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QUARTERREVIEW2017

Dubai Real Estate Market

rd

1 | Dubai Real Estate Market 3rd Quarter 2017 Review

2017Q3Real Estate Performance

Residential Office

*Residential & commercial trans.Source: DLD, ValuStrat

-11%Q-o-Q

*Residential & commercial trans.Source: DLD, ValuStrat

-8%Q-o-Q

Source: REIDIN, ValuStrat

-3.0%Q-o-Q


-3.5%Q-o-Q

.Source: REIDIN, ValuStrat

-4.3%Q-o-Q


7.6%Q-o-Q

Source: DTCM, ValuStrat

-4%Jan-Aug Y-o-Y

Source: DTCM, ValuStrat

0%Jan-Aug Y-o-Y

3.0%

Key Indicators

-1.2%

TransactionVolumes*

Average TransactedTicket Size*

ApartmentAsking Rents

VillaAsking Rents

OfficeAsking Rents

Office TransactedPrices

Hotel ADR Hotel Occupancy

Q3 Y-o-Y

Source: ValuStrat

Q3 Y-o-Y

Source: ValuStrat

Market Intelligence.Simplified.VPI

ValuStrat Price Index

http://valustrat.com/vpi

www.valustrat.com | 2

ResidentialThe third quarter 2017 VPI - Residential displayed an overall 1.2% annual declinein capital values, equivalent to 14.6%below 2014 peaks. However, sales price appreciation was seen in established prime locations such as Downtown Dubai, Palm Jumeirah (villas) and Emirates Hills, as values increased by between 0.6% - 1.2% quarterly and 1.8% - 8.1% annually.An exponential rise in sales of off-plan projects due for completion pre-Expo2020, some in established locations, may now delay an expected near-term overall market recovery. Previously high yielding areas such as International City, Dubai Production City (IMPZ) and Motor City saw declining rents contribute towards quarterly capital declines of up to 2.8%.

ValuStrat Price Index16 Apartment and 10 Villa Locationsin Dubai[Base: Jan 2014=100]

Source: ValuStrat

OfficeOur VPI-Office index is a quarterly review of prices for a representative basket of freehold offices within 19 towers located in five central business districts. The Q3 VPI stood at 91.3 points, suggesting that average capital values for office space are 6.5% lower than the same period during the base year 2015, 3% higher than the same period last year and 0.2% lower than the previous quarter. Jumeirah Lake Towers office prices saw the highest annual increase in capital values of 13.3%, while Business Bay office prices fell by 10.9% YoY. DIFC office prices remained stable.

ValuStrat Price Index5 Office Locations in Dubai[Base: Jan 2015=100]

Source: ValuStrat

80

100

120

2015 2016 2017

Mar

Jun

Sep

Dec

Mar

Jun

Mar

Jun

Sep

Sep

Dec

100.198.5 98.1 98.097.9 97.9 97.5 97.5 97.0 96.7 96.2

80

100

120

2015 2016 2017

Mar

Jun

Sep

Dec

Mar

Jun

Mar

Jun

Sep

Sep

Dec

10097.9 97.7

91.8

97.0

91.488.7

90.092.0 91.5

91.3

VPIValuStrat Price Index



• JAFZA witnessed 6% YoY growth in newentrants by attracting 267 companies during H1 ‘17, with companies from the Gulf Region (59%), Asia-Pacific (20%), Europe (13%), North America and Africa (4% each)

• DIFC grew 6.2% in H1 ‘17 to 1,750companies under its authority

• As of August, Dubai’s YoY inflation rateof less than 1% was at its lowest level since 2015. The monthly inflation rate stood at 0.22%

• Housing, water, electricity, gas andother fuel expenses as of August increased 0.47% YoY

MacroEconomicSnapshot• Total Foreign Direct Investment (FDI) capital inflows grew 8.4% in Q1 ‘17 and amounted to

AED 4.77 billion sourced mostly from the United States, Belgium, Japan, Cyprus and theBahamas (based on the latest report from Dubai FDI)

• Population reached 2.85 million in September• DXB passenger traffic reached 59 million by end of August, an increase of 6.6% YoY• A total of 10,646 new licenses were issued in H1 '17, up 0.29% from H1 '16. Reflective of an

improved business confidence in the emirate

Dubai PopulationSource: Dubai Statistics Centre

Consumer Price Index vs. Housing Index January 2015 – YTD

General Index (2014=100)

Housing, Water, Electricity, Gas and Other Fuels

2,105,000 2,210,300 2,320,800 2,450,000 2,695,0002012 2013 2014 2015 2016

2,853,0002017-Q3

Source: Dubai Statistics Centre

110

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

May

Jun

Jul

Aug

Sep

Oct

Nov

2015 2016 2017

108

106

112

104

102

100

98

96

94

114

Dec

Jan

Feb

Mar

Apr


ResidentialSupply• Approximately 50% of the projected 25,000

units for this year have been completed so far

• About 62% of total completions wereconcentrated in three areas: Dubailand, International City and Dubai Silicon Oasis

• A major reveal during this year’s Cityscapewas District 2020 in Dubai South, the master planned city that will continue the Expo legacy

• A total of 29 off-plan projects werelaunched in Q3, to add more than 21,000 units to the residential pipeline pre-2021

• Notable announced projects were AziziRiviera in Meydan, Park Lane Residence in Dubai South, wasl’s Park Gate Residences in Zabeel and Dubai Properties’ Marasi Riverside in Business Bay

ResidentialPrices• The median residential transacted price

declined 3.4% YoY and 4.2% QoQ, as opposed to upticks seen last quarter

• The median transacted price for readyapartments stood at AED 11,259 per sq m (AED 1,046 per sq ft), down 3.4% YoY and4.1% QoQ

• For ready villas, the median transacted pricewas AED 11,334 per sq m (1,053 per sq ft), declining 4% YoY and 5% QoQ

• The majority of residential transactions thisquarter came from the sales of off-plan properties, accounting for 73% of overall residential sales volume, and causing a slowdown in price recovery across established areas

• Locations included Downtown Dubai with88% of sales being off-plan, Business Bay at 83%, Dubai Silicon Oasis at 82% and Jumeirah Village at 78%

• In terms of total transaction value, AED 37.6billion was invested in residential properties during the first nine months of this year, AED 23.5 billion of which was off-plan

• YTD off-plan values are already 26% higherthan the whole of 2015 and 3% higher thanall of 2016

3.0%Last 2 Years

3.4%Last Year

-3.4%Last 6 Months

-4.2%Last Quarter

* Ready Properties Only


Residential Median Transacted Prices

Dubai Residential Supply2014-2018(‘000 UNITS)

Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat

*May be subject to significant downward adjustment

Existing New Apartments* New Villas*467

2014 2015 2016 2017E 2018E

450

550

600

400

500467

485 4973.3

49721

12.4

52243


• As of September 2017, no majorcompletions have taken place YTD, keeping the current estimated total office Gross Leasable Area (GLA) at8.47 million sq m (91 million sq ft)

• Expected office completions for thisyear has been adjusted upwards to 285,000 sq m (3.1 million sq ft)

• Available data for office space underconstruction is estimated at 592,000 sq m (6.4 million sq ft) for delivery in the next three years

• Most upcoming office space will beconcentrated in Jumeirah Lake Towers (50%), Business Bay (42%) and Barsha Heights (6.7%)

-9.7%Last 2 Years

-10.5%Last Year

-2.0%Last 6 Months

-2.8%Last Quarter


Residential Asking Rents• Overall residential asking rents were10.5% lower YoY and 2.8% QoQ

• However, on a quarterly basis askingrents remained flat for both villas and apartments

• Compared to the same period last year,rents were down 11% for apartments and 9.2% for villas. Additionally, landlords have become more accommodating in reducing rents for existing tenants approaching lease renewal

• ValuStrat research has found that somefamilies living in high-rise buildings in Dubai Marina and neighbouring areas have opted to shift to townhouses located further east, due to insignificant difference in market rents

• For example, 90% of all 3-bed apartmentrentals listed in Dubai Marina are more or less equivalent in rent to a 3-bed townhouse in Arabian Ranches, The Springs, Jumeirah Village Circle,Al Furjan and Mira

Dubai Office Supply2014-2018(Million sq m GLA)

Source: REIDIN, MEED Projects, ValuStrat

Existing Stock Expected Supply

2014 2015 2016 2017E

7.88

8.39

0.29

8.47

8.47

2018E

0.40

8.76

OfficeSupply

ResidentialRents


• Overall transacted office prices were 4.7%higher than last year and 7.6% higher than last quarter

• The median transacted price stood atAED 11,302 per sq m (AED 1,050 per sq ft)

• Business Bay remained as the mostpopular choice for office set-ups as it took the majority at 61.7% of citywide sales transactions, followed by Jumeirah Lakes Towers (JLT) at 27.2%

• The median size of offices sold inBusiness Bay were 95 sq m (1,027 sq ft) and 104 sq m (1,119 sq ft) in JLT

• 32,000 sq m (344,400 sq ft) of total officeGLA was sold during Q3 amounting to a total investment worth AED 390 million

• Median asking rents were stable YoY butfell 4.3% QoQ

• Asking rents for this quarter were 9.2%lower than two years ago

• The citywide median asking rent fora typical office space now stands at AED 1,076 per sq m (AED 100 per sq ft)

• Median asking rents and typical officespace varied based on location as shown below

• In Dubai International Financial Centre,the median asking rent was AED 2,100per sq m (AED 195 per sq ft) for the typical unit size of 218 sq m (2,350 sq ft)

• In Barsha Heights, asking rents wereAED 1,023 per sq m (AED 95 per sq ft) for the typical area of 130 sq m (1,400 sq ft)

-4.0%Last 2 Years

4.7%Last Year

0.0%Last 6 Months

7.6%Last Quarter


Office Median Transacted Prices

-9.2%Last 2 Years

0.1%Last Year

-0.1%Last 6 Months

-4.3%Last Quarter


Office Median Asking Rents

OfficePrices

OfficeRents


• Shopper’s Mall, a new neighbourhood centre byAl Madina Group opened in August at Jebel Ali Industrial 1. With a Gross Leasable Area (GLA) of 5,574 sq m (60,000 sq ft) and featuring the group’s healthcare brand Live Care Clinic and Pharmacy, among other retail offerings

• Emaar announced Dubai Hills Mall, a 185,800 sq m(2 million sq ft) GLA shopping centre with over 750 retail and F&B outlets, all set for a grand opening in 2019

• Nakheel unveiled Discovery Gardens Mall project,a 41,800 sq m (450,000 sq ft) GLA retail centre featuring shopping, dining and tourism amenities expected to be ready by 2020

• Union Properties through their newly establishedsubsidiary – Union Properties, through their newly established subsidiary Union Malls, announced their pilot project The Central Mall in Motor City. The centre will have a total area of 102,200 sq m (1.1 million sq ft) and will feature health, wellness and sports facilities

• Phase 1 of Meraas’ Al Seef development alongDubai Creek was opened late September. Once the entire project is complete, it will add at least 65,000 sq m (700,000 sq ft) GLA of retail space offering dining, shopping and entertainment choices

• Citywide shopping mall foot traffic increased5.8% YoY

• Two top mall operators saw an increasein total visitors in 2016, with Emaar Mallswelcoming 125 million and Majid Al Futtaim’s shopping centres attracting 119 million

• The Dubai Mall welcomed 39 million visitorsin H1 2017

• The highly anticipated digital marketplaceplatform Noon.com went live in the UAE in September, competing with Amazons’ longrunning Souq.com. Coming quarters will tell how these large scale B2C e-commerce services impact traditional brick and mortar performance


44187

416

852

1,878

Convenience< 3k sq m

Neighbourhood3k-10k sq m

Community10k-30k sq m

Super Regional> 90k sq m

Regional30k-90k sq m

Retail Malls & Shopping Centres(‘000 sq m GLA)

Number of Malls and ShoppingCentres in Dubai


RetailPerformance

RetailSupply

12 15

2223

32

Convenience< 3k sq m

Neighbourhood3k-10k sq m

Community10k-30k sq m

SuperRegional> 90k sq m

Regional30k-90k sq m


• As of August 2017, Dubai had 81,445 hotelrooms and 24,346 hotel apartments, with an additional 10,000 keys planned for the remainder of this year

• Notable openings during the quarter includedthe largest TRYP by Wyndham (650 rooms) and DoubleTree by Hilton (238 rooms). In total, 1,168 keys were added during Q3

• Twelve new hotel projects and one hotelre-branding were announced to add a totalof 3,737 keys to the pipeline over the next three years

• Noteworthy announcements included twonew Address hotels, Address Fashion Avenue & Address Harbour Point (total 369 rooms), Vida Hotel Dubai Mall (195 keys), Courtyard & Residence Inn by Marriott (250 rooms), Dubawi Hotel (500 keys) and The Floating Venice at World Islands (440 rooms)

• Union Properties PJSC launched Al EtihadHotel Management as a subsidiary to overlook their pilot hospitality projects in Motor City

Hotel Room Supply2014-2018(‘000 KEYS)

Source: DTCM, MEED Projects, ValuStrat

Hotel & Service Apt Rooms New Supply

• Total international guests as of Augustrose 8% YoY to 10.4 million

• Average occupancy was kept at a healthyrate of 76% from January to August, which was similar to the same period last year

• Average Daily Rate (ADR) and RevenuePer Available (RevPAR) for YTD August 2017 were down 4% each from same period last year

• The top source markets for Dubai’s visitorscame from the GCC countries (21%), Western Europe (20%), South Asia (18%), MENA (11%), North & South-East Asia (11%), Russia with rest of Eastern Europe (6%), USA (6%) and Africa (5%) and Australasia (2%)

GCC

Western Europe

South Asia

MENA

North Asia &South East Asia

Americas

Russia, CIS &

Eastern Europe

Africa

Australia

Source of Dubai Visitors by RegionJan - Aug 2017

Source: DTCM

HotelSupply

HotelPerformance

10.0

2014 2015 2016 2017E

10392 98 106

15.85

2018E

116

2%

21%

20%

18%

11%

11%

6%

6%5%


• Dubai Food Park (DFP) in Wholesale Citywas unveiled boasting 4.46 million sq m(48 million sq ft) of space exclusively allocated for all services and activities related to food industry

• A co-operation between Ningxia ForwardFund Management Company and DFP to build a 407,000 sq m (4.38 million sq ft) China-UAE Food Industrial Cluster was announced, set to house 30 food plants with a two-year handover schedule from start of construction

• Swiss company Access World LogisticsLLC in partnership with Rais Hassan Saadi Group broke ground on a 3PL facility that include a multi-product warehouse measuring 15,000 sq m (161,00 sq ft) in Jebel Ali Free Zone

• Industrial property prices during Q3 2017 have remained relatively stable and unchanged. Prices ranged between AED 2,045 - AED 4,306 per sq m (AED 180 - AED 400 per sq ft) with high specification / quality built and modern cold storage facilities priced at the upper scale

• Large and older warehouse propertiescontinued to be priced under AED 2,153 per sq m (AED 200 per sq ft)

• We observed increasing developmentactivity for warehouse and logisticproperties in areas such as Techno Parkand Dubai Industrial City

• Development activities in industrial parksin other Northern Emirates increased in conjunction with improved road networks/accesses to ports, and better utility services, thus providing increased competition in this sector

• Lower rents continue to be observedfor older and larger warehouse propertiesin locations such as Jebel Ali, Ras Al Khor, and Al Qusais. Rentals ranged between AED 300 to AED 484 per sq m (AED 28 to AED 45 per sq ft) with marginal declines also seen in other locations such as DIC, DIP, Al Quoz, and JAFZA

Source: ValuStrat

Al Quasis

DubaiInvestment

Park

Jebel AliFree Zone

Jebel AliIndustrial

Area

DubaiSouth

Al Quoz

Industrial Rental Rates(AED/sq m)

Rent - Upper Range Rent - Lower Range

Al Quoz DubaiInvestmentPark

Jebel AliFree Zone

Industrial Prices(AED/sq m)

Price - Upper range Price - Lower range

2000

4000

1000

3000

5000

2,800

4,1984,306

2,315

Source: ValuStrat

IndustrialSupply

IndustrialPerformance

322538

322431

322

322

322

377

484

484

538

538

2,045

4,000


10.09.17

ValuStratInMedia12.09.17

Buying a Home Before Expo

“Some real estate investors are likely encouraged by the anticipated legacy benefits of Expo 2020 in associated locations, particularly where infrastructural deliveries such as metro, roads, schools and retail offerings are expected to have a long-term benefit on the property market”, explains Declan King MRICS, Managing Director and Group Head of Real Estate at ValuStrat.

23.08.17

Adding Value to my Property

"It should be remembered that the market will always place a premium on tasteful cosmetic improvements, but one should be cautious of overcapitalising and putting a bold personal stamp on a home, as your style and taste may not always match that of a potential buyer", says Cheryl McAdams MRICS, Head of Residential Valuation at ValuStrat

16.07.17

Land is Best Bet for Investors in Dubai

“Plots in established locations such as Downtown, the Marina, Deira, Bur Dubai and Sheikh Zayed Road can be increasingly difficult to source as these districts become built out. Newer locations to the south and east of the city generally offer more availability, with open tracks of land being progressively opened up with installation of services and utilities,” says Declan King, MRICS - Managing Director and Group Head of Real Estate, ValuStrat.

Women on Cityscape Global

“I consider Cityscape Global to be the highlight of Dubai’s real estate calendar. It does an exceptional job in bringing together developers and service providers. The event is well-planned, has interesting exhibitors and serves as a ‘one-stop shop’ for everyone interested in Dubai real estate”, says Sarah Umerani, Marketing Manager at ValuStrat

15.08.17

Dubai Retail Realty Mix Evolves to Overcome Headwinds

Analysts also expect the trend of neighbourhood malls such as City Walk and Box Park to accelerate. “We expect this sector to continue to prosper,” Declan King MRICS, Managing Director and Group Head of Real Estate, at ValuStrat, tells PW. “With Expo 2020 driving tourists to the city, the event will also help deliver extra footfall to our major malls.”

01.07.17

Cheaper New Homes Drag Down Prices in Dubailand

Affordable homes in Dubai Sports City will be the main centre of activity for completions this year, with 2,100 units expected to be handed over, according to ValuStrat. This will be followed by Liwan (1,000 units) and Arjan (940). “This new supply may create downward pressure on rental prices, as more choice is given to potential tenants,” said Haider Tuaima, Head of Real Estate Research.

AboutValuStrat is a leading consulting firmheadquartered in Dubai providing Advisory, Valuations, Research, Due Diligence andDivestment services across a diverse rangeof industry sectors since 1977. Offices in the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 800 corporate clients in the Middle East Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team includereal estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transportand FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm andthe first company head quartered in all of MENAand Asia to be accepted into the prestigious RICS Tech Affiliate program.

Research MethodologyEvery effort has been made to ensure the accuracy of this document. New supply data covers 38 defined areas in Dubai including non-freehold areas. Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. The new supply database does not take into account most private building projects. Prices are calculated from actual transactions that have been carefully cleansed to exclude duplicates, bulk sales and outdated transactions. Rental data is derived from a carefully cleansed database of listings that don’t include duplicates, potential errors and outliers.

The ValuStrat Price Index for Dubai’s freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s freehold residential sector is constructed to represent the monthly price change experienced by typical residential units within Dubai. The VPI uses a comprehensive weighted sample representing more than 90% of all property types across the city and is built by our expert RICS Registered Valuers.

Copyright © ValuStrat Consulting FZCo. 2017This document is the property of ValuStrat Consulting FZCo and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat Consulting FZCo. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat Consulting FZCo does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document.

ValuStrat is a firm regulated by RICS

Dubai+971 4 326 [email protected]

Riyadh+966 11 293 [email protected]

Jeddah+966 12 283 [email protected]

Doha+ 974 4496 [email protected]

Karachi+92 213 517 [email protected]

London+44 207 493 [email protected]

Declan King, MRICSManaging Director & Group Head of Real [email protected]

Haider TuaimaHead of Real Estate [email protected]

Vismer Mulenga, MRICSAssociate [email protected]

Cheryl McAdam, MRICSHead of Residential [email protected]

Darshan Shah, MRICSAssociate Director & Head of Industrial [email protected]

VPI online www.valustrat.com/vpi

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