United Arab Emirates Real Estate Industry Update Quarter 4 2011

  • September 2014
  • -
  • Business Monitor International
  • -
  • 75 pages

Increasing tourism, strengthening investor confidence and the tentative shoots of lending in progress show that the UAE is getting to the end of its real estate market crash. Gross Domestic Product growth may well be small in 2011, but it is positive. However, the state remains plagued by huge amounts of unoccupied property. The UAE’s commercial real estate segment remains under pressure from failing rents. In H210 the quoted maximum and minimum rental levels for property across the board had dropped. However, when we spoke to our in-country sources again in the middle of 2011, rents had diverged. Maximum rents in the three sub-sectors in Sharjah had rocketed. The other two emirates had a mixed bag of results. The office rents continue to decline a little in Dubai and substantially in Abu Dhabi – by more than half. Conversely, retail rents rose in both, with the same pattern of movement in Dubai and a nearly 40% increase in Abu Dhabi. Industrial space commanded a moderate rise in rents in Dubai and a moderate decline in Abu Dhabi.
According to our in-country sources, we expect that rents across the board are likely to remain stable through the rest of 2011, at minimum and maximum levels. Considering the huge variations in previous half-years and by city and sub-sector, this may not be entirely likely. They do however, expect them to diverge again in 2012.
Some key opportunities in the real estate industry are: • Plenty of development projects are being restarted, including Dubailand, one of the most ambitious developments ever conceived. Following an evaluation, the plans are to relaunch the large leisure project backed by Dubai Properties Group by the end of 2011.
• Investor confidence has improved as they become more comfortable with the emirate’s debt situation. The latest FPI investor attitudes report shows investor confidence in the UAE has risen 5 points to 18, according to the Arabian Gazette in July 2011. Dubai Holding, a struggling state-owned entity repaid a US Dollar 317.6mn bond and Dubai Aerospace refinanced debt and debt revenues from the Dubai government and Emirates airline.
• Legislation is improving for property buyers and investors. Laws now protect investors' interest. According to Jones Lang Lasalle, the three-year residency visa for property owners is a new tenancy registration system ‘Tawtheeq’, where a buyer can register their property when purchasing, whether it is completed or purchased off plan and during the handover when they receive the title deeds. There is also a new law limiting overcrowding in residential properties. Some key risks to the real estate industry are:
- Some UAE real estate industry players remain in significant financial trouble through 2011. Al- Habtoor Leighton said in April 2011 that it needed AED4bn to safeguard its future projects in the Gulf following writedowns and delayed payments from clients, according to Arabian Business. The firm ’s parent, Australian industry player Leighton Holding, had to raise AUS757mn from shareholders to fund an injection of AUS272mn into the UAE subsidiary, following the announcement that the firm was owed more than AED4bn for completed projects.
- **The UAE’s construction market has looked to other states to take advantage of their governments’ large-scale infrastructure projects. Arabtec reported in Arabian Business that it is planning growth of its Saudi Arabian workforce to 2,500 in June 2011.
- RERA (Dubai’s real estate watchdog) lists 300 projects that have stalled or been cancelled and according to Arabian Business in August 2011, is reviewing the financial viability of about 90,000 properties due to be delivered over the next five years. Out of the projects it is investigating Nakheel, the struggling development behind the offshore Palm Jumeirah in Dubai, is the lead on 107 projects and the article says state-backed Dubai Properties has 42 projects that are on hold.
- The state government needs to focus on offering long-term subsidies to investors, such as discounts on municipality fees and electricity for up to 10 years, in a bid to boost the construction market .
- The UAE central bank announced that lending to the country's real estate segment declined by 1.4% between January and May 2011, according to Zawya. Credit levels have been affected by the continuing problems caused by the global financial crisis and the political unrest in other parts of the Middle East.

Table Of Contents

Executive Summary ... 5
Industry SWOT Analysis .... 7
UAE Real Estate Industry Environment and Risk Analysis .. 7
UAE Economic Environment and Risk Analysis .... 8
UAE Business Environment SWOT ...... 9
Real Estate Industry Overview . 10
Real Estate Industry Analysis .. 11
Data : UAE Real Estate Industry - Net Yield, 2011 And 2012 (%) 12
Data : UAE Real Estate Industry - Terms Of Contract/Lease, Mid-2011 .... 13
Data : UAE Real Estate Industry - Available And Vacant Space, Mid-2011 (m2, unless stated) ..... 13

Market Projection Scenario .... 14
Real Estate Outlook ...... 14
Data : Real Estate Industries - Rentals, from 2011 to 2012 (m²/month, AED) ... 15
Data : Projection Yield, from 2008 to 2015 (%) ...... 16
Construction Market Outlook .... 17
Data : UAE Construction And Infrastructure Market Data . 17
Data : UAE Construction And Infrastructure Market Data . 18
Construction and Infrastructure Projection Scenario 19

Macroeconomic Data ...... 21
United Arab Emirates - Economic Activity ...... 22

Environment Overview ... 23
Introduction .... 23
Data : BMI Business And Operation Risk Ratings .. 23
Legal Framework... 24
Data : BMI Legal Framework Rating 25
Infrastructure .. 26
Data : Labour Force Quality ...... 28
Market Orientation 29
Data : Middle East and Africa - Annual FDI Inflows .... 29
Data : Trade And Investment Ratings 32
Data : Top Export Destinations .. 33
Operational Risk .. 34

Competition Overview .. 35
Company Profiles ..... 37
Aldar Properties PJSC .. 37
Al Habtoor Leighton Group . 39
Damac Properties .. 41
Deyaar Development .... 43
Dutco Balfour Beatty .... 44
Emaar ...... 46
Mubadala Development 48
Nakheel .... 49
Sorouh ..... 51
BMI Methodology ..... 52
How We Generate Our Market Projections ...... 52
Construction Market ... 53
Bank Lending .. 54
Real Estate/Construction Business Environment Rating 54
Data : Weighting Of Indicators .. 55
Project Finance Ratings Indicators ... 58
Data : Design And Construction Phase .... 58
Data : Commissioning And Operating Phase - Commercial Construction 59
Data : Commissioning And Operating Phase - Energy And Utilities .. 60
Data : Commissioning And Operating Phase - Transport .... 61
Sources .... 62

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