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June 2015
OCCUPIERSENTIMENT SERIES
MENA
ANINITIAL WORD
Welcome to our first report on occupier sentiment in MENA, which provides insights into the current conditions and future
expectations of corporates based in the region.
As part of our efforts to continuously
improve our understanding of our
clients, whether they are international
conglomerates or local businesses, we asked a
number of occupiers across MENA to identify
some of the opportunities and challenges they
face when setting their real estate agendas.
These discussions are particularly relevant today,
given the economic, social and political volatility
of our region, which emerged as a main factor
influencing real estate decisions.
We extend our thanks to those who shared their
thoughts and perspectives through our one-on-
one discussions, and invite others to participate
in future editions as we roll out a more formal
Occupier Sentiment Survey in 2016.
By sharing the results of these discussions, we
hope that both corporate tenants and landlords
will benefit from a better understanding of their
peers, which will help create a more productive
corporate environment and mature market.
This report presents JLL’s own view on these
issues, and I look forward to hearing if you share
or disagree with them.
Best Regards
DANA WILLIAMSON
Head of Agency, MENA
The UAE’s macro environment remains strong and conducive to corporate growth and investment. The political and social unrest that has swept across the MENA region since 2011 has confirmed the UAE’s position as a ‘safe haven’ within a volatile region. Within the UAE, Dubai has cemented its place as the preferred business and financial centre within MENA. It’s success at diversifying its economy, supported by a strong private sector, has acted as a buffer against recent falls in oil prices, and allowed Dubai to achieve stronger economic growth than the rest of the UAE in 2014/2015. The emirate is expected to consolidate its
position as the favoured location for corporate occupiers in the MENA region over the next 3 years.
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GROWTH MARKETS
SOURCEJLL CITY MOMENTUM INDEX 2014
DUBAI’S STRATEGIC LOCATION
DUBAI IS THE PREFERRED MARKET IN MENA
Discussions with international corporates reveal they are currently forecasting a headcount growth of
between 5–20% per annum in the UAE over the next 3–5 years. This is driven by:
GDP GROWTH(3% PA 2015/18)
SOURCEOXFORD ECONOMICS
LABOUR GROWTH(2% PA 2015/18)
SOURCEOXFORD ECONOMICS
DIVERSIFIED ECONOMY
SOURCEOXFORD ECONOMICS
EASE OF DOING BUSINESS
SOURCE WORLD BANK
GLOBAL CONNECTIVITY
SOURCEEMIRATES AIRLINES
POPULATION GROWTH(2% PA 2015/18)
SOURCEOXFORD ECONOMICS
TRANSPARENT REAL ESTATE MARKET
SOURCE: JLL, LASALLE INVESTMENT
DOMESTIC GROWTH OF THE UAE REGIONAL & GLOBAL ROLE OF THE UAE
As occupiers remain more focused on accommodating growth within existing real estate portfolios, we see limited increases in net absorption in most MENA markets. This trend is likely to continue as corporates focus on cost containment strategies.
CHOICE OF BUILDING
ACCESS, AMENITIES AND MANAGEMENT ARE KEY FACTORS
• Corporate real estate teams and decision makers are
becoming more aware of the role their physical space
plays in promoting productivity and efficiency.
• Office space within developments with a significant
residential, leisure, and other components are
becoming more popular. As office densities increase
and flexible working becomes common; people may
work from their desk, at home, or public spaces.
• International property management teams have proven
to add value to tenants by undertaking lease renewal
negotiations, ensuring tenant satisfaction, reducing
operating costs through energy and sustainable
management practices, and maintaining the overall
security and maintenance of the office building.
LIMITED INCREASE IN THE QUANTUM OF SPACE DEMANDED
• While the level of enquiries continues to increase in most
MENA markets, the majority of corporates are currently
focused on utilising their existing space more efficiently,
rather than relocating to new premises.
• JLL data on net absorption reveals that while demand is still
active in Dubai, the preferred growth market, activity has
slowed down in 2014. Net absorption averaged 112,000 sq m
over the past 4 years (Q1 2012 – Q1 2015), closely in line with
the 109,000 sq m annual increase in supply.
• Corporates are trying to achieve short-term cost savings
through real estate initiatives such as refurbishment, as
opposed to relocation and expansion.
• As MENA markets are expected to witness the delivery of
further Grade A office space over the next couple of years,
corporates should find it more attractive to expand their
premises or relocate.
DUBAI – NET ABSORPTION OF CBD SPACE
NET ABSORPTION (‘000 SQ M)
2
QUANTUM OF SPACE 3
The performance gap between projects offering high quality amenities, sufficient parking, good accessibility and international standards of property management, is likely to widen in terms of higher occupancy and rental levels.
REPUTATION & PROFILE OF THE OWNER
QUALITY OF MANAGEMENT
FACILITIES / AMENITIES
ACCESSIBILITY & PUBLIC TRANSPORT
FLOOR PLATE EFFICIENCY /BUILDING SPECIFICATION
EXTERNALDESIGN
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2
3
4
5
6
OR
DE
R O
F IM
PO
RT
AN
CE
(MO
ST
TO
LE
AS
T)
-12012*
2013* 121
2014* 186
2015* 143* YEAR TO Q1
Occupiers attitudes towards green building features and specifications are now changing as real financial benefits are being increasingly recognised. Those buildings able to
demonstrate lower occupancy costs will enjoy a rental premium, as occupiers focus more on total occupancy costs over the period of their lease, rather than just on the initial rent.
USE OF SPACE
SIGNIFICANT CHANGE IN THE USE OF SPACE
• Workplace transformation is taking on a new significance
at the global level, as corporates respond to changing
economic conditions, with a continued emphasis on
cost control and efficiency gains.
• Corporates are re-designing their workplaces to create
more open, collaborative and flexible spaces and are
increasing their use of alternative workplace strategies
such as hot desking and remote working, as opposed to
traditional enclosed offices.
• This is supported by technologies such as web
conferencing, which have driven global connectivity,
increased mobility, and have aided in re-designing
workplaces.
SUSTAINABILITY PREMIUM – PROVIDING OPERATIONAL
COSTS CAN BE REDUCED
• Although MENA generally lags behind other global
regions on green building legislation, there is an
increasing recognition among corporates of the impact
that sustainable buildings have on businesses from an
operational standpoint.
• This is evident from our discussions with corporates,
which reveal there is a willingness to pay a rental
premium for sustainable buildings providing they
result in savings in operating costs, and therefore
total occupancy costs over the length of a
corporates’ tenure.
• Responding to this trend, more developers are now
seeking LEED certification to differentiate their
buildings from the rest of the market, particularly
in Dubai.
While government agencies and local companies still prefer traditional cellular offices, multinational corporates are looking to introduce more open, collaborative,
and flexible designs within their MENA offices as part of their workplace strategies to improve productivity.
SUSTAINABILITY
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jll-mena.com
DubaiEmaar SquareBuilding 1, Office 403Sheikh Zayed RoadPO Box 214029Dubai, UAETel: +971 4 426 6999Fax: +971 4 365 3260
Abu DhabiOffice No. 3, 7th FloorAbu Dhabi Trade Centre Building (East Tower)Next to Abu Dhabi MallTourist Club AreaPO Box 36788Abu Dhabi, UAETel: +971 2 443 7772Fax: +971 2 443 7762
Riyadh18th Floor, South TowerAbraj AttawuniyaKing Fahd RoadPO Box 13547Riyadh 11414, Saudi ArabiaTel: +966 1 218 0303Fax: +966 1 218 0308
JeddahLevel 4, Suite 406Jameel SquareTahliya & Andalus StreetsPO Box 2091Jeddah 8909–23326, Saudi ArabiaTel: +966 2 660 2555Fax: +966 2 669 4030
Craig PlumbHead of [email protected]
Dana WilliamsonHead of AgencyMENA [email protected]
Contributors
Toby HallHead of Office [email protected]
Dana SalbakSenior Research [email protected]
CairoStar Capital 28th FloorOffice 862, Aly Rashed StreetHeliopolisCairo, EgyptTel: +20 2 2480 1946Fax: +20 2 2480 1950
