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Contents
Abu Dhabi Office Occupancy Survey 4
www.colliers-me.com
Colliers International
mena real estate overview FIRST Quarter 2010
Abu Dhabi Office Market - Rumour Calculations and Preparing For Change
Less than
300m2 commercial villas
Between 50%
301-500m2
30% 3,000,000
2,500,000
2,000,000
m2 GLA
1,500,000
Colliers then looked at both current requirements in the market place
and existing tenants currently occupying office space. It was here 1,000,000
that the changes to occupiers profile are apparent. 50% of tenants
500,000
surveyed indicated requirements for space of less than 300 m2. 30%
of the tenants are seeking office space between 301 m2 and 500 m2, 0
while only 20% are looking for office space exceeding 500 m2. 2007 2008 2009 2010 2011 2012 2013
Colliers International
mena real estate overview FIRST Quarter 2010
100%
areas reflect an undersupplied market. Najda
90%
Street witnessed a 5% drop in occupancy rates
80%
from 100% occupancy in Q4 2009. Office space
70% surveyed in Najda Street includes primary
60% grade office space, which contrary to market
50% conditions, failed to witness a decline in rental
40% rates between Q4 2009 and Q1 2010. The drop
30% in occupancy levels in this area is likely to be
20% attributed to existing tenants either downsizing
10% their current operations or relocating to less
0% expensive commercial space available in the
Hamdan Street Khalifa Street Liwa Street Najda Street Salam Street
Emirate.
Q4 2009 Q1 2010
The overall results exemplify the present
Office occupancy rates are a key indicator of conducted in Q4 2009 and was tracked again in undersupplied market for office space in Abu
a city’s economic vitality. This is certainly the Q1 2010. Dhabi. Despite high occupancy levels across the
case in Abu Dhabi, where commercial office market, and a current supply of approximately
space enjoyed 100% occupancy in a historically The average occupancy currently stands at
1.6 million m2 of NLA, the office market is
undersupplied market. However, following 99%, dropping a marginal 1% from a fully
expected to reach equilibrium during 2010
the global economic downturn and falling real occupied market in Q4 2009. The results from
with an oversupply by the end of the year, due
estate prices, Colliers instigated a market watch the occupancy survey show Khalifa, Liwa and
Salam Street consistently achieving 100% to a lower demand rate than a forthcoming
last year, focusing on a sample of office buildings
occupancy while Hamdan Street consistently supply rate. The outlined oversupplied market
in the emirate – the intention being to monitor
the performance of these buildings in the light achieved 99% occupancy during Q4 2009 and condition, however, is only possible provided
of global conditions. The initial survey was Q1 2010. The high occupancy rates in these construction timelines are met.
700
600
500
US$ per m2 pa
400
300
200
100
0
Hamdan Street Khalifa Street Najda Street Salam Street
Q4 2009 Q1 2010
Average rental rate, covering the surveyed areas area failing to witness a decline in rental rates. Despite the limited availably of commercial
currently stands at US$ 465 per m2 per annum, Khalifa Street and Hamdaan Street witnessed a office space in the capital, changes in the global
a 5% drop from Q4 2009. Declining rental 4% and 9% decline in annual rents respectively. economic climate and falling real estate prices in
rates in Abu Dhabi are due to, among other Annual rents in Hamdan Street remained the Dubai are forcing landlords to lower their asking
reasons, the Emirate’s price sensitivity towards
highest at US$ 570 per m2 per annum. While prices in Abu Dhabi, in order to retain existing
falling prices in neighboring Dubai. The largest
decrease in rental rates was registered in Salaam primary grade office space witnessed a decline of tenants. With an expected forthcoming supply
Street, which dropped by 19%, from Q4 2009 to 9% between Q4 2009 and Q1 2010, secondary of approximately 435,000 m2 of NLA scheduled
Q1 2010 and is currently standing at US$ 460 grade office space dropped a marginal 2% during to be released this year, rental rates in the capital
per m2 per annum. Najda Street was the only the same period. are anticipated to decline further.
Colliers International
mena real estate overview FIRST Quarter 2010
50%
commercial districts such as Bur Dubai, Deira,
45% SZR and Downtown Dubai dropped from highs
40% of 97% in Q1 2009 to 90% in Q1 2010. Deira
35% and Bur Dubai witnessed the highest occupancy
30% rates of 93% and 91% respectively. Downtown
25% Dubai witnessed a 5% decline in occupancy
rates between Q3 2009 and Q1 2010, while
20%
increasing a marginal 1% Y-O-Y. Occupancy
15%
levels in Sheikh Zayed Road witnessed a 3%
10% drop from Q1 2009 to Q1 2010, but increased
5% 2% from Q3 2009 to Q1 2010.
0%
JLT DSO Tecom C Tecom A
Colliers International observed an overall
10% YOY increase in occupancy levels across
Q1 2009 Q3 2009 Q1 2010 new commercial districts, while occupancy
levels in the older, more established districts
A market watch instigated by Colliers in 2009, The average occupancy rate, in new commercial dropped by 7% during the same period. The
focused on recently delivered office space districts reached 32% in Q1 2009, 23% in Q3 movement of commercial tenants is believed to
in Dubai with the intention to monitor the 2009, followed by 42% in Q1 2010. be a direct result of the lower rental rates and
effect and performance in the light of global other incentives, such as rent-free fit-out periods
The survey for new office space showed the
conditions. The initial survey conducted in Q1 offered by landlords in the newer commercial
highest average occupancy rate consistently
2009, was reviewed in Q3 2009 and again in Q1 districts, in order to magnetize tenants from
achieved in TECOM A, which currently stands
2010. older, established office space in an already
at 40%. Other free zone areas such as JLT, DSO
Colliers followed occupancy rates, fit-out levels and TECOM C saw Y-O-Y increases of 10%, oversupplied office market.
and rental rate trends for specific buildings in 7% and 1% respectively. Downtown Jebel Ali Average occupancy levels across Dubai, covering
new commercial districts, such as Jumeirah (DTJA) witnessed the highest YOY increase from both new and established commercial office
Lake Towers (JLT), Dubai Silicon Oasis (DSO), 15% in Q1 2009 to 73% in Q1 2010. TECOM space, reached 71% in Q1 2010. The overall
Dubai Investment Park (DIP), Jebel Ali, Dubai C continues to witness comparatively lower occupancy rate was calculated by collating
Outsource Zone (DOZ), Al Barsha, TECOM A occupancy rates, which among other reasons occupancy rates of each commercial district
and C, and Dubai International Finance Centre is likely due to a majority of buildings under in Dubai with its corresponding NLA, and
(DIFC). The survey limited new office space in construction in the area discouraging potential calculating the weighted average in accordance
TECOM and DIFC to commercial buildings tenants occupying vacant space. Average to each districts’ contribution to the total NLA
delivered by private developers. occupancy levels in older, more established of office supply available in Dubai.
Colliers International
abu dhabi OFFICE FIRST Quarter 2010
3,000,000
2,500,000
2,000,000
m2 NLA
1,500,000
1,000,000
500,000
0
2007 2008 2009 2010 2011 2012 2013
Office space in Abu Dhabi is fragmented price sensitivity in Abu Dhabi. There is
from both a location and tenant profile also the threat of an oversupply of office
perspective. The majority of Abu Dhabi’s space looming and the market is adjusting
marginal primary grade office space for this.
is dispersed between buildings on the
Corniche, Salam Street, Hamdan and Colliers has qualified the provision of a total
Khalifa Street, and a number of buildings in of 1.2 million m2 NLA of office space to be
High occupancy rate, currently
the Tourist Club Area, including the East delivered between 2010 and 2013, leading
standing at 99%, reflects the
level of unsatisfied demand and West Towers of the Abu Dhabi Mall. to cumulative office supply of 2.8 million
for office accommodation Secondary and tertiary grade office space m2 in 2013. The largest forthcoming office
is located within the adjoining districts stock is scheduled to enter the market in
AVERAGE rentals q1 2010 of Khalidiyah and Tourist Club Areas on 2010, amounting to approximately 434,000
either side of Al Markaziyah. This includes m² NLA, a Y-O-Y increase of 27%. For the
1200
dedicated buildings with moderate quality purposes of the forthcoming supply study,
1000
finishing and limited dedicated parking Colliers has only included developments
US$ per m2 pa
800
600 facilities, mixed-use buildings with office that have ‘broken ground’ and verified
400 components in high density districts of the all completion estimates with concerned
200
city, and residential villas converted into developers. Forthcoming office supply over
0
office space in the low density districts. the next three years will be concentrated
Khalifa Street
Hamdan street
Corniche
Airport Street
Liwa Street
Electra Street
Despite numerous cancellations and delays, within the existing city. According to the
additional planned office stock scheduled Abu Dhabi Plan 2030, the Urban Planning
to enter the market this year constitutes of Council envisages the consolidation of office
Q1 2009 Q1 2010
approximately 434,000m² NLA, leading to space into two main areas, the financial
a cumulative supply of approximately 2.0 services oriented Al Suwwah Island, and
Average asking rental rate has decreased the Capital District, the complementary
by 38% between Q1 2009 and Q1 2010
million m² NLA by the end of 2010.
counterpart to Al Suwwah, providing
Post the global economic downturn, the medical centers, higher education facilities
PERFORMANCE indicators office sector in Abu Dhabi has registered and government buildings.
Average Rent: US$ 570 per m² pa significant decreases in rental rates,
Premium Rent: US$ 650 per m² pa sales prices and absorption rates, despite The currently undersupplied office market is
Average Sales Price: US$ 4,490 per m² limited supply of vacant office space. The expected to reach market equilibrium during
average yield: 11% compounded average growth rate (CAGR) 2010, and an oversupply by end of 2010,
Vacancy Rate: 1% of 40% achieved for rental rates between provided scheduled timelines are met. Due
2004 and 2008 was followed by a Y-O- to a lower demand rate than a forthcoming
Average sales price, specifically office Y decrease of 11% in 2009, with current supply rate, a continuous oversupplied
space on Al Reem Island, has decreased average rental rates at US$ 505 per m2. office market throughout end of 2010 to
by 14% between Q1 2009 and Q1 2010 Average asking sales price is currently US$ 2013 is anticipated. Consequently, the
Despite 186,000m2 NLA of office 4,490 per m2, representing a Y-O-Y decrease average occupancy rate is likely to follow
supply currently scaled back due to either of 13%. This is despite the high occupancy the same downward trend reaching levels of
development cancellation or construction rate of 99% across the market. The primary 90% within the next three years. Due to the
delays, the market may still anticipate
reason for this decline in prices can be expected outcome, the oversupplied market
the beginning of an oversupplied office
market by late 2010 / early 2011 attributed to the large decreases in rental is likely to translate into decreasing rental
rates and sales prices in Dubai and higher rates, as supply outstrips demand.
Colliers International
abu dhabi reSidential FIRST Quarter 2010
250.000
Number of Units
200.000
150.000
100.000
50.000
0
2007 2008 2009 2010 2011 2012 2013
Q1 2009 and Q1 2010, while dropping 38% in a softening of rental values for existing 300
250
from 2008. Residential sales prices in Abu developments that have enjoyed sustained
US$ per m2 pa
200
Dhabi have decreased by 42% from the peak value appreciations due to a market
150
in Q4 2008 to a current rate of US$ 3,675 undersupply rather than a superior product
100
per m2. Current occupancy rates continue offering. However, due to a significant
50
to remain close to 100% whilst rental yields undersupplied market, an economic 0
have fallen from 9% in 2009 to 8.5% in Q1 recovery in Abu Dhabi will most probably 1BR 2 BR 3 BR
2010. Asking prices have turned into an lead to an increase in rental rates and
inaccurate measurement tool of price levels sales prices, provided the number of newly Similar to the office sector, developments
in the market, with buyers and researchers established companies increase, resulting in offered for freehold ownership will start
to enter the market this year, assuming
reporting a possible discount of about 15% a higher inflow of expatriates, and thus an
no further development delays
of asking prices. increasing population.
Colliers International
abu dhabi retail FIRST Quarter 2010
1,600,000
1,400,000
1,200,000
1,000,000
m2 GLA
800,000
600,000
400,000
200,000
0
2009 2010 2011 2012
Shopping being a major leisure activity in Dhabi are around 53% lower than of those
the UAE, is also one of the most popular paid by line outlets in Dubai.
attractions for tourists visiting the country.
Despite large discounts, retailers Historically, Abu Dhabi’s retail offering The leasable area in the Emirate of Abu
are still recording a drop in sale Dhabi is set to increase from over 398,800
was limited to ‘high-street’ facing outlets
As of end of 2010 Abu Dhabi’s and a number of secondary facilities spread m² at the beginning of 2010 to 1.4 million
retail sector will consist of across the city, with Gross Leasable Areas m² by 2012, representing a 253% increase
approximately 739,500 m² of GLA, (GLA) ranging between 1,500m2 and and a projected 0.9 m² of GLA per capita.
an increase by 85% over 2009 8,000m². Over the past seven years, Abu Danet Abu Dhabi Mall, 4,820 m² GLA,
Dhabi has seen a marked change to its retail scheduled for completion in 2011 and
landscape, moving from a market with no Yas Mall, 296,000 m² GLA, scheduled for
SHOPPING MALL SUPPlY GROWTH
major retail malls to one with considerable, completion in 2012 are the two largest
Year m² GLA and successful, primary grade retail space. forthcoming malls. Current retail GLA
1985 - 1999 58,353 The current supply of shopping mall space per capita in the city is just 0.5 m2, while
2000 8,129 in the city reached over 398,800 m² GLA, retail GLA per capita in the neighbouring
2001 187,195 with a 95% occupancy rate across market, emirate, Dubai, exceeds 1m2. Based on
2006 5,574
and full occupancy in new generation these figures, it is likely that latent retail
2007 115,960
2009 23,600
shopping malls incorporating leisure demand remains in Abu Dhabi.
Total 398,811 amenities.
Analysis conducted by Colliers International
Whilst global market conditions at present suggests that retail spending per m2 will begin
Line store retail rents for established are expected to impact negatively on
to decline significantly in 2010, mainly due
and successful shopping malls spending power and consumer confidence,
to the 70% increase in retail space. Provided
remain high at US$ 864 per m2 the extent of the retailer cash-flow crunch
scheduled construction targets are met and
pa, while units in newer shopping is expected to be less marked than in
malls are offered at US$ 580 keeping the total income of Abu Dhabi
neighbouring Dubai, primarily due to a
per m², a decrease of 32% residents as a constant throughout the
retail market driven by UAE National
next three years, retailers can expect lower
spending power rather than tourism
revenue per m2 of retail space. However,
AVERAGE rentals q1 2010 inflows and expatriate spending, making
it less susceptible to the current economic keeping in-line with standards set by
1000
downturn and fickle consumer behaviour. the International Council of Shopping
900
800 The rapid success enjoyed by retail malls Centres (ICSC) and government population
700
in Abu Dhabi is reflected in the relatively estimates outlined in the Abu Dhabi 2030
US$ per m2 pa
600
500 high rental levels commanded by recently plan, Abu Dhabi’s retail market remains
400 completed malls. Annual rents for large undersupplied. Despite immediate concerns
300
anchor tenants average US$ 176 per m², of low footfall levels in smaller shopping
200
100 whilst average rates for line stores are centres and current economic conditions,
0 almost US$ 845 per m² per annum. Despite we remain bullish on the Abu Dhabi retail
Line Store Anchor Store
Established and Successful New Release
the high rental rates, line rentals in Abu market over the long term.
Colliers International
abu dhabi hospitality FIRST Quarter 2010
30,000
25,000
Number of Rooms
20,000
15,000
10,000
5,000
0
2009 2010 2011 2012 2013
The majority of hotels, until recently, are slightly higher at 78%. RevPAR for 2009
located at the northern end of the island, as well reached US$ 215, accounting for a 1.7%
as the Western Corniche, Eastern Commercial Y-O-Y decrease, while ARR increased by
District (Salam Street), and Eastern Corniche 4.7% during the same period. Despite the
(Tourist Club Area). The Eastern Commercial decrease in occupancy rate, an increase in Abu Dhabi’s focus on business
District and Eastern Corniche areas currently average room rate ensured the capital city’s visitors might reduce the anticipated
have the highest concentration of hotels. This RevPAR 74% higher than the regional long-term effect of the crisis
is primarily due to their proximity to the main average. However in Q1 2010, hotel revenues
commercial areas of the city. Abu Dhabi is have more than halved with RevPAR
PERFORMANCE INDICATORs (Y/E 2009)
also served by approximately 3,300 serviced dropping to US$ 142 compared to US$ 300
apartments, in many cases forming part of a durig the same period last year. Occupancy MARKET OCCUPANCY: 75%
4-star or 5-star hotel. rates in Q1 2010 also declined significantly 5-star OCCUPANCY: 78%
led to a decline in bookings from Europe and hospitality components within forthcoming 60%
50%
other regions to the Middle East. Secondly, master-planned developments, we expect hotel 40%
being pegged to the appreciating dollar has supply to increase by 133% between 2009 and 30%
20%
become more expensive for travellers from 2013 from approximately 10,700 in 2009 to 10%
the UK, leading to a choice of alternative 24,900 in 2013. The largest increase in hotel 0
2000 01 02 03 04 05 06 07 08 2009
holiday destinations. room supply is expected between 2011 and
2012, amounting to 43% of forthcoming supply.
Colliers’ survey of hotels in Abu Dhabi Given the fact that most of the city’s existing Abu Dhabi Tourism Authority
suggests that occupancy levels increased hotels are functionally full at present, there is (ADTA) indicates, that of
steadily from 2003 to 2005. Despite an potential for the market to absorb a fairly large the 13,000 hotel rooms they
average occupancy rate of 80% between number of additional rooms while remaining plan to license by 2012,
2006 and 2009, average occupancy rate profitable. Nevertheless, a supply increase of approximately 58% will be in
across all hotel categories dropped to 75% this scale is highly likely to have a considerable the 5-star category, highlighting
by the end of 2009. Average occupancy dampening effect on both occupancy rates and considerable oversupply risks in
levels experienced by 5-star hotels were ARRs in the medium term. this segment over the longer term
Colliers International
Dubai OFFICE FIRST Quarter 2010
7,000,000
6,000,000
5,000,000
4,000,000
m2 NLA
3,000,000
2,000,000
1,000,000
0
2008 2009 2010 2011 2012
The supply of office space in Dubai rose to suffered a decrease in Q3 2009. Its location
approximately 3.6 million m2 by the end of and overall quality of the developments
A decreasing demand for office 2009, an increase of 20% over the previous year. together with the supporting residential and
space, leading to a decline in Demand remained weak and showed no signs retail amenities are all factors contributing to
occupancy levels, have changed of recovery, as companies continue to downsize the attractiveness and sustainability of the new
the demand-supply dynamics and implement cost cutting measures. Overall CBD.
in favour of the tenant. office occupacy rates in Dubai average 71%.
Occupancy rates in old Dubai (Deira, Bur Dubai Dubai office sales prices have continued to
and Sheilh Zayed Road) average 90% while decline, decreasing by 27% over the last 12
average rentals q1 2010
occupancy rate in new office district is 42%. months. No price increases were recorded in
1,200,00
any of the office projects in Dubai during this
1,000,00
Because of the oversupply, owners of newly period. Before the global financial crisis hit
US$ per m2 pa
800,00
completed buildings must attract tenants and Dubai demand for both office and residential
600,00
are doing so by offering rent free fit-out periods, properties had been driven mainly by speculative
400,00
200,00
flexible rental structures and favourable lease transactions. This increased prices with little,
0
terms. This greater availability of space in new if any underlying appreciation in value. When
buildings coupled with low rental rates appears
JLT
DSO
SZR
DIP
DTJA
DOZ
Burj Dubai
Al Barsha
Tecom C
Tecom A
DIFC
Business Bay
10 Colliers International
Dubai reSidential FIRST Quarter 2010
450,000
400,000
350,000
Number of Units
300,000
250,000
200,000
150,000
100,000
50,000
0
2008 2009 2010 2011 2012 2013
The total supply of residential space in Dubai availability of mortgage finance and the economic
exceeded 330,000 units at the end of 2009 downturn. It was not, however, a gradual or even
and despite project cancelations and delays, decline. Prices dropped very sharply during Q1
is expected to increase by more than 12% to 2009 but the rate of decline eased during Q2
371,000 units by the end of 2010, Occupancy 2009. In Q3 2009 prices appeared to bottom
levels currently stand at 80% which means the out and the Colliers House Price Index (HPI)
market is oversupplied by around 65,000 units indicated 7% growth over average prices for Q2 At the end of the third quarter of 2009,
with a further 37,000 due to enter the market by 2009. This trend continued during Q4 2009 as residential sales prices started to increase.
the end of this year. the HPI registered further growth of almost 1%
over Q3.
Prior to the downturn at the end of 2008, the PERFORMANCE indicators
residential property market, just like the office What became clear from the HPI results for Q3
Average Rent: US$ 226 per m² pa
market, had to the largest extent been driven and Q4 2009 was that prospective purchasers
Premium Rent: US$ 284 per m² pa
by speculator demand. Other factors that were being very selective in the properties they
Average Sales Price: US$ 2,909 per m²
underpinned demand were the buoyant economy bought. The properties that enjoyed favour with
Average Yield: 7.8%
and rapidly growing population. The credit the market were properties in large community VACANCY Rate: 20%
crisis and downturn in the economy however developments where the developers are known
eliminated speculative demand, whilst at the entities with proven track records. These
same time forcing companies to downsize their developments would also generally offer additional The oversupply in the market has
operations. This led to large scale redundancies value in the form of amenities such as sport and caused rental rates to decline by 25%
leisure facilities, convenience retail, proximity to between Q2 2009 and Q1 2010
and thousands of expatriate workers returning to
their countries of origin. Demand for residential schools, landscaped gardens and public spaces.
The rate of decline in rental rates
property slumped and led to the precipitous Significantly, because these developments has slowed down in Q1 2010.
declines in rental rates as well as selling prices. enjoyed greater demand, financial institutions
The impact of this is still felt in the current were also more inclined to provide funding for
market where rental rates and selling prices have properties in these developments. The prospect Average apartment rental rate Q1 2010
continued to decline. of purchasers being able to get loan finance in
400
Rental rates declined by 25% in the period those developments further stimulated demand. 350
US$ per m2 pa
300
between Q2 2009 and Q1 2010, but over the past At the other end of the spectrum are developments 250
two quarters certain select developments have that don’t offer the additional value or the 200
indicated that rentals have started to stabilise comfort of a branded, known developer. Such 150
100
and in certain instances have staged a marginal developments generally enjoy less favour in the 50
recovery. A full recovery of the residential rental market. The result is that, because of reduced 0
Studio 1BR 2BR 3BR
market will however depend upon an increase in demand, banks are very reluctant to lend on
population, which can only occur on the back such developments which further stifles demand. Q2 2008 Q4 2009 Q1 2010
Colliers International 11
Dubai retail FIRST Quarter 2010
3,500,000
3,000,000
2,500,000
m2 GLA
2,000,000
1,500,000
1,000,000
500,000
0
2008 2009 2010 2011 2012 2013
The effects of the global economic downturn confidence evidenced by increased residential
that impacted the retail industry in Dubai property transaction volumes, and a return of
Shopping mall space is were primarily the following: tourist arrivals to pre-downturn levels.
set to increase by 9% • A reduction in the number of tourist arrivals Whilst rentals payable under new leases
between 2009 and 2010, during the first half of 2009, although this negotiated during 2009 showed a decline of
increasing the total supply was reversed during the second half of the around 18%, average rentals in formal shopping
to 2.4 million m2 GLA year, when tourist numbers increased again, mall space have remained relatively stable.
According to tourism authorities the total Current line shop rentals in shopping malls
number of tourists during 2009, recorded at are approximately US$ 1,310 per m² with large
NEW SHOPPING MALL SUPPLY* 6.9 million, equalled that of tourist arrivals in space occupiers (anchor tenants and department
2008. stores) at approximately US$ 210 per m².
Project Year m² GLA
• Consumer insecurity flowing from Average occupancy levels in malls remained
Bay Avenue 2010 18,000
widespread redundancies and job losses as high at 99% during 2009, and mall owners
Sunset Mall 2010 10,683
well as the recession in general. Anecdotal advise that there continues to be a healthy
Mirdiff City Center 2010 180,000 evidence suggests that spending patterns interest in available mall space. Developers
* This table does not constitute an exhaustive list of forthcoming supply became more reserved and that a greater of new shopping malls have however noted a
percentage of income was being saved in slow-down in the take-up (absorption) rate of
case the breadwinner lost his/her job. space in malls currently under construction,
The majority of shopping although this might be attributed as much to
• Decline in population numbers as shortcomings in the developments themselves
malls still continue to maintain unemployed expatriates returned to their as to prevailing economic conditions.
high occupancy levels country of origin. Although no official
statistics are available in this regard, The total supply of shopping mall retail space
reports of major job losses, coupled with in Dubai stood at 2.2 million m² at the end of
average rentals q1 2010 increased residential and office vacancies, 2009. Forthcoming supply due to enter the
and reduced foot traffic in shopping malls market by the end of 2010 should increase
1,400 support this contention. the total to 2.4 million m², an increase of 9%.
1,200 A further 400,000 m² is schedule for release
Throughout the first half of 2009, retailers
US$ per m2 pa
1,000
between 2011 and 2013.
800
reported that there had been a decline
600
in transaction volumes and basket sizes, Using the International Council of Shopping
400
200 downgrading by consumers from more Centres (ICSC) supply yardstick of 1.1 m²
0
expensive brands to less expensive brands of mall space per member of population and
Line Store Anchor Store
of the same item, a sharp decline in non- Dubai Government population projections
of around 1.7 million people at the end of
discretionary spend by consumers particularly
2009, the Dubai population could absorb
Rental rates in shopping on luxury goods and, also a drop in tourist
approximately 1.9 million m² of retail space.
malls have remained sales because of fewer tourists with reduced
However, taking into account Dubai’s
budgets. Trading densities (turnover per
relatively stable between transient tourist population of around 7.0
square metre of shop space) declined and
Q3 2009 and Q1 2010 turnovers suffered.
million people per year, many of whom come
to Dubai with the express purpose of shopping,
The second half of 2009 however was it will be fair to conclude that Dubai is by no
characterised by improved consumer means oversupplied in terms of retail space.
12 Colliers International
Dubai hospitality FIRST Quarter 2010
40,000
35,000
Number of Rooms
30,000
25,000
20,000
15,000
10,000
5,000
0
2008 2009 2010 2011
Despite the global downturn tourism inflows the cumulative stock of 4 and 5-star hotel
for 2009 remained unchanged compared to rooms in Dubai to 31,586. The number of
2008. According to official figures, Dubai beach hotels is also set to increase with the
received 6.9 million tourists in 2009, which opening of three new hotels in Jumeirah
is the same number of tourists that was Beach Residence.
recorded in 2008. Whilst tourist inflows from Revenue per available room
Europe and other Western countries showed In terms of tourist attractions, the opening of
(RevPAR) has declined as
a decline, Dubai was able to attract tourists Burj Khalifa, the tallest tower in the world,
a result of an 8% drop in
from new markets, mainly from other GCC with its supporting retail and leisure amenities
occupancy as well as room rates
countries and the MENA (Middle East and is expected to be a major drawcard for tourists.
North Africa) region. Another great attraction is the Meydan
Racecourse, a state of the art horse racecourse,
market PERFORMANCE (Y/E 2009)
Nonetheless, industry performance indicators, which recently opened. Meydan will be the
such as occupancy rates and RevPAR venue for the Dubai World Cup, the most Market Occupancy: 69%
(Revenue per Available Room), have shown a expensive horse race in the world. Dubai ARR: US$ 235
decline. This could be attributed mainly to the furthermore remains a major destination for RevPAR: US$ 164
additional new room supply which entered the shoppers from around the world. The MICE
market. To counteract the increase in supply, and trade tourism market is also expected to
hotels lowered room rates in an attempt to remain buoyant as Dubai is home to many 31% decrease in RevPAR in 2009,
increase occupancy rates. This however had a major exhibitions and conferences in the attributable to a 23% decline in
negative impact on RevPAR. region. ARR and a 69% drop
in occupancy level
In the 4 and 5-star hotel categories, occupancy Apart from the tourist attractions, prices of
levels dropped to 69% compared to 77% in goods in Dubai have not increased as is evident Despite the global recession,
2008, simply because of the availability of a from the decline in the consumer price index. tourist arrivals in 2009 has
greater number of rooms for the same number Coupled with the decline in the cost of hotel remained the same as in
of tourists. In order to boost occupancy rates, accommodation Dubai is set to be positioned 2008, namely 6.9 million.
hotels started to offer reduced room rates. as a more affordable tourism destination.
The average room rates (ARR) dropped by Greater affordability might increase the
existing beach hotel vs. city hotel
24% to US$235, compared to US$309 in average length of stay of tourists and increase
2008. The decline in occupancy rates and the average expenditure per tourists which
30,000
the ARR compressed the RevPAR, which will benefit retail sector and the economy as
Number of Rooms
25,000
is the main indicator of hotel performance. whole. 20,000
The RevPAR declined by 31% to US$162, 15,000
compared to US$237 in 2008. However in However, the sector still faces many challenges. 10,000
Q1 2010 indicators have shown a considerable The current global economic conditions 5,000
improvement in hotel performance. Occupancy are expected to affect the global tourism 0
2008 2009 2010 2011 2012
rate increased to 79% and average room rate market for years to come as individuals are Beach Hotel City Hotel
reached US$ 252, which consequently led to cut spending and increase savings. Another
an increase in RevPAR to US$ 199. challenge facing the market is the expected
future supply. Unless this supply is met with The number of hotel rooms
The supply of hotel rooms increased by 3% in increasing number of tourists and, therefore, is expected to increase by
2009 and is expected to increase by a further increased occupancy rates, the hotel market 12% by end of 2010.
12% by the end of 2010. This will increase in the city will become oversupplied.
Colliers International 13
doha OFFICE FIRST Quarter 2010
1,800,000
1,600,000
1,400,000
1,200,000
m2 NLA
1,000,000
800,000
600,000
400,000
200,000
0
2008 2009 2010 2011 2012
The majority of Doha’s grade A office space Over the same period office space sales prices
is located in West Bay and along Grand dropped by around 15% YOY to approximately
Existing supply amounts to 1.06 US$ 4,670 per m². Although sales prices
Hamad Avenue. The remaining office stock
million m2 of NLA, of which
in Doha is generally of sub-standard quality and rental rates have dropped, a compressed
70% is located in West Bay
and in need of upgrading. Colliers estimates interest yield indicates that the office market
the current total supply of A and B grade is maturing. Furthermore, a decrease in sales
average rentals q1 2010 office space in Doha to be approximately 1.06 prices will entice potential investors to acquire
800 million m2 NLA, which includes secondary office space at a reduced rate. Currently
700
600 space in locations such as the A, B, C and D the Doha office market is witnessing a 90%
US$ per m2 pa
500
Ring Roads and Grand Hamad Avenue. occupancy rate, which indicates that the
400
300 market is not oversupplied and that a healthy
200 Demand for office space in the West Bay appetite for office space exist as local business
100
0
area has to a large extent been driven by the continue to grow and international businesses
relocation of many government departments
A&B
Ring Roads
C Ring Road
D Ring Road
Grand
Hamad Ave
West Bay
14 Colliers International
doha reSidential FIRST Quarter 2010
120,000
115,000
110,000
Number of Units
105,000
100,000
95,000
90,000
85,000
2008 2009 2010 2011 2012
Historically , the city centre was the most sought Despite the global economic downturn, rental
after location for housing in Doha. However, as rates in Doha have continued an upward trend
the city grew and spread away from the centre, reaching a level of US$ 415 per m2 per annum, Existing residential supply comprises
areas around the C, D and E Ring Roads grew which translates into a 68% increase over Q1 approximately of 102,500
in popularity. The West Bay CBD, in addition 2009. Three bedroom apartments are currently apartment and villa units
to its commercial demand, has also become a
achieving the highest rental rate at US$ 515 per PERFORMANCE indicators
sought after high-end residential area. These
m2 per annum, while rental rates for one and two Average Rent: US$ 415 per m² pa
changes in residential trends came about largely
bedroom apartments are below market average. Premium Rent: US$ 590 per m² pa
because of the suburban quality of the outlying
Average Sales Price: US$ 4,130 per m²
areas as well as the reduced traffic congestion on Premium rental rates are attained in the Pearl at
Average Yield: 10%
improved road systems. US$ 590 per m2 per annum, 42% above market
VACANCY Rate: 10%
average. Unlike rental rates, the economic
Doha’s residential sector has been plagued over Whilst sales prices decreased by
downturn has however had an effect on sales
the past three years by an acute housing shortage 9% YOY, rental rates increased
prices, which have declined by 9% over Q1 by 68% over the same period,
due to increasing demand not being met with
adequate increases in supply. Although the 2009, and is currently US$ 4,130 per m2. Viva leading to an increase in cap rates
position has eased somewhat most of the new Baharia is selling at a premium of US$ 6,320 per
average sales price q1 2010
supply is still under construction. m2. The large increase in average rental rate and
the decrease in average sales price led to average 7,000
The current population of Doha stands at around 6,000
investment yield to change from 6% in Q1 2009 5,000
841,000 people and with an average household
US$ per m2
4,000
size of 5.9 people, this translates into an overall to 10% in Q1 2010. 3,000
demand of 142,600 housing units. With existing Provided scheduled completion dates are met,
2,000
1,000
supply at around 102,600 units, the market is Doha residential supply is expected to increase 0
Lusail Porto Viva West
significantly undersupplied by around 40,000
by 6% in 2010, leading to a total supply of Arabia Baharia Bay
residential units.
around 108,200 residential units. The supply Provided completion dates are
Demand for additional housing is not just is forecasted to continue to increase and reach met, supply is expected to grow by
confined to the immediate Doha area but a total of 117,600 units in 2012, an increase of 15% between 2009 and 2012
includes the population of the Al Rayyan area, 15% over the preceding three years. Average annual apartment rent Q1 2010
which makes up greater Doha.
The projected growth in supply of residential 900
The type of housing needed to meet this additional 800
accommodation between now and 2012 will not
US$ per m2 pa
whereas for expatriates the provision will mainly the back of projected economic growth in Qatar. 300
200
consist of family housing and apartments ranging The Doha residential market may therefore be 100
from low to high-end, depending on their skill expected to remain in a strongly undersupplied 0
Old Al Saad West West Lagoon
base and income bracket. position for the foreseeable future. Airport Bay Bay Plaza
1 BR 2 BR 3 BR
Colliers International 15
doha retail FIRST Quarter 2010
1,000,000
900,000
800,000
700,000
600,000
m2 GLA
500,000
400,000
300,000
200,000
100,000
0
2009 2010 2011 2012
Doha currently has a total supply of formal 2010 (provided scheduled completion dates
Doha currently has approximately retail space of around 444,500 m² GLA are met), which represents a 39% increase
444,500 m² of GLA comprising (Gross Leasable Area). Historically the in supply. By 2012 total supply is expected
shopping centres spread across market has been undersupplied and despite to exceed 826,000 m² GLA, which is a 94%
extensions by a number of existing shopping increase on existing supply.
the capital city, which is
centres in recent times, demand continues to
expected to double by 2012 As new supply is delivered, market conditions
exceed supply. This is supported by the high
are likely to become more competitive and
Rental rates in shopping malls absorption rates experienced by developments
absorption rates along with rental rates
currently averages US$ 677 such as the Villagio Mall and the Pearl.
are expected to drop. With most of the
per m2 pa, with premium rent The global economic downturn in 2009 had forthcoming supply aimed at the upper end of
at US$ 785 per m2 pa being a very limited effect on the Qatar economy the market the impact of the additional supply
achieved by Doha City Centre and the country has continued to experience will be greater in this sector.
strong economic growth. Per capita GDP,
As retail markets grow so does the demand for
AVERAGE REnTAls Q1 2010 which for some years has been the highest
new brands in the new developments. Better
in the world, grew from US$ 80,000 to US$
900 marketing and management strategies will be
800 86,000 between Q1 2009 and Q1 2010. This
critical if the older centres are to continue
700
translates into high discretionary disposable
to offer competition to new developments.
US$ per m2 pa
600
500 incomes and a strong purchasing power for
Diversification is the most obvious way in
400 Qatari residents.
300 which retailers are seeking to minimize the
200
Retail rental rates in Doha are currently risk of potential over-supply. Management
100
0 amongst the highest in the Gulf region. teams from Grade B developments are turning
Average rental rates for line shops currently towards markets traditionally under-catered
City Center Doha
Hyatt Plaza
Royal Plaza
Landmark
Shopping Mall
VIllagio
Al Asmakh
Center Point
stand at around US$ 677/m² per annum, which for and attempting to create a new breed of
represents a 17% increase over Q1 2009. mall aimed at Qatari nationals at the lower
The highest rental rates are currently being and medium end of the market. The trend
achieved by the Doha City Centre, which is a towards diversification can also be seen in
existing supply snapshot
reflection of the popularity and therefore the the new development of shopping centres
Shopping Mall m² GLA Number
of Units commercial strength of the centre. in regions outside Doha. One of these new
Doha City Centre 303,000 380 projects, the Al Khor Mall by EMKE Group,
There are however a number of large retail
Villagio 140,000 200 will cater to the Al Khor municipality and
Porto Arabia 90,000 350 developments currently under construction
other northern municipalities.
Landmark Shopping Mall 58,000 120 in Doha, such as the Barwa Commercial
Avenue, that have the potential of bringing
Barwa Commercial about a change in the current supply/demand
Avenue is expected to fundamentals in the market. Colliers research
add 100,000 m2 GLA to indicates that around 175,000 m² GLA is
expected to be delivered to the market in
current supply by 2012
16 Colliers International
doha hospitality FIRST Quarter 2010
16,000
14,000
Number of Rooms
12,000
10,000
8,000
6,000
4,000
2,000
0
2009 2010 2011 2012 2013 2014
Demand for hotel rooms in Doha is driven by The number of hotel rooms in Doha is
the key factors of economic and population expected to increase to almost 13,000
growth, and is underpinned by a range of rooms by 2012, representing an increase of Over 2,100 hotel rooms to be
government-implemented initiatives aimed at approximately 3,930 rooms, or an increase added to the market by end of
attracting investment and creating demand. of 43%. Additional supply is scheduled for 2010, provided no delays occur
Building on an estimated influx of 962,000 completion post 2012, amounting to 1,880
tourists in 2006, the tourism authority in hotel rooms and 64% increase over the next PERFORMANCE INDICATORS (Y/E 2009)
Qatar has defined objectives which include five years. Total forthcoming supply by 2014 is
Market Occupancy: 50%
the development of the Meetings, Incentives, expected to reach approximately 5,600 rooms
ARR: US$ 327
Conferences and Exhibitions (MICE) market of which 74% is within the 5-star category,
RevPAR: US$ 164
in particular, given that 95% of current visits leading to a cumulative supply of over 14,800
to Qatar are believed to be at least partially hotel rooms by 2014. Note that forthcoming
business linked. supply included in the hospitality sector only
denotes 4 and 5-star hotels. Despite 20% increase in ARR,
The Doha hospitality sector is changing revPAR declined by 16% due to
significantly. Doha currently has approximately Qatar Tourism Authority had initially 30% decrease in occupancy rate
9,000 hotel rooms in the 5-star and 4-star forecasted 1.5 million visitors in 2010. Due
categories. With almost 6,500 hotel rooms, to decrease in number of tourists in 2009 by
5-star hotels have a clear majority of existing 160,000 visitors, the forecasted goal is unlikely trend hotel performance
hotel rooms in the two mentioned categories. to be achieved. Planned forthcoming hotel
350 90%
supply is thus based on an unsustainable goal, 300 80%
Except for 2008, average room rate in Doha which will most likely lead to an oversupply 70%
250
has witnessed a continuous increase post 2004, in the hospitality sector in the short term. 60%
US$
200 50%
amounting to a CAGR of 18% between 2004 The risk for oversupply is significantly higher 40%
150
and 2009. ARR increased by 20% between within the 5-star category due to the large 100
30%
2008 and 2009 and is currently at US$ 327. share of existing supply and the share of 50
20%
10%
Although ARR witnessed an intensifying forthcoming supply, which amounts to 74% of 0 0%
2004 2005 2006 2007 2008 2009
trend, occupancy rate has registered a more forthcoming supply.
volatile trend. Doha average occupancy rate ARR RevPAR Occupancy Rate
Colliers International 17
riyadh office FIRST Quarter 2010
3,000,000
2,500,000
2,000,000
m2 GLA
1,500,000
1,000,000
500,000
0
2008 2009 2010 2011 2012 2013
Riyadh’s office market experienced key projects are expected to compete with
considerable growth with 369,000 m2 of existing supply located in the city’s primary
Office space grew by over
additional office space delivered in the city’s CBD.
369,000 m2 between Q1
2009 and Q1 2010. core business artery during 2009 and into
Many landlords, supported by the recent
Q1 2010; however, the majority of space
Demand for office space largely has been within grade B whilst demand is government leasing pattern are seeking
stems from the government to lease only to large companies looking
primarily for grade A space.
sector during the past year for multiple floors. With the shortage
The city’s office stock is expected Demand in the main business district has of available grade A space smaller scale
to grow by over 436,000 m2 of net stemmed from the Government Sector tenants are facing difficulties sourcing
leasable space by the end of 2010 during the past year. Some non-CBD areas appropriate accommodation within grade
and the East Ring Road have witnessed A stock but are reticent about moving to
the construction of Government owned grade B offices.
PERFORMANCE indicators
purpose built offices and public agencies. In
Average Net Rent: US$ 310 per m² pa
addition, semi government agencies have On the back of increasing demand and
Premium Net Rent: US$ 413 per m² pa
also been the largest tenant, leasing deals limited supply of Grade A offices, rental
Average Sales Price: US$ 2,716 per m²
within the city with large lettings to among rates remained stable at US$ 413 per m2
Average yield: 11.5%
others, the Human Rights Commission and per annum excluding Kingdom Tower and
Vacancy Rate: 24%
The National Water Company. Al Faisaliah Centre. Meanwhile, rents of
grade B office space softened by an average
AVERAGE REnTAls Q1 2010 New low-rise office buildings are being
of 15% in Q1 of 2010 compared to the
constructed in the commercial districts of
350 previous year. Vacancy levels increased by
300 Maather and Malaz to south of the CBD.
7% reaching 24% while net stock absorption
250 However, the momentum of the city’s
US$ per m2 pa
200
development continues to be to the north, fell by 2% compared to previous year.
150
100 where a number of large new business parks Colliers foresees that this is only a short term
50 have started construction. issue as the volume of new space entering the
0
market will force landlords to change their
King Fahad
Road
Al Maather
Street
Al Dabab
Street
Olaya
Street
18 Colliers International
RIYADH reSidential FIRST Quarter 2010
2000
1800
1600
Number of Units
1400
1200
1000
800
600
400
200
0
Jana 4 Al Qasr Manazel Qurtoba Burj Rafal
Riyadh’s residential market continues to market witnessed a 12% YOY price increase
be marked by an undersupply especially in Q1 2010 reaching an average sales price Mid-scale and individual developers
in affordable houses. The Escrow Law of US$ 755 per m2. The rental market are currently the most active in
has polarised effects on the residential observed a YOY increase of 6% reaching an terms of construction activity
market: although it has induced end- average rent of US$ 60 per m2 per annum.
Increasing construction activities in
buyer’s confidence, it also inhibited delivery areas such as Al Yasmin and Al Rabih
Previously, construction of residential was
of supply with most master-planned
concentrated in North Riyadh—the city’s
developments put on hold or delayed.
most developed area. However, increases PERFORMANCE indicators
Mid-scale and individual developers are in land prices within these locations have Average Rent: US$ 66 per m² pa
currently the most active in terms of driven development further north to Al Premium Rent: US$ 72 per m² pa
construction activity. These developers Yasmin, Al Rabih, and Al Nafel Districts. Average Sales Price: US$ 730 per m²
focus on mid-scale to high-scale residential We anticipate city peripheral and suburban Average Yield: 7.5%
developments that are less than 100 units. schemes will continue to attract developers Riyadh residential market requires an estimated
Low-end villas are at an average sales price and occupiers alike as they take advantage 30,000 units per annum to address demand
of over US$ 490 per m2 and have an average of lower land purchase entry costs.
average sales price q1 2010
built up area of 300 m2. Riyadh’s median
There is an increasing number of residential
monthly household income stood at US$ 790
units currently in the pipeline that adopt 780
1,602 in 2009 which underscores that
the semi-gated community and master 770
affordability remains to be a major challenge.
US$ per m2
760
planned development concepts Blncyah
With the cost of land remaining high as 750
and Dar Al Arkan’s Al Qasr Project being 740
a component of the villa development
the most visible. 730
process, plot and end unit sizes have been 720
reduced in an attempt to bring down the cost The long overdue mortgage law is still under 710
700
of completed units. Conversely apartment consideration and its implementation is VIllas Apartments
sizes delivered in Q1 2010 have been larger anticipated the market by encouraging both Although new regulations are aimed to ease loan
as they seek to bridge the gap by offering an developers and purchasers alike. measures and are expected to stimulate demand,
affordable and desirable alternative to villa effects are yet to be tested in the market
accommodation.
average rentals q1 2010
With market correction attributed to, 80
among others, the global economic slump, 70
60
rents and sales prices of residential units
US$ per m2 pa
50
dropped at an average of 8% and 22% 40
Colliers International 19
RIYADH retail FIRST Quarter 2010
3,000,000
2,500,000
2,000,000
m2 GLA
1,500,000
1,000,000
500,000
0
2008 2009 2010 2011 2012 2013
500
400 Hard voids-units that are empty but areas and around the Ring Roads Retail
300
200
available for occupation, grew by 2.5%, space will be opened up for new brands to
100 attributed partly to the entry of Panorama enter the Kingdom, but older malls require
0
Anchor Store Department Store Line Shop
Mall and other small scale retail supply repositioning and revamping in order to
in early 2010. However, while soft voids stay competitive.
20 Colliers International
riyadh hospitality FIRST Quarter 2010
10,000
9,000
8,000
7,000
Number of Rooms
6,000
5,000
4,000
3,000
2,000
1,000
0
2008 2009 2010 2011 2012 2013
Compared to the rest of Saudi Arabia, term visitors; however, occupancy levels
hotel construction in Riyadh has been also declined by 2% in 2009 compared to
slow with the city’s hotel supply growing at previous year. Rise in corporate activities and
a CAGR of 6.5% between 2005 and 2008 Government events resulted to a
In a clear sign of corporate cost cutting
compared to Al Khobar and Dammam’s 5% increase in occupancy levels
13% YOY growth. Currently room supply a number of international and regional in Q1 2010 compared to the
is over 8,300 which constitutes only companies have limited or shortened same quarter in the previous year
6.5% of the total hotels in Saudi Arabia. visits, resulting in a decline of 1.5 days in reaching an average occupancy rate
However, despite hotel room undersupply length of stay from an average of 2 days in of 79% in the hotel segment.
especially in the 5-star segment, Riyadh 2009 compared to the previous year’s 3.5 Average occupancy rate for
carries 20% of the Kingdom’s premier days. Meanwhile VFR (visiting family and serviced apartments registered
hotels. Much of the forthcoming supply relatives) visitors have an average length a YOY decrease by 2%.
of premier hotels in the capital is within of stay at 5.5 days-the same as the previous average occupancy rate
mixed use developments reflecting the year.
100%
cities current top offerings which are 90%
The average room rate remained stable at
similarly configured. 80%
US$195 per night while RevPAR increased 70%
60%
Initiatives from the Government and the by two percent reaching US$ 144 per 50%
private sector such as the Global Economic available room. F&B and MICE segments 40%
30%
Forum and the Globe Summit seek to contribution to the hotel’s accrued revenue 20%
reposition Riyadh and consolidate its role which also increased representing an
10%
0%
as a major business and financial hub as average of 35% of the hospitality sectors 5-Star Hotels 4-Star Hotels Serviced Apartments
well as a major events tourist destination. total revenue in the past year. market PERFORMANCE (Y/E 2009)
Riyadh’s 5-star and 4-star room supply The city’s room supply is expected to grow MARKET OCCUPANCY: 74%
are concentrated in primary CBD’s and by 870 in 2010 and a further 1,034 rooms 5-star OCCUPANCY: 79%
adjoining roads with a concentration in
are expected to enter the market by the ARR: US$ 195
the Central Area constituting 57% of total REVPAR: US$ 144
end of 2011. About 10% of the future
supply, 32% are located in northern areas
hotel supply is in the 5-star category and The city’s room supply is expected to
while the remaining are dispersed on other
30% in the 4-star category, in addition grow by 870 in 2010 and a further
major roads. 1,034 rooms are expected to enter
there are currently 6 serviced apartments
Corporate demand continues to drive the the market by end of 2011
under construction in the city.
city’s hospitality sector. Occupancy levels average room rate
fell by 4.5% in 2009 compared to previous We anticipate a slight drop in occupancy
year due to cancellation or postponement rates once forthcoming supply is delivered; 500
450
of major events planned in the previous however, Riyadh’s hospitality sector is not 400
350
year and decline of corporate visitors due widely vulnerable to seasonality unlike 300
US$
to global economic downturn reaching markets in Eastern Province, Makkah and 250
200
an average occupancy rate of 79% in Madinah. We therefore expect demand for 150
100
the hotel segment. Serviced apartments hotel rooms to increase and for occupancy 50
continue as reasonable substitutes for long- levels to stabilise in the medium term. 0
5-Star 5-Star 4-Star 4-Star Serviced
Suite Suite Apartment
Colliers International 21
jeddah office FIRST Quarter 2010
900,000
800,000
700,000
600,000
m2 GLA
500,000
400,000
300,000
200,000
100,000
0
2008 2009 2010 2011 2012 2013 2014
Jeddah’s office space grew substantially by Rentals declined by 3% in other parts of the
Jeddah’s office space grew by over 119,200 m2 between Q1 2009 to Q1 city while North, South and Central Jeddah
over 119,200 m2 between 2010. However, with a commercial market witnessed rental increase by an average of
Q1 2009 to Q1 2010 marked by limited supply and increasing 4% YOY. Average office rents currently
Vacancy levels fell by 2% currently demand, vacancy levels fell by 1% while stand at US$ 110 per m2 per annum for
at an average of 5.5% market-wide modest increase in rents was observed. Grade B offices and US$ 336 per m2 per
annum for Grade A space.
Unlike Riyadh, delivery of office space in
PERFORMANCE indicators
Jeddah has been scattered with no defined Before end of 2010, over 115,400 m2 of
Average Net Rent: US$ 278 per m² pa primary CBD. Existing supply is dominated office net leasable area is expected to enter
Premium Net Rent: US$ 395 per m² pa by Grade B comprising approximately 72% the market-in various parts of the City-
Average Sales Price: US$ 2,650 per m²
of total net stock. Office space demand stems 60% of which is of Grade A quality. A
average yield: 10.5%
from the trade, tourism, finance, real estate number of office developments that are
Vacancy Rate: 5.5%
and other business services especially those currently under construction such as The
facilitating imports and exports. Over the Headquarters, Zahran Building, Lamar
Net stock absorption grew
modestly by 1% in Q1 2010 proceeding twelve months there has been
Towers and Jeddah Gate will be offered on
a slight increase in the number of domestic
free-hold. These developments will test the
and regional companies seeking to establish
AVERAGE REnTAls Q1 2010 market’s appetite on strata ownership, the
their presence in Jeddah translating to an
demand of which is currently challenging to
400
increased demand especially for Grade
350 gauge. Meanwhile, office space is set to grow
A accommodation. Overall the quality
300
by 17% by 2013. With a growing business
of office premises within Jeddah is below
US$ per m2
250
industry, it is expected that forthcoming
200 that of Riyadh’s, leaving a shortfall in
150
international standard or regional standard supply especially those of Grade A offices
100
Grade A accommodation. will be easily absorbed by the market.
50
0
King Abdulla Street Al Madina Street Al Tahlia Street
Unlike Riyadh, forthcoming supply in A majority of forthcoming supply and those
Jeddah is scattered in various locations in the pipeline are standalone commercial
within the City, Most of new supply is developments while forthcoming supply
Existing Supply m2 NLA
owner-occupied with Grade A multi-tenant located on the Corniche Area are generally
Al Murjan Tower 9,400
space generally found within mixed-use part of mixed-use developments.
Gulf Plaza 17,900
Saudi Business Centre 28,700 developments.
As the market recovers, demand for office
Gulf Centre 33,600
Jeddah Tower 38,900 Vacancy levels fell by 2% YOY and are space is set to increase in Jeddah; however,
Ibn Hamran Centre 64,800 currently at an average of 5.5% market- gap in market-wide supply is minimal.
wide. Tahlia district recorded the lowest Opportunity lies in readdressing the
By end of 2010, over 115,400
vacancy rate at 4% while vacancies in other imbalance of supply by developing Grade
m2 of office net leasable area is
expected to enter the market areas reached 7%. Movement of rentals has A offices that can accommodate multi-sized
been varied in different parts of the City. tenants.
22 Colliers International
jeddah reSidential FIRST Quarter 2010
4,500
4,000
3,500
Number of Units
3,000
2,500
2,000
1,500
1,000
500
0
Royal Escan Jeddah Gate Lamar Towers Burj Al Masarat
Newly delivered residential supply is active in residential construction with the 850
generally larger and has better finishing majority of units of mid-range constructed US$ per m2
800
quality compared to houses in other cities by mid-scale developers. With limited 750
of the Kingdom. Apartments recently available financing schemes and a median 700
delivered are larger in size compared to older monthly household income of US$ 1,614, 650
stock. This indicates the growing number affordability remains a major constraint in 600
VIllas Apartments
of Saudis that are relocating to residential supply absorption.
apartments as they are currently priced out Due to the Jeddah flood, rents in some
of a majority of villa supply. Demand for According to a strategic plan by the Jeddah
parts of the city increased by almost 15%
apartments has been sustained whereby a Municipality, the city needs more than
sizeable number of units are of 2-bedroom 570,000 housing units over the next 20 With an average household
years. Jeddah municipality’s plan is based on income of US$ 1,614, the major
and 3-bedroom types. Average size of
present shortages and future requirements. challenge lies in affordability
apartment units of one-bedroom structure
stands at 86 m2 while four-bedroom units Currently there is a shortage of 283,000
can span at an average of 270 m2. housing units, including 80,000 in the PERFORMANCE indicators
low-income group with the Government Average Rent: US$ 81 per m² pa
Drop in plot size and BUA of villa units is actively calling for the development of Premium Rent: US$ 89 per m² pa
indicative of declining household size and 151,600 residential units to accommodate Average Sales Price: US$ 850 per m²
developers’ attempts to address affordability. residents in underdeveloped areas especially average Yield: 9.5%
However, high-end residential villas those affected by the flood, and a further
especially those located in the Corniche 51,500 units to meet rising demand. average rentals q1 2010
Areas are bigger in sizes reaching an average
90
of 800 m2 BUA.
80
50
to high-end and more spacious apartment 40
units. Price growth in Q1 2010 compared 30
to previous year is driven by increase in 20
land prices. The freehold market witnessed 10
0
VIllas Apartments
Colliers International 23
jeddah retail FIRST Quarter 2010
1,200,000
1,000,000
800,000
m2 GLA
600,000
400,000
200,000
0
2008 2009 2010 2011 2012 2013 2014
Jeddah’s retail sector has been performing With a minor overall decline in retail
robustly in recent years, despite voids rentals have remained relatively
considerable increases in available retail stable. We attribute the decline n overall
Shopping mall supply grew gross lettable area. However, the volume occupancy levels to be relatively short
by 16% in 2009. of lettable space to be delivered into the term as the worlds markets recover and
market, even when combined with the Jeddah’s previous large influx of new retail
under construction and planning total, floor space is absorbed.
Existing Supply m² GLA
is notably smaller than that which has
Big Box tenants in Jeddah with an average
Herra Mall 61,600 been delivered and absorbed by the market
area size of 18,000 m2 GLA currently
Al Andalus Mall 79,900 in the last three years - indicating that
lease at an average of US$ 147 per m2 per
Serafi Mega Mall 90,278 Jeddahs retail supply has reached a plateau.
annum, line shops with an average unit
Jeddah’s shopping mall gross lettable area
Aziz Mall 99,100 size of 140 m2 are currently achieving an
grew by 16% over the past year compared
Red Sea Mall 133,200 average of US$ 667 per m2 per annum.
to a 51% growth in 2008.
Mall of Arabia 139,800
Jeddah’s shopping mall stock is expected
*This table does not constitute an exhaustive list of current supply The city’s current four leading malls are
to grow by 351,000 m2 GLA by 2014. A
Mall of Arabia, Red Sea Mall, Al Andalus
sizeable portion of forthcoming malls
Mall and Serafi Mega Mall all with an
are part of mixed-use and masterplanned
average daily footfall of 34,250. These
Average retail occupancy in Q1 developments. Retail remains one of
2010 stands at 86% while net lettable malls lead the market in terms of gross
the few available recreational activities
stock absorption declined by 3%. lettable area, tenant mix and available
in Jeddah where a whole family can go,
food and entertainment centres (FEC).
Jeddah’s shopping mall suggesting that the market may support a
Jeddah’s malls are the most developed in
stock is expected to grow by higher GLA per capita and higher average
the Kingdoms in terms of entertainment
351,000 m2 by 2014. spend requirement than might otherwise
activities available. It is usual to find two
be the case.
entertainment centres inside a mall that
appeal to different age ranges. As Jeddah is gears itself as a prime business
tourism destination in the Middle East with
AVERAGE rentals q1 2010 Market-wide footfall grew by 3% in Q1
the help of the General Commission of
2010 compared to the previous year due to
800 Tourism and Antiquities, more competition
700 a longer summer vacation which coincided
in Jeddah’s retail sector is set to accelerate
600 with Ramadan and Jeddah witnessing the
as investors will try to attract consumers
US$ per m2 pa
500
benefits of increased domestic tourism.
400 with high-end retail shops coupled with
300 Hard voids-units that are empty but international brands that appeal to the
200
available for occupation, grew by 4% with general public. This competition will
100
0
the entry of Danube Mall and other retail result in the construction of improved
Anchor Store Department Store Line Shop supply in early 2010, while soft voids-those quality retail offering with added features
available but currently trading, declined that will attract various types of consumers.
by 2%. Average retail occupancy in Q1 Older malls are expected to lose footfall
2010 stood at 86% while net lettable stock and tenant base to newer malls which will
absorption in Q1 2010 registered a 3% necessitate revamps in facilities in order to
decline compared to previous year. remain competitive.
24 Colliers International
jeddah hospitality FIRST Quarter 2010
12,000
10,000
Number of Rooms
8,000
6,000
4,000
2,000
0
2008 2009 2010 2011 2012 2013
Jeddah’s hospitality sector has been marked due to the extended summer holidays
by an undersupply especially in the 5-star that coincided with Ramadan. Although
segment. As of 2009, the 5-star market the quality of existing stock is poor both Occupancy levels declined by
comprised a total of 2,996 rooms, spread by national and regional standards, 1.5% during the past year due to
over 14 hotels. Only 3 hotels of the city’s occupancy levels increased by 5% in Q1 a drop in corporate tourism
current stock are of international 5-star 2010 compared to previous year. This is a
quality whilst others, although classified dual effect of increased domestic tourism market PERFORMANCE (Y/E 2009)
as 5-star and 4-star hotels are generally and the aftermath of the Jeddah floods that MARKET OCCUPANCY: 71%
old and have reached their prime income occurred in November 2009. 5-STAR OCCUPANCY: 75%
generating tenure. ARR: US$ 195
Another factor in the success of the
The Government has recently taken steps REVPAR: US$ 139
serviced apartment market is the minimal
to spur growth by issuing a study which difference between the city’s 4-star room
calls for reclassification of the Kingdom’s ARR and the average rate of a serviced AVERAGE ROOM RATE
hotels in lieu of international classification apartment when considering the general 600
standards to boost hotel occupancy. The
poor quality of 4-star hotels. Average room 500
study also recommends measures such as 400
rate stands at US$ 32 per night during
US$
Jeddah’s hospitality sector is not vulnerable per available room) in the 5-star market The city’s existing room stock is
increased from US$ 178 in Q1 2008 to expected to increase by over 800
to seasonality as other hotel markets in rooms in the coming two years
Saudi Arabia and enjoys sustained robust US$ 186 in Q1 2010.
occupancy rates for most part of the year. The city’s existing room stock is to
However, occupancy levels declined by increase by over 800 rooms in the coming AVERAGE OCCUPANCY RATE
1.5% during the past year due to drop in two years; however, the growing number of 90%
Serviced apartments continue to dominate to buoy the hospitality sector in the short 60%
50%
the domestic tourist catchment market. term. The city’s hotel supply is expected 40%
Jeddah’s numerous festivals have attracted to increase by another 5,000 rooms by 30%
20%
an increasing number of domestic tourists 2014. This is expected to result to drop 10%
over the recent past with a notable increase in occupancy once forthcoming supply is 0%
5-Star Hotels 4-Star Hotels Serviced
in tourism visitation during the past year delivered. Apartments
Colliers International 25
eastern province office FIRST Quarter 2010
1,400,000
1,200,000
1,000,000
m2 NLA
800.000
600,000
400,000
200,000
0
2008 2009 2010 2011 2012 2013
200
150 A majority of available office space is of Grade 2010 compared to previous year. Current average
100 B quality consisting 78% of total supply and is rents of Grade A office space ranges from US$
50 predominantly owner occupied. Unlike other 200 to US$ 320 per m2 per annum while average
0
leading cities in the Kingdom, demand for Grade rents for Grade B office space ranges from US$
Mousa Ibn Al Naseer
Street
King Fahad Road
9th Street
King Saud Street
Prince Faisal Bin
Fahad Street
Mecca Street
King Abdullah Street
Prince Mohammed Ibn
Fahad Street
Al Ashrea’s Street
King Abdulaziz Road
Prince Sultan Street
B office space is more dominant than demand for 113 to US$ 147 per m2 per annum.
Grade A office space. We continue to foresee
this to remain the case in the short to medium Al Khobar and Dammam’s office supply is
term due to the nature of the province’s business expected to increase by over 196,900 m2 of NLA
and industry. However, demand for Grade A in 2010, followed by an additional increase
A majority of available office space is of grade office is also increasing at a modest rate. The of 261,000 m2 in 2011. Whilst a majority of
B quality, amounting to 78% of total supply demand profile from occupants is, in the main, the forthcoming supply will be standalone
for larger floor plates although there has been a developments one forthcoming development, Al
Al Khobar and Dammam’s office supply is Turki Business Park set completion in Q2 2010
noticeable increase in the demand for smaller
expected to increase by over 184,800 m2
offices, predominately from the banking sector. is a mixed-use development. Once completed,
of NLA in 2010, followed by an additional
it will offer over 12,400 m2 of NLA. Although
increase of 257,200 m2 in 2011 Al Hugayet Tower is currently the tallest iconic
tower in the province and the market leader demand is increasing, supply will continue to
in terms of floorplate size and facilities offered. outstrip demand in the medium term. Rents
Existing Supply m2 NLA
Meanwhile, Dammam Municipality recently are expected to further soften when new supply
Al Subaiei Building 1,900
revised its building code permitting commercial enters the market as landlords will be forced to
Adil Kashoggi Tower 10,490
developments with greater permissible heights. revisit their rents to attract tenants. Due to
Al Mohammadiah Tower 10,220
Novotel Business Park 30,000 This encouraged a number of high rise office the nature of the province’s business sector, we
Al Rashid Tower 24,300 developments currently under construction expect demand for Grade B office space to still
Al Hugayet Tower 38,400 particularly along the Dammam-Al Khobar dominate the market with minimal growth in
*This table does not constitute an exhaustive list of current supply Highway where some office buildings have Grade A office space demand.
26 Colliers International
eastern province reSidential FIRST Quarter 2010
350
300
Number of Units
250
200
150
100
50
0
Al Fahad Saraya Al Al Sweilam Al Ghadeer Meda 3 Abraj Al Muhandseen
Residential Al Waha Andalusiat Village Village Yasmeen
Towers Project
Eastern Province’s overall residential which underscores that current price levels
unit demand has not been met on the have priced out a majority of the province’s
supply side whilst conversely mid-range residents.
developers indicate that about 13% of
current supply is unoccupied. We attribute Overall Sales prices dropped by an average Affordability remains a challenge
this to the continued bias of developers of 13% YOY from Q3 2008 to Q3 2009, resulting to 13% vacancy rate
on developing mid-end and high-end with rents softened by an average of 4% in despite increasing demand
residential units while pent up demand for the same period. However, rents and sales
affordable accommodation climbs. Delays prices in prime residential areas remained
PERFORMANCE indicators
in residential unit delivery has further stable due to high demand. Land prices in
aggravated rising demand. prime areas increased by an average of 5% to Average Rent: US$ 68 per m² pa
Premium Rent: US$ 72 per m² pa
Currently, there is a good supply of low-end 10% in Q3 2009 as compared to last year.
Average Sales Price: US$ 716 per m²
leasehold residential villas and apartments Sustained demand from the end of Q3 Average Yield: 9.5%
in the province while existing freehold
2009 has resulted in a nominal increase in
supply are within the midto high-end
freehold prices at 2% on average in Q1 2010
ranges. New units under construction tend average sales price q1 2010
to be of higher quality than those seen in reaching an average of US$ 870. Rents
900
other Saudi cities, although not on par reached an average of US$ 57 per m2 per 890
with those in Jeddah. Unit sizes of new annum. We expect rental and sales prices 880
US$ per m2
residential units in both Dammam and Al to further increase as the economy recovers 870
860
Khobar are relatively bigger than those and as pent up demand continues to grow. 850
in Riyadh with an average sizes of 175 m2 840
Previous trends indicate that a majority
and 200 m2 for a two and threebedroom 830
units delivered to the market are slightly concentrated in Khobar, which is the Eastern 810
VIllas Apartments
smaller than previously delivered. To some Province’s most developed area. Similarly,
extent, this reflects declining household size most residential units presently under Average monthly household income
and the market requirement for affordable construction are also located in Khobar. stood at US$ 1,497 in 2009
property aimed at low to middle-income However trends indicate that a majority of
occupiers. Residential freehold market registered an
announced planned residential projects are
average increase of 2% in Q1 2010
We find that almost 62% of residential located in Dammam and Dhahran.
units have a plot size between 300 m2 and The effects of the Mortgage Law are
450 m2 with either three-bedroom or four- expected not to be felt in Eastern Province’s
average rentals q1 2010
bedroom units. To put into perspective, 70
residential market in the medium term
Al Khobar’s and Dammam’s household size 60
new regulations are tested. However, as
stood at 6.0 and 6.2 respectively, according 50
US$ per m2 pa
conducted in 2009. Eastern Province’s for residential units will also grow. The 30
20
median monthly household income stood challenge therefore lies in developing units 10
at US$ 1,497 in 2009 according to a recent that will be financially within reach of the 0
Villas Apartments
Colliers commissioned consumer survey province’s residents.
Colliers International 27
eastern province retail FIRST Quarter 2010
1,800,000
1,600,000
1,400,000
1,200,000
m2 GLA
1,000,000
800,000
600,000
400,000
200,000
0
2008 2009 2010 2011 2012
Limited shopping mall gross leasable area but currently trading declined by 1%. Average
(GLA) per capita in Dammam and Al Khobar retail occupancy in Q1 2010 stands at 89%.
in the past have resulted to a historical robust Net lettable stock absorption in Q1 2010 has
occupancy levels. However, with huge experienced a 1% decline compared to previous
Retail GLA supply grew by over
additional stock of over 614,000 m2 entering year.
614,000 m2 in the past two years
the market in the previous two years, tenants Meanwhile, big box tenants have an average
have started abandoning older malls in area size of 16,500 m2 and an average lease
favour of new ones which prompted owners rate of US$ 121 per m2 per annum. Average
Existing Supply m² GLA
to revamp their properties. One notable rent of line shop tenants stands at US$ 644
addition in supply is the Mall of Dhahran per m2 per annum excluding service charge.
Mall of Dhahran 150,600
which was originally completed in 2005. The
Al Rashid Mall 150,000
mall since then had undergone expansion in Mall operators have attempted to diversify
Ibn Al Khaldoun Mall 20,520 2009 increasing its gross lettable area to over their malls by including bigger spaces for
Al Shatea Mall 40,100 150,500 m2 and created increase in retail food courts and entertainment centres.
These facilities have proven to increase
Marina Mall 44,200 hard voids. The mall had secured covenants
footfall and dwell time at malls. One
Fouad Centre 24,000 with strong tenants however, when one of its
notable forthcoming supply that follows this
*This table does not constitute an exhaustive list of current supply major anchor tenants pulled out, occupancy
scheme is Al Othaim Mall Dammam. Once
levels dipped while some of the additional
delivered, it will be the first Al Othaim mall
space has yet to be absorbed.
Market wide occupancy rate of to operate in Dammam and will have the
shopping malls in the province Al Rashid Mall and Mall of Dhahran biggest indoor entertainment centre in the
stood at 94% in Q1 of 2010, a currently dominate the retail segment in area at 12,500 m2.
2% decline over the previous year Al Khobar and Dammam. Although new
Although recently delivered supply have
centres currently under construction are in
Average rent of line shop tenants more entertainment facilities, the number
par in terms of size, their strong reputations
stands at US$ 644 per m2 per of centres offering destination retail
will help to ensure ongoing competitiveness.
annum excluding service charges, opportunities, with shopping, entertainment
equating 7% YOY increase Retail footfall declined by 1.3% with less and family food and beverage outlets under
leisure visitors coming in from neighbouring the same roof remains a relatively untapped
Bahrain while footfall of premier malls territory.
AVERAGE rentals q1 2010 increased by 3% in Q1 2010 compared to
The general trend towards larger retail
last year. Market wide occupancy rate of
700 properties, as witnessed elsewhere in the
shopping malls in the province stood at 94%
600
GCC, is expected to continue in Dammam
US$ per m2 pa
28 Colliers International
eastern province hospitality FIRST Quarter 2010
6,000
5,000
Number of Rooms
4,000
3,000
2,000
1,000
0
2008 2009 2010 2011 2012 2013
Hospitality demand continues to largely daily rate in the 4-star segment. As the
stem from corporate tourism and domestic first value hotel in Eastern Province, Park
visitation in Eastern Province. Previously Inn enjoyed a robust occupancy in Q1 Hotel room supply grew by 7%
characterised by limited supply, the growth 2010 at an average of 60% compared to while growth of the serviced
of room stock in Dammam and Al Khobar apartment is estimated at 20%
its soft opening occupancy of 40% last
has been significant especially in serviced over the past two years
year. Observed ARR of the hotel segment
apartments over the previous two years.
Hotel room supply grew by 7% while growth declined by an average of 8% while market PERFORMANCE (Y/E 2009)
of the serviced apartment is estimated at average room rates of serviced apartments MARKET OCCUPANCY: 65%
20%. Delivery of additional stock resulted remained stable. 5-STAR OCCUPANCY: 68%
to drop in occupancy levels and a softening ARR: US$ 150
Average occupancy of the 4-star segment
of observed average daily rates. REVPAR: US$ 98
declined by 9% reaching 62% compared
A majority of Dammam and Al Khobar’s to previous year. Although a large average occupancy rate
5-star and 4-star stock is located along proportion of 4-star hotel guests belong 76
major roads while the rest are located in 74
to the corporate segment which currently
the Corniche areas. The number of 5- 72
represents 66% of total number of guests,
percentage
70
star hotels in Dammam and Al Khobar is 68
limited while quality is not on par with a number of 4-star hotels in the province 66
64
those found in Riyadh. However, this is have started offering suites and duplex 62
largely a reflection of demand which is units to capture the domestic tourism 60
5-Star 4-Star Serviced Apartments
highly business-oriented. Luxury hotels market. Currently, the 5-star and 4-star
therefore are not feasible in the province as Average occupancy of the 5-star
hotel segments cater to 5% of the domestic segment in Q4 of 2009 stood
it is in the Kingdom’s other leading cities. tourism market share. at 67% with a 5% decline on
Average occupancy of the 5-star segment average compared to the same
There are a total of 1,086 hotel rooms
in 2009 stood at 68% with a 5% decline quarter in the previous year
currently in the pipeline with the delivery
on average compared to previous year. Existing Supply Rooms
of Novotel and Sofitel delayed to end of
Drop in occupancy rates is attributable Al Khobar Intercontinental Hotel 120
to decline in the number of corporate 2010. Delivery of these rooms in tandem Al Nimran Hotel 123
tourism in addition to the large number with a sizeable number of rooms that Carlton Al Moaibed Hotel 123
Coral International Hotel Al Khobar 131
of 4-star hotel room supply that entered entered the market this year is expected Moevenpick Hotels & Resorts Al Khobar 143
the market this year reaching 301 rooms. to create a market dilution in the short to Sheraton Dammam Hotels & Towers 274
Le Meridien Al Khobar 330
Nonetheless, the 5-star segment continues medium term. However, as the economy *This table does not constitute an exhaustive list of current supply
to be driven by corporate tourism with picks up, inbound and domestic tourism
corporate guests representing 79% of the in the province is expected to sustain
average room rate
total number of 5-star hotel guests in the
the market. The key is to define where 400
province. This does not take into account 350
opportunity lies. With corporate tourism 300
Le Meridien Hotel’s observed occupancy 250
which stood at around 80%. The hotel and domestic tourism clearly playing major
US$
200
continues to lead the 5-star segment while roles in the performance of the hospitality 150
100
Park Inn Al Khobar is the market leader in sector, potential remains to hotels which 50
0
terms of occupancy and observed average are affordable and business-friendly. 5-Star 5-Star 4-Star 4-Star Serviced
Suite Suite Apartment
Colliers International 29
amman OFFICE FIRST Quarter 2010
300,000
250,000
200,000
m2 NLA
150,000
100,000
50,000
0
Jordan Gate Living Wall Commerce One Abdali
120 witnessed several office buildings in Amman targeted towards secondary grade markets
2
100
80 to be partially vacant, an indication that respectively.
60 occupancy rates are closer to 90% and will
40 Due to weak economic indicators of market
20 continue to drop in the first quarter of 2010
conditions it is difficult to quantify the
0 as new supply is released onto the market.
Abdoun
7th Circle
Umm Uthaina
Sweifiyah
Jabal Amman
Shmeisani
Rabiyah
2000
1500 in future. slightly over supplied with formal, grade
1000 A dedicated office accommodation for the
500 Over the last two quarters there has been
0 short to medium term. As and when new
decrease in asking sales prices due the economic
Jabal Al Hussain
Shmeisani
Sweiflyah
Wadi Saqra
Mecca Road
30 Colliers International
amman reSidential FIRST Quarter 2010
580,000
560,000
Number of Units
540,000
520,000
500,000
480,000
460,000
440,000
2004 2005 2006 2007 2008 2009 2010
Current demand for housing units stands Umm Uthaina and Sweifiyah. The rental
at approximately 490,000 units and the and sales prices of three bedroom apartments
Greater Amman Municipality estimates in Amman broadly follow those of the two
that around 30,000 additional housing bedroom segment. Yields are therefore
units are required annually in order to meet largely similar to those found in the two
the city’s demand growth. bedroom segment as well. Purchase prices Organic demand growth aimed
per unit area of four bedroom apartments at low to middle income housing.
Residential villas account for around 26%
are slightly more expensive than those of Total current housing supply stands
of overall residential stock in Amman.
two and three bedroom properties, although at around 560,000 units
The villa segment has traditionally been a
rents are broadly similar. Hence, yields are
relatively safe investment, and yields across
lower in this sub-section of the residential
this part of the residential market are low. PERFORMANCE indicators
apartment segment. In part this reflects
It should be noted that the rental market
the lower availability of these properties. Average Rent: US$ 55 per m² pa
for residential villas is dominated by smaller It is also due in part to the relative price Average Sales Price: US$ 585 per m²
unit sizes, with the vast majority of five increase of villa properties, which have Average Yield: 9.4%
and six bedrooms being owner-occupied. driven some occupiers away from villas and Vacancy Rate: 17%
Residential apartments constitute the into the large apartment market.
majority of residential units in Amman,
The residential sector in Amman
predominantly within 7 storey apartment Three bedroom villas constitute the
is oversupplied evidenced by the
buildings or less. largest sub-section of the overall villa
60% decrease in average rental rate
market by number of units. Rental rates
High end apartment units are currently and sales price since Q4 2008.
and sales prices of both three and four
dispersed around the core commercial hubs bedroom properties are among the highest
of Shmeisani and Sweifiyah. Villa units in the city. Rental properties in the five average rentals q1 2010
targeting the high income segment are bedroom segment are scarce in a number 30000
located primarily in Abdoun, around the of the city’s areas. To some extent this 25000
1st Circle, and around Dabuq to the north- is due to the smaller overall number of
US$ per m2 pa
20000
west of the city – a high growth location units available in this segment, but it also 15000
that is emerging as a core retail and leisure reflects a greater tendency towards owner 10000
hub targeting high-income and visitors occupation in these areas than elsewhere. 5000
segments. Key attractions in close proximity Colliers International research suggests 0
include the King Hussein Mosque, the that six bedroom villas available for rent Q4 2008 Q1 2020
Children and Aviation museums and the are extremely rare and therefore calculating
City Mall. yields for these properties is not possible.
average Sales price Q1 2010
With the exception of one bedroom With 560,000 units currently in Amman 1400
apartments in Abdoun, apartments in and with a population of approximately 2.46 1200
Amman attract lower prices per unit area million people with an average household 1000
US$ per m2
than villas. One bedroom apartments carry size of 5 persons per household (pph) the 800
the highest prices per unit area across average occupancy rate is around 88%. 600
apartment sizes. Rental and sales prices for However, we believe the bulk of the vacancy 400
two bedroom properties per m² are markedly is due to units being owned by expatriate 200
lower than prices for one bedroom properties, Jordanians who do not permanently reside 0
with the notable exceptions of properties in in Amman. Q4 2008 Q1 2020
Colliers International 31
amman retail FIRST Quarter 2010
180,000
160,000
140,000
m2 GLA
120,000
100,000
80,000
60,000
40,000
20,000
0
Mihrath Project Abdoun Abdali Beitna Jordan Gate
Mega Mall Boulevard Mega Mall
The retail sector in Amman has traditionally These brands range from major big box
been dominated by independent, street anchor stores such as Carrefour through to
facing retail units. The retail landscape has well known international consumer brands
Existing supply amounts to gradually shifted towards shopping malls such as Calvin Klein.
216,500m² GLA of retail mall space since the beginning of this decade, driven
According to a national income survey
Current average rental rate is primarily by a liberalised trade regime
recently carried out by Ipsos, 47.4% of
approximately US$ 418 per and the emergence of regional retail
Jordanian households earn US$285 – $560
m2 which is a decrease of 5% groups expanding beyond home markets
per month, with only 1.6% earning more
over the previous year. in the GCC. Shopping mall supply is
than US$2,800. According to Colliers
concentrated primarily in Amman’s high-
GDP Per Capita estimates, household
AVERAGE rentals q1 2010 income districts of Abdoun, Sweifiyah and
incomes in Amman increase to an
Tlaa Al Aall (comprising the City Mall and
average of US$966 per month against a
Mecca Mall), located in West Amman.
800 national average of US$440. The focus of
700 Nevertheless, street facing retail units forthcoming retail supply is therefore on
600
remain an important and popular segment the capital city, given higher disposable
US$ per m2 pa
500
of the city’s overall retail provision, incomes and the opportunity to capture
400
300
given a favourable climate and weaker tourism markets. In contrast to the tourism
200
spending power when compared to GCC marketing drive of regional destinations
100 markets. The concept of a shopping mall such as Dubai, however, Jordan is not
0 as an entertainment destination in itself is positioned as a shopping hub given that
therefore yet to be established in Amman, the country is visited primarily by Arab,
Mecca Mall
City Mall
Abdoun Mall
Zara Centre
and forthcoming shopping mall supply will Jordanian expatriate and European tourists
also compete with retail supply integrated whose shopping needs are amply serviced
within mixed-use developments. An by their home countries. The core demand
Mall Total Units m2 GLA Footfall(per day)
Example of this is the Abdali Boulevard base of Jordan’s retail sector therefore
MECCA MALL 350 110,000 80,000 – a 180 unit shopping arcade targeting remains internal.
ABDOUN MALL 70 12,000 7,500 high-income markets and incorporating
CITY MALL 60 55,000 43,000 There is a considerable amount of retail
both shopping mall and high street
AMMAN MALL 50 12,000 3,000 mall space under construction in Amman,
characteristics.
ZARA CENTRE 45 11,500 1,000 and even more under planning. Although
BARAKA MALL 90 17,000 3,250
With the recent opening of the Baraka Mall the GLA volume is still low on a per capita
in Sweifiyah, total supply of shopping mall basis, there are signs that the market may
space in the city has reached approximately be reaching saturation. City Mall has only
216,500m². Although the weather in recently achieved full occupancy after a
Jordan doesn’t render climate controlled year of operation. Baraka Mall’s leasing
shopping environments essential in programme has taken longer than expected
the way that they are in other regional and remains incomplete. Problems are
markets, the concept has been welcomed being experienced by Beitna Mega Mall
by consumers. This is in part due to the in finding tenants, compounded by the
arrival of major international brands that mall’s location in the low-income east of
have provided an impetus to the sector. Amman.
32 Colliers International
amman hospitality FIRST Quarter 2010
700
600
Number of Rooms
500
400
300
200
100
0
Amman Rotana Hilton W-Hotel
A significant number of hotels are reported to contract with the Marriott Amman, for example,
be at the planning stages in Amman. In general to provide rooms for transiting service personnel
terms, the Abdali project is expected to offer and ancillary staff.
between four and eight hotels additional to the
A second major source of demand for hotel
Rotana that is already under construction. Abdali
accommodation in Amman is Jordan’s popularity
Boulevard, developed by Abdali Investment
as a Meetings Incentives Conferences and PERFORMANCE INDICATORs (Y/E 2009)
Company, will offer several serviced apartments.
Exhibitions (MICE) destination. Whilst the
MARKET OCCUPANCY: 65%
Kurdi Group have also indicated that Mecca Mall bulk of conferences and exhibition facilities are
5-STAR OCCUPANCY: 54%
Phase III will include a hotel that will begin the located on the Dead Sea and near to Petra, hotels
process of converting the mall into a mixed use in the city report that the majority of delegates 5-STAR ARR: US$ 207
centre. The Royal Village Project also reportedly will spend at least one night in a hotel in Amman REVPAR: US$ 135
includes provision for a hotel, although details during their visit. These guests complement the
remain limited. The Grand Amman Financial number of business travellers visiting Amman as
Complex is planned to include a 5-star hotel. A their primary destination. An increase by 25% in number
450 room hotel is also planned for the Mihrath
The third primary source of demand for hotel of hotel rooms was registered
Project. Nevertheless, these proposed hotels all
rooms in Amman is leisure tourists. In a similar between 2008 and 2009
remain in the early stages of planning, and there
manner to MICE visitors, a significant number
is no confirmation that these will be developed
of these visitors pass through Amman’s hotels
as proposed.
for between one and three nights as one of the
Occupancy rates only recovered in 2007 and destinations on their tour of Jordan. While it trend in occupancy rate
this resurgence led to an average occupancy of remains highly unlikely that leisure tourists will
61% in 2008, which was expected to continue ever have long durations of stay in the capital, 80%
assuming that the impact of external shocks was they do provide a valuable additional source of 70%
60%
constrained and corporate and leisure tourism demand to the city’s hospitality sector. 50%
continued to grow. However, with the economic 40%
The fourth, and largest, source of demand for
crisis in late 2008 caused occupancy rates to drop 30%
Amman’s hotels is business travellers. The bulk
to around 54% in 2009. 20%
of the city’s premium hospitality stock is business 10%
Although the amount of tourist arrivals is oriented, and this remains unlikely to change for 0%
2004 2005 2006 2007 2008 2009
increasing, the occupancy rate for 5-star hotels is the foreseeable future.
around less than what it was for 2008, and with
Although of lesser impact than the above factors,
the forthcoming supply, predominantly in the
Jordan also attracts a considerable number of
5-star category, it is expected that occupancy Hotels in Amman witnessed
airport transit visitors. A significant proportion of
levels will decline over the next three years, to a 13% decrease in occupancy
these transit visitors are of relatively low net worth.
47%, indicating an oversupply in the market.
The Queen Alia International Airport Hotel rates from the previous year
Amman derives its hospitality sector demand from currently attracts a considerable proportion of its
a number of sources. As is the case in the city’s demand from this visitor segment. This is largely
other real estate sectors, demand related to the due to the favourable agreement that it enjoys
security situation in Iraq has bolstered the market. with Jordanian Immigration allowing transit
In the hospitality sector additional demand related passengers to leave the airport itself and visit the
to Iraq has mainly been the result of Amman’s hotel without officially entering Jordan. Although
position as a primary access point to the country. this generates a sizeable volume of demand for the
Non Governmental Organisations, contractors hotel, the low spending of these visitors means that
and journalists commonly pass through Jordan they do not provide a compelling revenue source
as a result. The US military maintains a rolling for sustainable future growth.
Colliers International 33
cario OFFICE FIRST Quarter 2010
4,000,000
3.500,000
3,000,000
2,500,000
m2 NLA
2,000,000
1,500,000
1,000,000
500,000
0
2010 2011 2012 2013
Despite a decline in growth rate in GDP the conversion of ground floor residential
from an estimated 6-8% per annum to 4.7% units into office space as a short-term
in 2009 over 2008 and a decrease in FDI measure which has led to a fragmentation of
inflows from US$ 13.2bn in 2007/2008 the office market. The market is expected to
to US$ 9.5bn in 2009, the entry of new fragment further as private sector developers
Continuously increasing office multinational organisations and the rush to meet unsatisfied demand for office
demand remains unsatisfied
expansion of local business has continued space. Given land availability constraints in
new establishments and enterprises to increase, leading to an increased demand central Cairo and the focus of development
9,000
for office space, particularly primary grade activity in the new communities, New
8,000 office space. Cairo and 6th October will house the vast
Number of Companies
7,000
majority of forthcoming office space.
6,000 The volume of foreign direct investments
5,000
4,000
registered by the creation of new Whilst other office sectors in the Middle
3,000 establishments and expansions of businesses East have witnessed large decreases
2,000 peaked in 2007/2008. The growth in in average rental rates between 2008
1,000
0
the number of new establishments and and 2009, Cairo office sector registered
expansions in 2007/2008 had exceeded
2003 / 2004
2004 / 2005
2005 / 2006
2006 / 2007
2007 / 2008
2008 / 2009
600
500 rental rates are currently US$ 260 per m²,
and 2009 and the expansion by companies
400 with premium rental rates reaching US$
300 has continued to increase. Private
750 per m².
200 investment as a share of of GDP grew to
100
0 15% in 2008 followed by a decline in 2009 Due to the insufficient supply and
to 8.8% of GDP. Despite the decrease, continuously increasing demand, the gap
Star Capital
Nile City
Towers
Liberty
Tower
165 Tower
JAC Office
Tower
Al Oubour
Gardens
DHL Commercial
Tower
private and public investments remain an between demand and supply is expected
important source of income to the country. to widen. Colliers International therefore
2008 2009 Q12010
34 Colliers International
cairo reSidential FIRST Quarter 2010
400,000
350,000
Number of Units
300,000
250,000
200,000
150,000
100,000
50,000
0
2009 2010 2011 2012 2013 2014 2015
Whilst USAID is forecasting a total demand on real estate performance, property prices in
of 2.1 million housing units, the Ministry of Zamalek continued to increase throughout
Planning is forecasting demand for housing units the economic downturn. Nasr City and
at 5.3 million units between 2007 and 2017, Dominant demand for housing units
Heliopolis witnessed a continuous decrease in in the lower income segment
which denotes 152% difference. Although both
prices between 2008 and 2009, but the largest Average apartment sales price has registered
sources indicate the same ranking in demand,
in terms of low income witnessing highest decrease was recorded in New Cairo, which 29% increase between 2009 and Q1
amounted to 78% between 2008 and 2009. 2010, while average villa sales price has
demand followed by middle income, USAID is decreased by 8% over the same time period
forecasting approximately 51,000 housing units Aggregated sales price for apartment units is
Average apartment sales price
in demand in the higher income category while currently US$ 926 per m², which equates to a
Ministry of Planning is forecasting 128,800 units 9.4% investment yield. 2,000
in the same income category. 1,800
Research conducted by Colliers International 1,600
The problem is therefore not one of supply shows that approximately 72,000 high end
1,400
1,200
but rather the affordability constraints
US$ per m2
of the population from purchasing or renting scheduled completion dates are met. Current 400
200
new homes. The problem is compounded by supply of approximately 281,000 units is set to 0
a reluctance on the part of landlords to enter increase by 27% over the next six years.
Zamalek
Heliopolis
Moandseen
Nasr City
Maadi
Doqqi
New Cairo
6th October
into tenancy agreements with low-income
tenants because of historic difficulties in Economic growth, increased capital inflows,
evicting tenants. occupancy saturation in central Cairo and 2008 2009 Q1 2010
apartment rental market witnessed a recovery 2015, Colliers expect moderate levels of price
US$ per m2 pa
120
100
of 44% between 2009 and Q1 2010. Average appreciation in the new communities over the 80
rental rates for apartment and villa units in next six years. Colliers also anticipate owner- 60
these areas are currently US$ 87 per m² and occupier demand within the high income
40
20
US$ 119 per m² respectively. segment to increase as the new communities 0
Zamalek
Maadi
Heliopolis
Mohandseen
Nasr City
Doqqi
New Cairo
6th October
The change in average apartment sales become more developed. This is demonstrated
price followed the same trend as rental rates, by the current premium enjoyed by Kattameya
witnessing a 29% decrease between 2008 Heights and Palm Hills in New Cairo and 6th 2008 2009 Q12010
and 2009, followed by 29% increase between October respectively. 25% increase in supply between
2009 and Q1 2010. Despite the economic
2010 and 2013, provided scheduled
downturn and the negative effects thereof completion dates are met
Colliers International 35
cairo retail FIRST Quarter 2010
1,400,000
1,200,000
1,000,000
m2 GLA
800,000
600,000
400,000
200,000
0
2009 2010 2011 2012 2013
The entry of the City Stars mall in the consist of 644,742 m² GLA and by 2013,
Cairo retail sector has successfully attracted provided scheduled completion dates are
Retailers have witnessed a international brands to the city, meeting met, approximately 1.18 million m² GLA,
decrease in sales volume despite demand from wealthy Egyptians, and offering an increase by 83% over three years and a
an increasing footfallt a shopping experience closer to international CAGR of 22%. Mall of Arabia is currently the
retailing standards with anchor tenants, a largest planned mall in Cairo, amounting to
AVERAGE rentals q1 2010
professionally compiled tenant mix, food approximately 176,000 m² GLA, followed by
courts, and entertainment facilities. Cairo Festival City at 154,000 m² GLA. Sun
1200
City Stars is the largest existing mall in terms City Mall with its 275 retail units, located
1000
of number of units and size. Although Hyper in Heliopolis, is scheduled for completion
US$ per m2 pa
800
600 One is the second smallest mall in terms in late 2010 and has successfully pre leased
400 of m² GLA, it has the largest average unit 50% of the retail units. The majority of
200 size at 741 m² per unit, followed by 419 m² forthcoming shopping malls are developed in
0 per unit in Maadi City Centre. City Stars large residential communities and as part of
master plan developments, mainly located in
City Stars
Nile City
Towers Mall
Dandy Mega
Mall
Hyper One
Rehab Mall 2
100,000 Although the effect of the global economic profitable. Rental rates and services charges
80,000 downturn in Egypt was not severe, compared will have a crucial role in the development
60,000
to other countries in the Middle East, many and outcome of the retail sector in Cairo. As
40,000
20,000
retailers have registered a decrease in sales mentioned earlier, street facing retail units
0 volumes despite an increase in footfalls. are performing better than shopping malls
Mall of Arabia
Cairo
Festival City
Uptown Cairo
36 Colliers International
cairo hospitality FIRST Quarter 2010
17,000
16,500
Number of Rooms
16,000
15,500
15,000
14,500
14,000
13,500
2008 2009 2010 2011
Tourist inflows into Egypt in 2009 totalled over the same period. The decrease in
12.5 million visitors, representing a decrease of average room rate between 2008 and 2009
2% over 2008. Despite the decrease between and the decrease in occupancy rate by 8% Cairo has currently a total of 175
2008 and 2009, the CAGR for tourist arrivals over the same period led to a decrease in hotels, combining 14,600 hotel rooms
between 2000 to 2009 remains strong at 10%. RevPAR by 12%.
This translated into a room night demand of average tourist daily spending
over 126 million room nights in Cairo last Looking forward, the focus of new hotel supply
year, with an average stay of 10.6 nights. in central Cairo l be on the redevelopment of 140
Daily tourists spend reached a peak in 2001at existing sites, the regeneration of urbanised 120
US$ 132 with a total annual tourist spend areas (such as Islamic Cairo or Giza) and the 100
m2 GLA
of US$ 4 billion. Whilst average spend levels transfer of existing hotels to new operators, 80
60
have declined by 36% to US$ 85 since the as happened the case of the Ramses Hilton’s
40
peak in 2001, growth in tourist numbers have transfer to the Ritz-Carlton group. The 20
increased total tourist spend to US$ 10.8 concentration of future hotel development 0
billion in 2009. will otherwise be in the new communities of 2000 01 02 03 04 05 06 07 08 2009
The entry of luxury hotel brands such as the 6th October and New Cairo, together with Market occupancy rate has
Four Seasons and Fairmont over the past selected locations in Moqattam and possibly decreased from an average of 83%
few years, prompting a recovery in high- New Maadi, mainly integrated within major YTD 2007 to 75% YTD 2008,
income cultural tourism markets, following master plan developments. Existing supply is followed by 62% YTD 2009
perceived downturn in the quality offering expected to increase by 2,270 rooms.
of the Egyptian tourism market. This is PERFORMANCE INDICATORs (Y/E 2009)
At the micro-level, high quality hotels
being reinforced by the renovation and MARKET OCCUPANCY: 62%
located on the Nile are expected to maintain
refurbishment of existing hotels which had 5-STAR OCCUPANCY: 65%
previously claimed 5-star status due to a a market premium despite the delivery
5-STAR ARR: US$ 118
lack of alternatives rather than quality of of new supply, with marginal impact on
REVPAR: US$ 75
product. Several operating contracts are performance expected. The real question
running out in the near future, prompting concerning the development of hotels in 6% decrease in ARR and 21%
the entry of new operators into the market. the new communities will be the tourism decrease in occupancy rate between
The improved level of service set by new market they intend to attract. Whilst the 2008 and 2009 led to 22% decrease
operators may prompt surviving incumbents Smart Village hotel can benefit from the in RevPAR over the same period
to renovate their hotels, providing a much immediate catchment area of large Egyptian
occupancy rate
needed boost to overall service quality. and multinational companies within the
Average room rates increased by 3% Business Park, and Cairo Festival City will 90%
80%
between 2007 and 2008, followed by 6% seek to establish itself as a retail-driven leisure 70%
decrease between 2008 and 2009. Average destination in its own right, traditional 60%
50%
occupancy rate continued a downward trend corporate and leisure tourism markets are 40%
post 2007, amounting to a total decrease of more likely to prefer hotels located in central 30%
20%
21% between 2007 and 2009, consequently Cairo. The diversification of Egypt’s tourism 10%
leading to a decrease in revPAR by 22% offering will be central to achieving this. 0%
2007 2008 2009
Colliers International 37
TRIPOLI OFFICE FIRST Quarter 2010
90,000
80,000
70,000
60,000
50,000
m2 NLA
40,000
30,000
20,000
10,000
0
Beroco Office Tripoli Al Waha Tripolis Al Gaddafi
Building Centre COmplex Tower Complex Tower
The Tripoli office market is highly Corinthia Hotel. Apart from these three
Given the current economic and diversified. It varies from state owned multi- office complexes, there are around five to
political climate, it is likely that this storey towers to privately owned low-rise six storey office buildings in the Dhahra
demand growth for primary grade office buildings and villas and apartments and Downtown Areas. These are of similar
accommodation will continue throughout converted into offices. The lease terms and or lower quality to the Burj al Fateh office
the short and medium term. conditions, the amenities and the tenant tower.
mix also vary considerably. The demand
for high quality office accommodation The market for converted villas is
average rentals q1 2010
is derived primarily from oil companies, expanding as a result of limited supply of
1,000
airlines, government departments and formal office space. A considerable number
900
embassies. of government offices and embassies have
800
700 been forced to use this alternative. For
US$ per m pa
600 There are several projects that will deliver example, the property formerly used as the
2
500
400
primary grade office space to the Tripoli prince’s palace is being refurbished for use
300 market over the coming three to five years. as the American Embassy. The rental rates
200 Demand for such space is high, and a large and lease terms for commercial villas are
100
0
proportion of the tenants of existing office similar to those of residential villas.
facilities could possibly relocate should
Carinthia Business
Centre
Buliela Towers
Al Fateh Tower
Dhat Al Emad
38 Colliers International
TRIPOLI reSidential FIRST Quarter 2010
7,000
6,000
Number of Units
5,000
4,000
3,000
2,000
1,000
0
2010 2012 2013
The provision of adequate housing for Libya’s the sale of residential properties only. It was
population is a necessity for the government. illegal for individuals to lease residential
The previous regime gave commitments property and collect rent on the grounds that
to build 100,000 units in order to meet the it would be exploitative.
housing shortage, but following cost and
In the mid 1990s, when the country started
implementation problems the programme was PERFORMANCE indicators
to experience the effects of the UN sanctions,
abandoned in 1969. At that time, a major Average Rent: US$ 95 per m² pa
these rules were gradually relaxed. The
housing survey found that 150,000 families premium Rent: US$ 125 per m² pa
government needed to satisfy a growing
lacked a domicile of acceptable quality, and Average Sales Price: US$ 830 per m²
housing shortage while also providing Average Yield: 11%
placed the overall housing shortfall at over
accommodation for a growing population Vacancy Rate: 7.5%
180,000 units (including allowances for over-
of expatriate workers from countries such as
occupancy of existing units). By the 1970’s
Egypt and Sudan. However, this relaxation
both the public and private sectors were
of regulations has not yet stimulated large average rentals q1 2010
involved in housing construction. Towards
scale private investment in residential
the end of the decade, the housing blocks 118
apartments. Currently existing high rise
surrounding Benghazi and Tripoli had begun 116
apartment buildings in the city are under
US$ per m2 pa
114
to give way to more modern apartment
state ownership. The various projects under 112
blocks with electricity and running water. Up 110
planning or construction will largely target 108
until 1986, the government invested around
a high-income bracket, primarily expatriate 106
US$2.2 million (LD2.8 million) in housing, 104
population. 2 BR 3 BR 4 BR
which resulted in the construction of 277,500
housing units. At present villa owners continue to prefer
to rent to commercial tenants on long Average rental rates increased by 4%
Soon after, budget allocations for housing fell
term leases, even though the rental prices between Q4 2009 and Q1 2010
short. This shortfall in new construction raised
commanded are relatively similar to those Average sales rates increased by 27%
the prospect of overcrowding and the creation
of primary grade residential use rentals. In between Q4 2009 and Q1 2010
of slums as the country’s population expanded.
the case of units let for residential purposes,
There have been ongoing government-
the lease period is generally 1-2 years. While
sponsored building projects since 1954, but the
villas are more expensive than apartments average sales prices q1 2010
housing deficit remains. Low-income families
on an absolute basis, evidence supplied to
were allowed to buy houses from the state at
Colliers staff by local brokers suggests that, 1,120
10% of cost or to build their own homes with 1,100
with a small number of exceptions, rental
US$ per m2
Colliers International 39
TRIPOLI retail FIRST Quarter 2010
120,000
100,000
80,000
m2 GLA
60,000
40,000
20,000
0
Bab Tripoli Andalus Al Waha
Centre Mall Complex Mall
In the past, retail in Tripoli has been have an expandable income; currently
dominated by street facing retail units in Libya has a per capita income of $ 13,450.
Retail sector characterized by areas such as Gargaresh Road, Rashid Street This limits the potential constituency for
high occupancy rates derived and Bin Ashour Street. The city had only a expanded retail provision. Nevertheless, the
by into high demand. few small shopping centres, such as Zarqa Al recent substantial salary increments in the
Existing supply of shopping Yamama. public sector are expected to increase overall
malls as of Q1 2010 is in purchasing power. Foreign brands are already
The retail market has undergone considerable
excess of 200,000 m2 GLA popular within higher income groups. In
growth in the last few years with the opening
of high end malls, albeit small, like the Oasis principal, they are likely to be successful
average rentals q1 2010 Centre and the Al Mahary Supermarket. when they enter the broader market.
Government owned retail units have also
800 The demand for retail comes not only
been taken over by private individuals/firms.
700 from Libyan nationals, but also from the
Since then, few international brands had
600
increasing expatriate population associated
entered the market – Benetton, Damas and
US$ per m2 pa
500
with oil companies. There are also a smaller
400 Armani being among them.
number of Tunisians and Algerians who
300
Following the revolution in 1969, the travel approximately160-200 kilometres over
200
government forced the closure of all private the weekends to shop in Tripoli.
100
retail operations. State run department
0
stores were opened across the city, and until There is a strong demand for good quality
Oases Complex
Souk Al Thulatha’s
Complex
Al Mahary
Supermarket
Al Fateh Tower
the late 1980s these were the only retail retail space in Tripoli. This is demonstrated
facilities available. In an effort to create by the high occupancy rates enjoyed by most
jobs and stimulate the economy, private retail properties in the city, Oasis Centre
retailing was again permitted in 1988. being an exception due to its positioning.
However, rebuilding of confidence in retail Retail market demand arises not only from
Line store retail rents for established investment was slow, and it is only in recent Libyans and expatriates working in Libya,
and successful shopping malls years that the industry has seen meaningful but also from residents of neighbouring
are US$ 440 per m2 pa growth. Retailers in Tripoli have slowly countries. There is a moderate volume of
Street facing retail units are begun to adopt international retail industry additional stock being added to the market,
offered at US$ 795 per m² pa standards in terms of store design, layout, although total GLA per capita still remain
merchandising, store lighting and other small by regional standards. In addition, it is
presentation features. expected that when Majid Al Futtaim Group
A number of new shopping centres have deliver their retail property, the majority of
started operations in the last two years. The existing facilities will suffer a fall in footfalls
demand for higher quality retail environments and rental rates. This is simply a reflection
and products is evident from the success that of the group’s strength and track record in
the new shopping centres have achieved. delivering best in class facilities in cities
However, the majority of Libyans do not across the region.
40 Colliers International
TRIPOLI hospitality FIRST Quarter 2010
16500
Number of Rooms
16000
15500
15000
14500
14000
13500
2011 2012 2013
The Libyan hospitality market is currently Mahary Radisson Blue Hotel, is operating at
in relative infancy. There are approximately around 50% occupancy. Along with these
13,638 existing hotel rooms in Libya across internationally operated hotels, there are a Existing hotel room supply in
market and star stage rating. The government large number of small, locally operated hotels Libya amount to 13,638.
expects considerable expansion of Libya’s which are enjoying healthy occupancy rates
tourist arrivals in the short to medium term. because of more competitive room rates and the
market PERFORMANCE (Y/E 2009)
As a result, the government has entered into fact that many travellers are simply unable to
a programme of promoting hotel construction. find any availability in one of the higher grade MARKET OCCUPANCY: 75%
This programme includes granting permission for properties. However, it is likely that much of 5-STAR OCCUPANCY: 65%
resort projects to be developed by international the forthcoming hospitality stock in the market 5-STAR ARR: US$ 455
companies, construction of tourism hotels near will be absorbed before the internationally 5-STAR RevPAR: US$ 275
local attractions such as the Leptis Magna, and operated segment starts to experience a decline
the renovation of government owned hotels in in occupancy rates. Currently, newly renovated
After experience lack of existing
Tripoli. Demand is expected to increase mostly or recently constructed hotels such as the Al
supply and heavily unsatisfied
in the 4 and 5-star segments. Waddan Hotel are experiencing occupancy
demand; now a number of
rates of around 60%.
The current supply of 4 and 5-star hotels (as international hotel chains have
locally classified) in Tripoli is around 1,950 There are significant numbers of 5-star hotel now entered the Libyan market
rooms. It is expected that a further 2,664 rooms under development in Tripoli, which
international standard 4 and 5-star rooms will will end the functionally monopolistic position
be delivered by the end of 2013 (with the bulk enjoyed by the Corinthia at present. These average room rate
of this supply being added during the course developments will satisfy the existing latent
500
of 2012). This delivery schedule is, as always, demand for 5-star hotel accommodation 450
subject to the possibility of construction delays within the city, as well as causing a downwards 400
and project release timings. As new stock is reclassification of nominally 5-star government 350
300
added, a de facto downwards reclassification run hotels. As this occurs, it is likely that a
US$
250
of properties currently listed as 4 or 5-star is proportion of the demand currently satisfied 200
likely to occur, and the likelihood of moderate by government run hotels will be relocated to 150
customer movement away from the existing new hotels under development. However, it is 100
50
3-star sector (currently supported by a lack of likely that this additional supply will result in a
0
supply at the upper quality levels), is likely to moderate reduction in occupancy rates. 4-star 5-star
Colliers International 41
damascus OFFICE FIRST Quarter 2010
5,000
4,500
4,000
3,500
3,000
US$ per m2
2,500
2,000
1,500
1,000
500
0
Damascus Tower Al Faiha Tower Victoria Building Wahet Al Fardos Engineers Buinding Queen Centre
(Downtown) (Downtown) (Downtown) Tower (Salhiyeh) A (Salhiyeh) (Mezzeh)
Office supply in the traditional Central Salhiyeh, which comprises the majority of
Business District (CBD) of Damsascus is a the capital’s converted office space and the
microcosm of the country’s historic business free zone area in Baramkeh.
Average sales price has remained stable
environment: predominantly outdated
in the last 12 months at US$5,430 Average rental rates recorded a large
buildings developed in the late 1960s to
Average annual rental rates showedan increase of 28% between Q3 2007 and Q3
increase of 24% between Q3 2008 early 1980s to house state-owned enterprises
2008. Rates increased by a further 24%,
and Q3 2009 but remained level and professional clusters including lawyers,
between Q3 2009 and Q1 2010 between Q3 2008 and Q3 2009. Sales prices
engineers and doctors. The previously
followed the same upward trend between
fragmented office space and CBD in
average rentals q1 2010 Q3 2007 and Q3 2008, increasing by 4%,
Damascus has become more formalised with
700 followed by a larger increase between Q3
the establishment of privately-owned banks
600 2008 and Q3 2009 from US$ 2,550 per m2
and insurance companies in the wake of
US$ per m2 pa
500
400 and US$ 3,561 per m2, amounting to 40%.
the sector’s liberalisation. This process was
300 In Q1 2010, sales transactions slowed, down
200 driven further by the entry of multinational
100 causing prices and rental rates to level out.
0 companies and more recently, financial
brokerage firms into the city’s business Colliers expects the supply of dedicated
Damascus Tower
(Downtown)
Al Faiha Tower
(Downtown)
Victoria Building
(Downtown)
Wahet Al Fardos
Tower (Salhiyeh)
Engineers Buinding
A (Salhiyeh)
Queen Centre
(Mezzeh)
arena, which has also sustained demand for office space to increase by 66% between
office space. 2010 and 2012, concentrated mainly in
Yafour. The combination of rising demand
Damascus office market is immature and Colliers International conducted a survey and inadequate supply, compounded by
fragmented, with high sales prices driven of designated office buildings in Damascus,
by demand regardless of quality of product
the supply constraints and costs involved
which comprised seven buildings with a in converting residential space into office
total Net Leasable Area (NLA) of 61,205 units, have led to a steady rise in office sales
PERFORMANCE indicators
m². Office space within existing mixed-use prices. The potential increases in investment
Average Rent: US$ 370 per m² pa
developments, most notably the Queen yields has renewed investor interest in the
Premium Rent: US$ 887 per m² pa
Average Sales Price: US$ 5,430 per m²
Centre in Mezzeh and the Damascus development of office space, though this
Average yield: 6.8% Boulevard attached to the Four Seasons has yet to manifest itself into further supply.
Vacancy Rate: 10% Hotel, amounts to an additional NLA of Demand is expected to further increase
2,640m². Collective office space in the city when the free trade agreement between
Colliers anticipates delivery of
86,000 m2 NLA to enter the market is still less than total NLA within the free Syria and the EU is finalized during the
between 2010 and 2012 zone located in Baramkeh, estimated at course of 2010. This agreement is expected
65,550m². Existing office supply is allocated to remove all trade barriers, albeit gradually,
change in the average sales
in the following areas; the business area of between Syria and the EU and it will allow
6,000
5,000 Downtown Damascus, the Mezzeh district, European companies to enter the Syrian
which has emerged as a secondary business
US$ per m2
42 Colliers International
damascus reSidential FIRST Quarter 2010
10,000
9,000
8,000
7,000
6,000
US$ per m2
5,000
4,000
3,000
2,000
1,000
0
Abu Malki West Maisat East East Kafr Dummar
Romana Malki Rukn Mezzeh Mezzeh Sousseh
(Villas) (Villas) (Towers)
banking sector, and the expected improvement showed little movement between Q3 2009 Rental yield decreased from 6% in
in the competitiveness of mortgage financing and Q1 2010 due to the levelling of both Q3 2008 to 5% in Q3 2009, due
to a larger increase in sales price
offerings, the scope for which has been rental rates and sales prices.
boosted by the draft mortgage and financing average rentals q1 2010
Forthcoming supply, amounting to
law. Demand generated by investor appetite
approximately 3,000 residential units, will be 400
together with demand driven by the growth 350
concentrated primarily in western Damascus,
US$ per m2 pa
300
in population are expected to give rise to an
and the western outskirts of the city, in line 250
undersupply in residential property. 200
with urban expansion trends, government 150
Current residential supply is estimated at planning and investor activity. A number 100
50
877,323 units. The Housing Authority itself of major developments are currently under 0
has only developed 40,000 units over the last construction in urban and rural Damascus,
Abu Romana
Malki
West Malki
Maisah Rukn
El Deen
East Mezzeh
(Villas)
East Mezzeh
(Towers)
Kafr Sousseh
Dummar
50 years, meeting only 20% of actual demand. carried out by private, public and cooperative
The housing shortage currently experienced developers.
has been exacerbated by tenants vacating Colliers expects over 3,000 units to be
Based on Colliers’ analysis, total demand in delivered to the market over the next three years
long-term rented accommodation. Demand
2012 is forecasted to exceed supply by 10.5%. Based on estimated demand and
for housing is mainly concentrated in middle
Applying this to existing units and confirmed forthcoming supply, it is expected that
and lower-income segments, given that a shortfall of approximately 106,339
forthcoming supply in 2012 (assuming that
salaries in the city centre average US$ 200 a units will arise, likely to leave the market
the government succeeds in building 96,600 undersupplied for the next five years
month. Demand for upper-middle and high
low cost housing units in rural Damascus),
income housing, driven by the entry of more
results in a shortfall of approximately 106,339 change in the average sales
foreign companies into the Syrian market will
units, indicating that the market will remain 4,500
further increase the supply shortage in this 4,000
undersupplied for the next five years.
segment of the market. 3,500
3,000
US$ per m2
Colliers International 43
damascus retail FIRST Quarter 2010
180,000
160,000
140,000
120,000
100,000
m2 GLA
80,000
60,000
40,000
20,000
0
Sabboura Project Eight Gate Salaam Mall Syria Towers Mall
Whilst retail in Old Damascus is underpinned A young population, the successful adoption
Damascus is registering an increase by international tourists and low to middle of the mall concept both as a shopping and
in consumer purchasing power income shoppers from all over the city and leisure destination, increases in consumer
driven by the entry of expatriates, the rural outskirts, international brands in spending power, sustained and rising demand
repatriated Syrians, and the Shalaan’s retail outlets started to attract on the part of expatriates living in Syria
growth of the private sector the Syrian high-income segment, who and increases in tourism inflows represent
Average annual rent in shopping had previously done most of their clothes compelling fundamentals driving the
malls is currently US$ 840 per m2 shopping whilst on holiday abroad. The development of shopping malls both in the
new clothing lines also attracted visitors city and in the emerging new Damascus.
from Lebanon, Jordan and to a lesser extent
average rentals q1 2010 The city has seen an increase in consumer
the GCC. This process saw the emergence
1,800 purchasing power driven by the entry of
of single-brand outlets in the Shalaan area
1,600 expatriates, repatriated Syrians, and the
1,400 and the establishment of retail outlets in
growth of the private sector in response to
US$ per m2 pa
1,200
the neighbouring high-income area of Abu
1,000 improvements in the business environment.
800 Roumana. Existing shopping mall supply
Shopping mall supply is expected to double
600 amounts to 86,600 m2 of GLA.
400 over the next five years, indicating investor
200 One of the major shifts in the Damascus retail confidence in the popularity of malls in
0
market was initiated with the introduction Syria. The volume of forthcoming supply,
City Mall
Town Center
Cham City
Center
Skiland
Damascus
Boulevard
Damasquino
Mall
of shopping malls, providing a new retail however, does raise concerns as to the
experience for customers. Although the strength of demand required to absorb future
first mall to be established in the capital development. Based on Colliers International
Reduction of import restrictions on was technically the City Mall, part of the analysis of existing shopping mall supply,
internationally branded clothing, mixed-use Rotana Queen Centre in Mezzeh, current GLA per capita in Metropolitan
supported by the GAFTA, Syria- the concept did not really take off until the Damascus is 0.02, compared to 1.3 in
Turkey and tentative Syria-EU
Free Trade Agreements completion of the Town Center Mall in Dubai or 0.53 in Doha. This is expected to
2004, the first and largest standalone retail increase to more than 0.07 by 2013, based on
Shopping mall supply is development in Syria. The mall concept forthcoming supply and population growth
expected to increase by 256%
has been taken further with the completion estimates. The introduction of new leisure
over the next five years
of the Cham City Center in Kafr Soussa facilities and the encouragement of transport
AVERAGE sales price in February 2007, the completion of the facilities to and from the destination at
Skiland shopping mall off the Airport Road hotels, tourism centres, universities and
60,000
at the end of June 2007 and the opening selected residential areas, are all optimal
50,000
of the biggest mall in Syria, Damasquino, means of reducing market oversupply risk.
40,000
US$ per m2
20,000
Sousa area. The mall is targeting middle to
10,000
high income citizens and has attracted new
0
international brands to Syria such as Nike
and Lacoste.
Al Shaalan
Al Hamra
Street
Hamediya
Abu
Rumanah
Salhiya
44 Colliers International
damascus hospitality FIRST Quarter 2010
7,000
6,000
Number of Rooms
5,000
4,000
3,000
2,000
1,000
0
2009 2010 2011 2012 2013 2014 2015
Increasing demand, generated by higher visitors Hotel performance has followed an upward
inflows, has urged the government to attract trend, where average room rate increased
A recovery in the number of Lebanese
greater tourism investments and develop the to US$110 in 2009 and market occupancy
visitors and international tourists, and
required infrastructure and facilities. Demand rate increased from 70% to 72% over the
a significant increase in the number of
increased as a result of growth in corporate same period. The increases in occupancy rate
Turkish tourists is expected in 2010
tourism in line with economic development and and average room rate led to an increase in
increased business opportunities. In addition to RevPAR, reaching US$79. The number of tourists visiting
a recovery in the number of Lebanese visitors Forthcoming supply of 4 and 5-star hotels, Syria has increased by 12%
and international tourists. An expected scheduled for completion by 2013, is in 2009 over 2008.
doubling of religious tourism by 2010, and an estimated to increase existing supply by
expected surge in the number of Turkish tourist 31%. The development of the forthcoming market PERFORMANCE (Y/E 2009)
will potentially increase demand. Intercontinental on a site adjoined to the
MARKET OCCUPANCY: 72%
Whilst rural areas of Damascus have Sheraton is representative of the future
5-STAR OCCUPANCY: 77%
been designated as strategic areas for the challenge to incumbent hotels that have
ARR: US$ 110
enjoyed a monopoly over the 5-star market,
development of the capital’s tourism offering REVPAR: US$ 79
up until the completion of the Four Seasons
in the longer term, the immediate focus is on
last year. The proposed operator transfer of
hotel provision within the city itself due to an
the older hotels will serve to reduce the risk An increase in occupancy levels have
existing shortage of hotel rooms in proportion
of a decline in occupancy levels, providing supported an increase in RevPAR
to demand, causing high occupancy levels
them with a chance to upgrade their business, Average occupancy rate for 5-
and inflated average room rates on the basis
leisure and F&B amenities to compete with
of supply shortfalls, rather than the quality of star hotels has decreased from
forthcoming supply.
rooms and services available. The shortage 89% in 2008 to 77% in 2009
is particularly acute in the four and five star To achieve demand supply equilibrium by 2015,
We expect the delivery of over 2,396
hotel segments in Damascus, which hosts the the supply of hotel rooms should increase by
hotel rooms between 2009 and 2013
majority of regional and international tourism 90%. On the other hand, the confirmed hotel
inflows. forthcoming supply will only increase by 70%,
therefore the hotel market in Damascus will 5-star Average room rate
Arab tourists represent the largest market for remain undersupplied in the short to medium
hotels in both urban and rural Damascus. Arab 300
term, inflating room rates and occupancy levels
tourists staying in urban Damascus are more on the bases of supply shortage rather than 250
likely to visit a 5-star rather than 4-star hotels. the quality, services and amenities offered by 200
Syrians represent the second largest market the hotels. However, as more internationally
US$
150
for hotels in Damascus, however they tend to branded hotels enter the market, such as the
stay in lower rating hotels, such as 4-star and Kempenski and Movenpick hotels, the quality 110
lower. International tourists staying in urban of hotel services and amenities in Damascus 50
Damascus are slightly more likely to visit a 5- will therefore improve, providing larger array
0
star rather than 4-star hotels. of selections to hotel guests. Dedeman Sheraton Cham Four
Hotel Palace Seasor
Colliers International 45
mena real estate overview FIRST Quarter 2010
EMEA 85
Americas 129
Asia Pacific 52
Dubai, UAE
Doha, Qatar
Riyadh, KSA
Jeddah, KSA
Muscat, Oman
Cairo, Egypt Colliers International is a global real estate consultancy company providing a comprehensive
Amman, Jordan range of property services to a broad range of clients on an international basis. Core services
include property and asset management; leasing; development consultancy & strategic
Damascus, Syria
advisory; property valuations and international property investment services.
Tripoli, Libya
Khartoum, Sudan
www.colliers-me.com
46 Colliers International
regional research contacts
DUBAI
Colliers International MENA Headquarters
consultancy@colliers-me.com