Q1 2015
Dubai Real Estate
Market Overview
Dubai Market Summary
The first quarter of the year continued to see subdued activity in Dubai’s real estate market. While
residential rents remained relatively flat, sale prices saw a marginal decline across both apartments and
villas. The retail market continues to be constrained by the slowdown in spending, restricting overall
growth levels, while the delivery of more Grade A office space has limited rental growth in the office
sector. The hospitality market saw RevPAR’s drop on an annual basis. While occupancy rates remain
strong at 86%, the increase in supply continues to outstrip demand, placing downward pressure on
average daily room rates.
Dubai Prime Rental Clock
Q1 2014
Residential
Hotel*
Rental
Growth
Slowing
Rents
Falling
Rental
Growth
Accelerating
Rents
Bottoming
Out
Retail
Office
Q1 2015
Retail
Rental
Growth
Slowing
Rental
Growth
Accelerating
Residential
Hotel*
Rents
Falling
Rents
Bottoming
Out
Office
* 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
Dubai Office Market Overview
Market Summary
Dubai’s office market remained relatively stable over the first
quarter, with average rents across the CBD registering AED
1,880 per sq m and vacancies recording 23%. Demand for
Grade A quality stock continues to be robust, particularly in the
DIFC and it’s surrounding precinct (e.g. Daman Tower), evident
by the rate of leasing activity. In turn, demand for Grade B office
space remains weak, exerting downward pressure on asking
rents. The first quarter saw the handover of Central Park in
DIFC, adding approximately 130,000 sq m of office space to the
market. This brings the total GLA to 7.7 million sq m as of Q1
2015.
Hot Topic
Future supply to constrain rents. The next couple of years are
expected to see more Grade A office space enter the market, as
the flight to quality remains the trend in Dubai’s office sector. In
addition to the handover of Central Park, an additional 900,000
sq m of office GLA is expected to enter the market over the next
9 months. In addition, the DIFC have announced a AED 200
million expansion plan which includes a commercial tower & new
retail space; Building 11 of Gate Village is expected to complete
in 2017. In 2018, ICD Brookfield are expected to deliver a USD 1
billion development, which includes a 50-storey office tower in
the DIFC. While this increases the number of Grade A offerings,
the excess supply is expected to exert downward pressure on
office rents, leaving the office market situated at the bottom of
the property cycle in the short-to-medium term.
Office Supply
Current Supply (2012–2015)
7.1M
sq m (GLA)
2012
7.4M
sq m (GLA)
7.6M
sq m (GLA)
2013
2014
Future Supply (2015–2017)
7.7M
sq m (GLA)
Q1 2015
900K
sq m (GLA)
9M 2015
332K
200K
sq m (GLA)
sq m (GLA)
2016
2017
Office Performance
CBD Vacancy Rate
Prime CBD Rents (per sq m) / Annual Change
26%
23%
Q1 2014
Q1 2015
AED
1,860 1,880
1%
Q1 2014
Y-o-Y
Q1 2015
2015 / 2016
Outlook
2015 / 2016
Outlook
COPYRIGHT © JONES LANG LASALLE IP, INC. 2015
Dubai Residential Market Overview
Market Summary
Q1 saw the delivery of approximately 730 residential units
across Dubai. An additional 22,000 are expected to enter the
market by the end of 2015, however we remain cautious of the
delivery of some projects within the specified timeframe. While
Dubai’s rental market has maintained its overall stability during
the first quarter, the REIDIN sales index depicts a marginal
decline in prices across both apartments & villas. This comes as
the REIDIN rental index shows growth levels dropping to 8% Yo-Y in February 2015 (from 23% Y-o-Y in Q1 2014). Similarly,
the REIDIN sale price index shows a decline in growth levels
from 30% to 6% over the same period. This downward trend is
expected to continue throughout 2015, as we foresee prices
dropping up to 10% by year end.
Hot Topic
Increased focus on affordable housing. As Dubai’s residential
market moves towards a period of correction, the next driving
force is predicted to be end-users or middle-income earners, as
opposed to speculative buyers. The first quarter of the year saw
developer and government initiatives target the affordable
housing sector. On the development side, Nshama launched 2
phases of it’s Town Square project, Zahra & Hayat, consisting of
townhouses & apartments below AED 600 per sq ft, located
close to the Arabian Ranches. The Dubai Municipality has
proposed to introduce mandatory affordable housing quotas for
all new residential developments. In addition, it allocated over
100 hectares of land for affordable housing across various
locations in Dubai, targeting buyers and tenants with monthly
salaries of AED 3,000 – AED 10,000.
Residential Supply
Current Supply (2012–2015)
356K
units
2012
366K
units
2013
Future Supply (2015–2017)
377K
379K
units
units
2014
Q1 2015
22K
units
9M 2015
13K
10K
units
units
2016
2017
Residential
Residential Performance
Performance
Dubai Residential Property Rent and Sale Indices
Apartment
residential
Sales
Rentals
-2%
0%
Villa
residential
Rentals
7%
Source : REIDIN
9%
Y-o-Y
-1%
Rentals
0%
Q-o-Q
Q-o-Q
Sales
Sales
Source : REIDIN
COPYRIGHT © JONES LANG LASALLE IP, INC. 2015
Sales
Rentals
6%
2%
Y-o-Y
Dubai Retail Market Overview
Market Summary
The first quarter saw Dubai’s retail market remain largely stable.
Despite recording strong annual growth levels, average retail
rents registered no quarterly increases. Similarly, vacancy levels
remained at 8% as no major deliveries took place, except for the
handover of ‘Box Park’ by Meraas. The subdued nature of the
retail market comes as the industry copes with a drop in the
number of visitors from Russia, while the weak euro threatens
visitors from the Eurozone. Performance of the retail market is
expected to remain stagnant throughout 2015, following
estimates of a slowdown in retail sales growth figures. The latter
is likely to put pressure on retailers and squeeze out some of the
small & mid sized tenants as they become burdened with
achieving targets to meet high rents.
Hot Topic
Importance of Shopping Festival. According to statistics
issued by Visa, the total Visa card spend in the first 2 weeks of
Dubai’s Shopping Festival (DSF) 2015 increased 12% Y-o-Y to
reach USD 54 million. In terms of spending growth patterns,
restaurants witnessed the largest annual increase; 31%
compared to 2014 figures. Predictably, visitors from Saudi
Arabia emerged as the top spenders, contributing USD 35
million to the UAE’s economy, and representing a 29% Y-o-Y
increase. Given the general stability in the sector, these figures
portray the significant impact the event has on Dubai’s retail
market.
Retail Supply
Current Supply (2012–2015)
2.8M
sq m (GLA)
2012
2.9M
sq m (GLA)
2.9M
Future Supply (2015–2017)
2.9M
sq m (GLA)
sq m (GLA)
2014
Q1 2015
2013
194K
sq m (GLA)
9M 2015
373K
sq m (GLA)
219K
sq m (GLA)
2016
2017
Retail Performance
Vacancy Rate
Average Retail Rents (per sq m) / Annual Change
10%
8%
Q1 2014
Q1 2015
Primary
AED
Secondary
2015 / 2016
Outlook
4,230
4,890
16%
Q1 2014
Q1 2015
Y-o-Y
1,885
2,180
16%
Q1 2014
Q1 2015
Y-o-Y
2015 / 2016
Outlook
COPYRIGHT © JONES LANG LASALLE IP, INC. 2015
Dubai Hotel Market Overview
Market Summary
The hotel sector continued to face downward pressure in the first
quarter of the year. While occupancy rates only dipped marginally
(2% Y-o-Y), ADR’s saw a 5% decrease to reach USD 273 in the
YT February. This negatively impacted RevPar’s, which saw a 7%
decline to USD 235 over the same period. While occupancy
levels remain healthy and above the MENA average, downside
risk remains that ADR’s will soften further in response to the
additional 3,600 keys scheduled for delivery over the next 9
months.
Hot Topic
Demand increasing at a slower rate. Dubai’s hotel market
welcomed 11.6 million guests in 2014, according to figures
released by the Dubai Tourism & Commerce Marketing. While
this represents a 6% Y-o-Y increase, the rate of growth has
declined from the 11% registered in 2013. The slowdown can be
attributed to a decline in the number of tourists from Russia and
the Eurozone. By contrast, tourist numbers from emerging
markets have increased significantly. Guests from South Asia,
Far East Asia and Africa increased 14%, 13% and 11%
respectively. This comes on the back of rising wealth and
changing consumer habits in emerging markets, in addition to
increased efforts to diversify Dubai’s inbound markets.
Hotel Supply
Current Supply (2012–2015)
57,000
keys
2012
60,200 64,400
keys
keys
2013
2014
Future Supply (2015–2018)
64,900
keys
Q1 2015
3,600
keys
9M 2015
8,400
9,200
6,800
2016
2017
2018
keys
keys
keys
Hotel Performance
Average Daily Rate / Annual Change
Occupancy Rate
88%
86%
YT Feb
2014
YT Feb
2015
USD
273
-5%
YT Feb
2014
YT Feb
2015
Y-o-Y
2015/2016
Outlook
2015/2016
Outlook
Source : STR Global
286
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.
The supply and stock data is based on our quarterly survey of 53 sub markets, starting from 2009. This data
excludes labour accommodation and local Emirati housing supply.
Completed buildings refer to those handed over for immediate occupation. Future supply is based on projects under
construction.
Residential performance data is based on the REIDIN monthly index. REIDIN Dubai Residential Property Price Indices
(RPPIs) use monthly sample of offered/asked listing price data and land registry price data (trans- action 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 32 sub-markets, starting from 2009.
Completed buildings refer to those handed over for immediate occupation. Future supply is based on projects under
construction.
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. It represents the average rate across a basket of buildings
in the CBD that make up around 80% of the CBD supply and 15% of the total current supply.
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
The supply data is based on our quarterly survey of 45 sub-markets, starting from 2009. Future supply is based on projects
under construction.
Malls are categorized based on their turnover levels. Primary Malls are the good performing malls with high levels of
turnover. Secondary Malls are the average performing malls with lower levels of turnover.
Average rents represent the top open market net rent expected for a standard in line unit shop of 100 sq m in a basket of
regional and super regional centers.
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 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 a 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
dana.williamson@eu.jll.com
Andrew Williamson
Head of Retail
MENA
andrew.williamson@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
@JLLMENA
youtube.com/joneslanglasalle
Chiheb Ben-Mahmoud
Head of Hotels & Hospitality
MEA
chiheb.ben-mahmoud@eu.jll.com
linkedin.com/companies/jll
joneslanglasalleblog.com/EMEAResearch
jll-mena.com
COPYRIGHT © JONES LANG LASALLE IP, INC. 2015
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