DUBAI REAL ESTATE MARKET

OVERVIEW

Q3 2016

DUBAI
MARKET SUMMARY
Cityscape reflects muted
current market, ahead of
expected Expo related boost
in activity.

Expo 2020 was a dominant topic during the

presentations at the summit. The planning
for a meaningful legacy and ensuring a
positive impact beyond 2020 are at the
forefront of the governments agenda.

Another trending topic at Cityscape was

alternative real estate investments. These
include
education,
healthcare,
infrastructure, logistics and student
housing.

The overall sentiment at Cityscape

Global 2016 (held in Dubai in September)
reflected the relatively subdued nature of
current real estate market conditions in
Dubai as well as the broader region.

Being the first Arab nation to host an expo,

Dubai is faced with the challenge of hosting
an exceptional event, when it opens its
doors on the 20th of October 2020. Under
the theme Connecting Minds, Creating the
Future, Dubai is seeking to combine a
series of themes (from the age of industry
to globalization) under one roof.

The education sector is leading the way as

an increased number of real estate
investors, developers and builders seek to
diversify their portfolios. The major
attraction of this sector to real estate
investors and developers are the strength
of demand, the attractive financial returns
available and the alignment of this sector
with government policies to improve
educational standards across the region.

Specifically in Dubai, sentiment was

muted. The re-announcement of existing
projects dominated the scene, leaving
little room for new ones.

DUBAI PRIME RENTAL CLOCK

RENTAL GROWTH
SLOWING

RENTS
FALLING

RENTAL GROWTH
SLOWING

Q3 2015

RENTAL GROWTH
ACCELERATING

RENTS
FALLING

Q3 2016

RENTS
BOTTOMING OUT

OFFICE

RENTAL GROWTH
ACCELERATING

RESIDENTIAL

RETAIL

RENTS
BOTTOMING OUT

HOTEL*

* 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
COPYRIGHT JONES LANG LASALLE IP, INC. 2016

DUBAI OFFICE
MARKET SUMMARY
SUPPLY
The third quarter saw the delivery of 51,000 sq
m of office GLA, 64% being single-owned
projects in TECOM which included The
Butterfly and Al Sajwani buildings in DMC. The
remaining 36% being strata titled space in
Business Bay, which has been the most active
precinct for completions so far in 2016.
Q3 also witnessed a number of changes of
office projects into alternative uses. For
example, Le Presidium, Nova and Moon towers
(occupying 55,550 sq m in total) have been
converted to residential use buildings, resulting
in a small reduction in total office stock from
what we were previously expecting for Q3.

HOT TOPIC

PERFORMANCE
Vacancy levels in the CBD continue to reduce,
falling to 15% this quarter. This highlights the
continuing tenant demand for quality single
owned buildings in central locations. Major
corporates continue to favor buildings offering
Grade A specs and amenities, as there is
increased recognition that this contributes to
overall staff motivation and productivity.
Rents remained largely unchanged over the
quarter, with a marginal (2%) increase being
recorded Y-o-Y. We expect stability in rental
levels for the remainder of the year.

Looking ahead, an additional 152,000 sq m of

GLA is scheduled to be delivered in Q4, almost
3 times that delivered during Q3. Business Bay
continues to be the focus for completions, with
projects also expected to complete in Silicon
Oasis, the Greens and TECOM.

Smaller offices in favor. There has been a

trend towards smaller deals, with few large
transactions agreed during Q3. This reflects
occupiers caution in the face of more
challenging economic conditions in both Dubai
and across the broader region. This has
resulted in a number of firms downsizing their
staffing and space requirements.
A number of office towers across Dubai are
catering for this trend towards smaller units.
Index tower (located in the DIFC) has divided
four of its floors into smaller units (offering
suits of 50, 150 and 300 sq m on a fully fitted
ready to lease basis). The exercise has proven
to be successful, with most of these floors
now leased.
Emirates NBD, which owns 3 floors in Burj
Daman in the DIFC, has followed a similar
strategy, offering small units of between 250
and 300 sq m. This trend is expected to be
followed by other landlords seeking to cater for
the current strength of demand for small units.

OFFICE SUPPLY

CURRENT SUPPLY (2013Q3 2016)

FUTURE SUPPLY (Q4 20162018)

80K

SQ M (GLA)

140K

SQ M (GLA)

152K
SQ M (GLA)

7.6M

7.8M

8.4M

8.6M

8.6M

8.8M

8.9M

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

2013

2014

2015

Q3 2016

Q4 2016

2017

2018

OFFICE PERFORMANCE

CBD VACANCY RATE

22%

GRADE A RENTS / PER SQ M

15%
1,884

1,922

AED

AED

2%
Q3 2015

Q3 2016

Q3 2015

Y-O-Y

2016 / 2017

2016 / 2017

OUTLOOK

OUTLOOK / ANNUAL CHANGE

Q3 2016

COPYRIGHT JONES LANG LASALLE IP, INC. 2016

DUBAI RESIDENTIAL
MARKET SUMMARY
SUPPLY
The completion of 5,400 residential units during
Q3 2016 marks the highest quarterly
completion since Q4 2012 (when approximately
6,200 units came into the market).
Apartment units comprised the majority (63%)
of total residential units completed during the
past quarter, with Wasl Oasis II (a 13 building
project in Muhaisanah, near Sharjahs border)
releasing approximately 690 units. The largest
completion of villas was the 400 units
completed and delivered in Rahat Villas (the
second phase of the Mudon project in
Dubailand).
The supply pipeline remains active, with a
further 11 thousand units scheduled to enter
the market in Q4 2016, although not all of
these projects are likely to be delivered on
schedule. Completions scheduled for Q4
include approximately 2,500 townhouse and
apartment units in the Akoya project by Damac
on Al Qudra Street.

CURRENT SUPPLY (2013Q3 2016)

HOT TOPIC

PERFORMANCE
There has been no change in either rents or
prices in the apartment segment of the market
during Q3, resulting in a reduction in the rate of
decline on an annual basis. Y-o-Y apartment
rents have declined by -4%, slightly more than
the Y-o-Y decline in sale prices (-2%).
The pace of decline also seems to be
moderating in the villa segment (where prices
and rents fell by a marginal (-1%) over the
quarter).
With only minimal change reported in prices
and rents during Q3, it appears the residential
market has now reached the bottom of its
current cycle. While we expect prices and rents
to recover in 2017, the pace of this recovery is
expected to be limited by economic
uncertainties and the volume of potential
supply.

Jumeirah Central master plan announced

at Cityscape Global 2016. Dubai Holding
group announced its mixed-use development
at Cityscape in early September 2016. The
mega scale project will include 11,000
residential units. Construction of Phase 1
(which will include 13 residential buildings
encompassing 3,000 units) will start in 2017,
on a land plot on the opposite side of Sheikh
Zayed road from the Mall of the Emirates.
This project has replaced Mall of the World
which was announced in 2014. Since this
time, the concept of the mall has been
redesigned and phased over a much longer
timeframe and has been relocated to a new
site on Sheikh Mohammed bin Zayed road.
Jumeirah Central is something of a milestone
project that will establish new levels of
infrastructure,
environmentally
friendly
transportation and a new pattern of urban form
and community within Dubai.

RESIDENTIAL SUPPLY

FUTURE SUPPLY (Q4 20162018)

16K
UNITS

30K
UNITS

11K
UNITS

434K

449K

456K

467K

467K

478K

508K

2013

2014

2015

Q3 2016

Q4 2016

2017

2018

UNITS

UNITS

UNITS

UNITS

UNITS

UNITS

RESIDENTIAL PERFORMANCE
APARTMENTS

COPYRIGHT JONES LANG LASALLE IP, INC. 2016

PROPERTY RENT AND SALES INDICES

VILLAS

SALES

RENTALS

Q-O-Q

Q-O-Q

SALES

RENTALS

SALES

RENTALS

Y-O-Y

Y-O-Y

Y-O-Y

Y-O-Y

0%

-2%

SOURCE: REIDIN

UNITS

0%

-4%

SALES

RENTALS

Q-O-Q

Q-O-Q

-1%

-2%

SOURCE: REIDIN

-1%

-6%

DUBAI RETAIL
MARKET SUMMARY
SUPPLY
The third quarter saw the delivery of two retail
projects with a total GLA of 28,000 sq m, the
majority (25,000 sq m) of which is the Outlet
Village; a community type development in Saih
Shuaib (Dubais Industrial City), while the other
community centre was located in Dubai Silicon
Oasis.
A further 3 projects (with a total of 20,000 sq
m) are scheduled to complete in Q4. These
centres will be located in Al Furjan, Al Badrah
and International Media Production Zone
(IMPZ).

HOT TOPIC
Sensational performances on Dubais
Opera stage. Dubai Opera opened its doors
on 31st August 2016 in the heart of the
downtown precinct.

PERFORMANCE
Average rents have remained unchanged in the
Dubai retail market on both a Q-o-Q and Y-o-Y
basis. While rents have not actually declined in
many centres, this stability suggests market
saturation. The flat rents indicate that
competition for units is thin and tenants are not
competing for locations that become available
within either regional malls or community
centres. Given the overall slowdown in the
regional economy that drives retail demand in
Dubai, this is not a surprise.

The Opera forms part of the Governments

plan to broaden the base of the cities tourism
and leisure offerings and adds further diversity
within the downtown precinct.
The dhow-shaped structure in the middle of
the Downtown Dubai skyline has received
rave reviews. With 2,000 seats in the main
auditorium and a series of smaller studio and
classroom spaces, visitors will be attracted to
the downtown by a range of ballet, theatre,
musicals and other live entertainment.

Visitors from Saudi Arabia heavily contribute to

Dubais retail economy. Given the recent
announcements by the Saudi Government to
freeze annual salaries for public sector
employees, this will lead to a further reduction
in purchasing power which will trickle down to
the retail segment in Dubai. Data shows that in
2015, approximately 24% of Riyadhs retail
leakage was spent in the UAE.

Given its proximity to the Dubai Mall, the

opening of the Dubai opera is expected to
support additional footfall for the major
expansion of the mall (due to open in 2017) as
well as generate further demand for additional
F & B outlets along Mohamed bin Rashid
Boulevard.

RETAIL SUPPLY

CURRENT SUPPLY (2013Q3 2016)

FUTURE SUPPLY (Q4 20162018)

18K

SQ M (GLA)

326K

SQ M (GLA)

14K

SQ M (GLA)

2.9M

3.0M

3.2M

3.4M

3.4M

3.4M

3.7M

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

SQ M (GLA)

2013

2014

2015

Q3 2016

Q4 2016

2017

2018

RETAIL PERFORMANCE

VACANCY RATE

8%

CHANGE IN AVERAGE RENTS

8%
0%

0%

Q-O-Q

Q3 2015

Q3 2016

Y-O-Y

0%

9%

Q-O-Q

PRIMARY

Y-O-Y

SECONDARY

2016 / 2017

2016 / 2017

OUTLOOK

OUTLOOK / ANNUAL CHANGE

COPYRIGHT JONES LANG LASALLE IP, INC. 2016

DUBAI HOTEL
MARKET SUMMARY

HOT TOPIC
Dubai 2016; the year of theme park
entertainment.

PERFORMANCE
Hotels performance in Dubai remained under
pressure over the third quarter of 2016 due to
the combination of low oil prices (affecting
business travel) and the strong US Dollar
(reducing demand from many traditional leisure
source markets).

SUPPLY
A total of 5,500 hotel rooms have entered the
market since the beginning of the year,
indicating the continued momentum in Dubais
hospitality and tourism sector. Among the
projects completed in Q3 were Westin Al
Habtoor with around 1,000 rooms, and Atana
Hotel in TECOM with 830 rooms.

The relatively diversified spread of source

markets and the growth of demand from new
markets (especially in Asia), helped minimize
the impact on occupancy rates which remained
almost stable at around 76% over the YT
August. Average daily rates were more strongly
impacted, with a 11% decrease to USD 191.

Major projects expected to complete by the end

of 2016 include the Jumeirah Al Naseem (430
rooms) and Dukes Dubai on Palm Jumeirah
(279 hotel rooms and 227 serviced
apartments). The 117 key Nikki Beach Resort
on Palm Jumeirah is also expected by the end
of the year, following the opening of its beach
club earlier in 2016.

While a further decline in room rates and yields

can be expected over the short term, the
medium term outlook for the market remains
positive due to the heavy government
investment in expanding the cities tourism
infrastructure.

Dubai is undoubtedly a leader in innovation in

the leisure and hospitality market. Dubai Parks
and Resorts (located in Jebel Ali) represents
the latest innovative offering. Once it is fully
open (by the end of 2016), it will be the largest
multi-themed leisure and entertainment
destination in the Middle East.
IMG World of Adventure, an indoor themed
park opened its doors on the 31st of August,
and is considered the largest of its kind. It is
spread across 139,000 sq m of land and
brings the international brands Marvel and
Cartoon Network together for the first time.
Dubais theme parks are seen as a major
attraction for the city as it seeks to expand the
number of tourist arrivals from 14 million in
2016 to 20 million by 2020.
Coupled with similar developments in Abu
Dhabi, these theme parks will help position the
UAE on the regional and international leisure
tourism map.

HOTEL SUPPLY

CURRENT SUPPLY (2013Q3 2016)

FUTURE SUPPLY (Q4 20162018)

15,200
KEYS

13,100
KEYS

1,300
KEYS

61,700

67,500

72,500

78,000

78,000

79,300

92,400

2013

2014

2015

Q3 2016

Q4 2016

2017

2018

KEYS

KEYS

KEYS

KEYS

KEYS

KEYS

KEYS

HOTEL PERFORMANCE

OCCUPANCY RATE

76%

AVERAGE DAILY RATE

76%
214

191

USD

USD

-11%
YT AUGUST 2015

YT AUGUST 2016

YT AUGUST 2015

Y-O-Y

2016 / 2017

2016 / 2017

OUTLOOK

OUTLOOK / ANNUAL CHANGE

COPYRIGHT JONES LANG LASALLE IP, INC. 2016

YT AUGUST 2016

DEFINITIONS AND
METHODOLOGY

12 oclock 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.

6 oclock 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 oclock 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.

OFFICE

RESIDENTIAL

Supply data is based on our quarterly survey of 32 sub-markets.

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.

The supply and stock data has been updated based on data from
the Dubai Government. Our quarterly survey now covers 158 sub
markets (the entire Dubai market) starting from 2010. This data
excludes labour accommodation and local Emirati housing supply.

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.

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.

RETAIL

HOTEL

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
- Neighborhood Malls have a GLA of 3,000 - 10,000 sq m
- Convenience Malls have a GLA of less than 3,000 sq m

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 55,000 rooms across
Dubai.

Supply data is based on our quarterly survey of 45 sub-markets.

Malls are categorized based on turnover levels. Primary Malls are
good performing with high levels of turnover. Secondary Malls are
average performing 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 centres. Given the variation in rentals,
we quote % change for retail rents rather than actual figures.
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.

COPYRIGHT JONES LANG LASALLE IP, INC. 2016

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

Asma Dakkak
Research Manager
MENA
asma.dakkak@eu.jll.com

@JLLMENA

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