing malls with high levels of turnover. Secondary Malls are the average performing malls with lower levels of turnover. Prime Rent Shopping Centre represents the top open market net rent that could be expected for a notional standard in line unit shop of 100 sq m 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 regional malls.

Hotel room supply is based on existing supply figures provided by DTCM as well as future hotel development data tracked by JLL Hotels. Room supply includes all graded supply and excludes serviced apartments. STR performance data is based on monthly survey conducted by STR Global on a sample of more than 32,000 rooms across Dubai.

Dubai Emaar Square Building 1, Office 403 Sheikh Zayed Road PO Box 214029 Dubai, UAE Tel: +971 4 426 6999 Fax: +971 4 365 3260

For questions and inquires about the Dubai real estate market, please contact: Dana Williamson Head of Agency MENA [email protected]

Andrew Williamson Head of Retail MENA [email protected]

Craig Plumb Head of Research MENA [email protected]

Dana Salbak Senior Research Analyst MENA [email protected]

@JLLMENA

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

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jll-mena.com 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.