Abu Dhabi Market Overview Q4 2007

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SUDAN ProPerty tyPe SeCoND QUArter | 2007

Abu DhabiReal Estate Overview

Co l l i e r S i N t e r N At i o N A l | M e N A r e G i o N

eCoNoMiC HiGHliGHtS

Abu Dhabis economy accounts or over 60% o the UAEs GDP

Holds 95% o UAE oil reserves and 92% o proven gas reserves

Economic growth at a Compound Annual Growth Rate (CAGR) o 16% over the past ten

years

GDP estimated to reach US$ 159bn by 2010 up rom US$ 98bn in 2006

Emphasis on developing tourism, industrial and real estate sectors to diversiy economy

towards private sector orientated growth and away rom hydrocarbon revenue dependence

Growth in value o construction sector activity orecast to slow to US$ 6.5bn in 2007,

representing a modest 4.3% increase over 2006, compared against 173% growth between

2005 and 2006

Real estate price boom driven by a substantial historic undersupply across all o the key real

estate sectors

Optimism in the real estate sector driven in large part by the property boom in the

neighbouring Emirate o Dubai

Spending in excess o US$ 200bn over the next ve years on inrastructure projects

eCoNoMiC MArket iNDiCAtorS

2006 2007Acua Fcass

GDP: US$ 98bn

o: 2.5bn bpd

tad Baanc: US$ 64.25bn

(supus)

Ppuan: 1.6mn

inan: 10.0%

FDi: US$ 1.9bn

A population surge,

a series of legislative

reforms in 2005

governing property

ownership and the

phenomenal growth

witnessed within

neighbouring Dubai,

have constituted the

main drivers for real

estate investment in

the Emirate

M A r k e t r e S e A r C H | F o U r t H Q U A rt e r | 2 0 0 7

Abu Dhab

CollierS iNterNAtioNAl 1

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ABU DHABi reSiDeNtiAl FoUrtH QUArter | 2007

Current demand orresidential property acrossall segments o Abu Dhabisdemographic spectrumhas outstripped availablesupply. Occupancy levelso approximately 97-98%to remain consistent overthe medium-term uture

reSiDeNtiAl

Despite the announcement o numerous

master-planned developments, the impact

o a two year construction moratorium

imposed between 1999 and 2001 is stillevident in Abu Dhabi. Current demand

or all types o residential property in Abu

Dhabi has outstripped available supply,

with occupancy levels o approximately

97-98% reported across the city. One and

two-bedroom apartments currently enjoy

the highest demand, whilst buildings

with a reputation or eective property

management and a good selection o

amenities have waiting lists or potential

tenants. In addition, new buildings enjoyhigh absorption levels, with some developers

claiming that projects are 100% pre-let well

in advance o construction completion.

Rental prices have steadily increased over

the past six years, with a price appreciation

particularly marked at the upper end o the

pricing scale. The infationary pressures

resulting rom rapid rental price increases

have prompted the Abu Dhabi Government

to issue a law in late 2006, capping

rent review increases at 7% per annum.

Nevertheless, market pressure means that

new leases are commonly contracted at

premiums o up to 25% over the average

passing rents o incumbent neighbours.

Price appreciation in the high income

segment notwithstanding, the largest gap in

the current market remains in the middle

income segment.

Given the extremely limited acilities enjoyed

by existing middle income properties, new

buildings with a range o ancillary acilities

are likely to perorm particularly well. Overall

benchmarks o building quality and acility

provision now are increasing to meet occupier

requirements. All new apartments targeting

middle income occupiers and above oer

central air conditioning and gas acilities.

Almost 70% have underground car parking

while around 25% provide a health club and/or

gym to tenants. Provision o these associatedacilities is now a minimum benchmark or

new developments in Abu Dhabi.

Colliers International has identied

approximately 14,000 villas and 18,000

apartments that are currently under

construction across the city. Economic

growth and a shortage o supply have

provided the natural stimulus or

development activity in the Emirate. Based

on gures supplied by developers operatingin Abu Dhabi or developments either under

construction or planned, we expect the

supply o residential accommodation units

in the city to increase by approximately

205,000 by 2015.

AvErAgE ApArtmEnt rEntAls

70,000

60,000

50,000

40,000

30,000

20,000

10,000

01 Bdm 2 Bdm 3 Bdm 4 Bdm Pnhus

Annuarent(US$)

Md-rang Hgh-end

projEct snApshot

ProJeCt totAl UNitS

Al MArkAziyAH 1,300

Al rAHA BeACH 41,800

Al reeM iSlAND 77,000

BreAkwAter 7,750

GHANtoot 5,000

kHAliFA CitieS 8,000

MoHD. BiN zAyeD City 10,700

SAADiyAt iSlAND 43,500

toUriSt ClUB AreA 15,600

zAyeD SPortS City 3,800



The continuous fow onew organisations keento establish themselvesin the Emirate, as wellas the natural expansiono existing organisationsagainst the backdropo benign economicconditions, serve as

key demand drivers

oFFiCe

Abu Dhabis ofce sector experienced

development in spurts between 1978 and

2007. In recent years growth has not been as

dramatic as witnessed in the early 1980s whenthe supply o ofce space doubled consecutively

in 1982 and 1983. Since 2000 ofce supply

has grown by 50% to a total o 460,000 m2

o Gross Floor Area (GFA). With a spate

o projects under construction and planned,

Colliers International anticipates that by

2011, existing ofce space supply will increase

by a urther 85% to 850,000 m2 o GFA.

The continuous fow o new organisations

keen to establish themselves in the Emirate,as well as the natural expansion o existing

organisations against the backdrop o benign

economic conditions, serve as key demand

drivers. These actors are urther reinorced

by the Emirates economic diversication

ambitions, and the development o planned

industrial, nancial and ree trade zones.

According to statistics supplied by the Abu

Dhabi Chamber o Commerce & Industry

(ADCCI), there were approximately 60,000

licensed businesses in the city in 2006,

growing at an annual rate o 5%.

Colliers Internationals comprehensive

survey o Abu Dhabis dedicated oce stock

has identied the ollowing characteristics:

There are ew purpose-built primary grade

oce buildings in the city, and the bulk o

them are owned by government or semi-

government entities

Occupancy rates in purpose-built oce

buildings are typically around 98%, with

the balance o space being subject to the

natural vacancy rate which is associated

with lease transers or new tenant t-outs

The quality o the citys remaining stock

is low with the majority o oce buildings

in the city o secondary or tertiary grade.

Nevertheless, the nishes o these

buildings are generally air and they oer

unctional oce space, albeit lacking in

modern communications systems, services

and foor plate design eciency Virtually all buildings suer rom a lack o

dedicated parking acilities

Our research indicates that approximately

415,000 m2 o oce space GFA is currently

under construction across the city. In the

meantime, unsatised demand has resulted

in average rental increases o over 30% in all

oce accommodation under study between

2005 and 2006. There have been urther

increases o around 10% between 2006 and2007, with the reduction in the average level

o increase attributable to the government

imposed rental cap. Despite this, Colliers

International anticipates rents to continue

to rise, until substantial supply enters the

market rom the end o 2009 onwards.

oFFiCe FoUrtH QUArter | 2007

prImArY grADE oFFIcE rEntAl groWth

400

300

200

100

02001 2002 2003 2004 2005 2006 2007

Annuarent(US$/m2)

Class A (Primary): Strong location, purpose-built, high quality fnishing, central provision o Inormation and Communications Technology (ICT), Air-conditioning(A/C) and central heating (C/H), good state o repair, available parking acilities.

Class B (Secondary): Strong location, converted use, moderate quality fnishing, provision o ICT, A/C and C/H, limited parking acilitiesClass C (Tertiary): Poor location, congestion and parking constraints, limited or no ICT, A/C and C/H, adequate state o repair, moderate quality fnishing

projEct snApshot

ProJeCt GFA (m)

Al MAMoUrA 24,000

CeNtrAl MArket 25,000

Al MASooD reveloPMeNt 32,000

CAPitAl PlAzA 25,000

DArwiSH iSlAND City 57,000

Al FAHiM BtB 40,000

Al wAHDA CoMPlex 25,000

PreStiGe towerS 61,000

tDiC oFFiCeS 37,000

etiHAD towerS 65,000

ABU DHABi

ForthcomIng sUpplY

yeAr GFA (m)

2007 24,000

2008 58,000

2009 256,000

2010 183,000

2011 250,000


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The leasable area in theEmirate o Abu Dhabiis set to increase rom526,700m at the end o2006 to 1.4 million mby 2010, representinga 165% increase

retAil

In 2000 there were no destination

retail venues in Abu Dhabi. During the

intervening period, there has been a notable

shit towards the provision o internationalstandard shopping malls, doubling-up as

visitor destinations. The Marina Mall and

the Abu Dhabi Mall both opened during

2001, contributing a total Gross Leasable

Area (GLA) o 139,000m, ollowed by a

urther 35,000m at the Meena Retail Park

in 2002. In 2006, Phase II o the Marina Mall

contributed an additional 40,000m o GLA

to the citys available retail mall stock. The

opening o Al Raha Mall and Al Wahda Mall

in May and July 2007 respectively increasedthe existing supply by a total o 172,500m.

Early indications suggest that these malls

are perorming in line with the operators

expectations. An additional 46,000m is

anticipated in November 2007 with the

completion o the Al Khalidiyah Mall.

The new malls have introduced the concept

o convenience shopping in a climate-

controlled environment with the added

benet o dedicated parking, crche, and

adequate restroom acilities marking a shit

away rom the citys traditional high-street

retailing orientation. This continuing trend

towards one-stop shopping environments, in

tandem with increases in disposable income

over the last decade, has been refected

in the number o recently completed and

orthcoming retail developments.

In mid-2008, Aldar Properties are expecting

to complete a modern Arabian Souq

(ShopCentral), as part o its fagship Central

Market development. With the addition

o this new oering, it is anticipated that

traditional modes o downtown retail in

Abu Dhabi will change dramatically. This

is in part due to the location o the Central

Market project, at the intersection o the

Airport Road, Khalia Street and Hamdan

Street. The year 2010 is likely to represent

a watershed or retail market perormance inthe city, with Sorouh Real Estate set to open

the Al Reem Mall with 130,000m o GLA

and the Al Yas development adding a urther

300,000m o leasable area.

The leasable area in the Emirate o Abu

Dhabi is set to increase rom 526,700m at

the end o 2006 to 1.4 million m by 2010,

representing a 165% increase. In 2010,

Abu Dhabi will have 0.87 m o GLA per

capita. Colliers International Retail Servicesproject that in order to support this volume

o retail mall stock, an approximate annual

retail spend o US$ 4,900 per capita will be

required.

CollierS iNterNAtioNAl

retAil FoUrtH QUArter | 2007

UpcomIng rEtAIl locAtIons

ABU DHABi

abu dhabi shopping mallcumulative supply

2005 2006 2007 2008 2009 2010

GlA

m2

A rm isand15.8%

A yas isand25%

zad Sps C8.4% khada

5.6%Baa

4.7%

Bn h Bdgs3.8%

ohs5.7%

A raha Bach36.5%

gcc rEtAIl mAll glApEr cApItA

2.50

2.00

1.50

1.00

0.50

0.00

PeCapitaGlA

(m2)

radh Jddah Abu Qaa Bahan DubaDhab

2000 2010

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0



In line with thegovernments objective ostimulating tourism, the

ADTA plans to license theconstruction o 17,000 newhotel rooms in the Emirateby 2015, o which 45%would be in the 5* category

HoSPitAlity

Historically, Abu Dhabi has been

overshadowed by Dubai as a leisure tourist

destination. Demand or hotel accommodation

in the city is driven predominantly bybusiness tourism, which accounts or 75%

o overall hospitality market demand. In

2006 the Emirate witnessed average hotel

room occupancy rates o 78.6%, while

serviced apartments achieved approximately

80%. Average Room Rates (ARR) rose by

approximately 40% compared to the previous

year, to US$ 167 and US$ 235 or 4* & 5*

rooms respectively. Early industry reports

suggest that Q2 2007 occupancy rates have

been maintained at 78.5%.

The Abu Dhabi Tourism Authority (ADTA)

is seeking to increase the market share

enjoyed by the leisure tourist segment to

40% by 2015. It plans to do so by developing

destination attractions or cultural, sporting,

and Meetings, Incentives, Conerences

and Exhibitions (MICE) tourism segments.

Such initiatives include the provision o

dedicated hotels, resorts, art & culture

venues, shopping malls and other acilities

which aim to capitalise on Abu Dhabis

endowment o natural islands, long stretches

o beach, and its position as the UAEs socio-

political and cultural core.

The recent announcement o an agreement

between Mubadala, a government-owned

investment authority, and Formula 1 ounder

Bernie Ecclestone that Abu Dhabi will play

host to the prestigious racing circuit rom

2010, has been hailed as the frst major step

in the citys eorts towards becoming a more

widely recognised leisure tourism destination.

This has been complemented by the decision

o the world-amous Louvre and Guggenheim

museums to establish Middle East counterparts

on Abu Dhabis Saadiyat Island, both

scheduled or completion in 2012.

In line with the governments objective

o stimulating tourism, the ADTA plans

to license the construction o 17,000 new

hotel rooms in the Emirate by 2015, o

which 45% are in the 5* category. There arecurrently 9,500 rooms (including all hotel

categories and serviced apartments) in the

Emirate, with Abu Dhabi city accounting or

approximately 8,000 rooms, with Al Ain, Al

Dharah, Maraq, Ruwais and Liwa providing

the remainder.

Approximately 8,500 hotel rooms are currently

under construction in the city. Increases in

the numbers o visitors to the Emirate and an

expansion in the destination reach o AbuDhabi based Etihad Airways have supported

strong occupancy rates and ARR growth

during the past 18 months. We expect this

growth to be sustainable as Abu Dhabi carves

out a position or itsel as a business, sporting

and cultural tourism destination.

ForthcomIng 4* & 5*

hotEl sUpplY

yeAr rooMS

2007 913

2008 4,114

2009 2,155

2010 1,380

2011 1,600

HoSPitAlity FoUrtH QUArter | 2007

FUtUrE hospItAlItY sUpplY - mArkEt shArE

hotel performance (Q2 2007)

oCCUPANCy 78.5%

Arr (US$) 221

rPAr (US$) 174

(Suc: HBnchma Su, D 2007)

ABU DHABi

4*17.5%5*

45%

3*10.7%

Scd Apamns26.8%


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This market overview is extracted from a comprehensive Abu Dhabi real estate market study carriedout in 2007, available from Colliers International UAE for purchase.

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Abu DhabPo Box 47435UAet : +971 2 445 9898

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Ga BnDcCnsuanc [email protected]

DubaPo Box 71591UAet : +971 4 355 4177Fa : +971 4 355 4277

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ABU DHABi reAl eStAte overview FoUrtH QUArter | 2007

Colliers International is a global real estate consultancy company providing a comprehensive

range o property services to a broad range o clients on an international basis. Core services

include property and asset management; leasing; development consultancy & strategic advisory;property valuations and international property investment services.

Documents

Abu Dhabi Market Overview Q4 2007