United Arab Emirates Real Estate Industry Update Quarter 4 2011

Executive Summary
The UAE Real Estate report examines the commercial office, retail, industrial and construction segments
in the context of an increasingly positive macroeconomic perspective, which may well see the tide turning
on a market which has spent the last four years suffering from over-supply; and the legacy of the property
bubble.
With a focus on the three principal emirates of Dubai, Abu Dhabi and Sharjah, the report covers market
performance in terms of rental rates and yields over the past 18 months and examines how best to
maximise returns in the commercial real estate market; while minimising investment risk and exploring
the impact of the government-led growth on a market already characterised by oversupply and historically
low rates. The key potential growth areas driven by increasing activity on the part of international
investors and the potential of the domestic consumer market are also explored, with corporate growth
strategies looking to the emirates for expansionary opportunities.
Nevertheless, Saudi Arabia’s various real estate sectors are developing in different directions and at
varying rates. The commercial market in general suffers from oversupply and is forecast to undergo
limited growth in the short term; however, BMI believes that there is light at the end of the tunnel; that
the market will reach its nadir over the course of 2012 and that positive sentiment growing around the
sector (as evidenced by our newly collected data covering H112) will see its first few shoots rise above
the surface, if the positive economic fundamentals remain on course.

Key Points
- Due to the emirates’ relative stability over the course of the Arab Spring, tourism has received a
real boost. As such we see a bright spot developing in related real estate projects.
- The macroeconomic outlook for the UAE has brightened considerably over the past several
quarters, as the country's prolonged recovery from 2009's slump gradually gathers steam. BMI
estimates real GDP expanded by 4.2% in 2011, which would mark the fastest pace of growth in
five years. In addition to higher oil production, the economy is also benefiting from an uptick in
the trade, tourism and services sectors.
- Deleveraging will remain a prominent theme well into 2013, as corporations continue to focus on
repairing their balance sheets.
- Abu Dhabi will outperform Dubai over the coming years, given its large-scale investment plans
targeting the infrastructure sector and ongoing concerns surrounding Dubai's lingering debt
repayment schedule. Further tightening in international sanctions on Iran bodes poorly for
Dubai's outlook, given its trade linkages with the Islamic Republic.
- A gradual softening of negative conditions that have blighted the UAE for the past four years
underpins our forecast for construction growth of 5.2% between 2012 and 2016.