FutureBrand's Annual Gulf Real Estate Study

Futurebrand’s annual GulF real estate study

GULF REAL ESTATE STUDY 1 This year’s Gulf Real Estate Study (GRES) is a reaction to the challenging landscape of the real estate market we face today, and a shift in the way we both question and celebrate the events spurred by the industry in the past twelve months. Having focused and built many of the leading brands in this region and category for over ten years, we are continually looking to assess achievements and failures as well as to measure the performance of the brands that remain and those that we hope will capitalize. As our name suggests, we seek insights and trends that will inform the brands’ future. Where hyperbole once ruled, today the focus is on moderation. Developers are turning their attention to previously neglected segments of the market with a broader variety of developments that cater not only to the luxury customer but also to the more affordable end of the market. Countries in the Gulf Cooperation Council (GCC) are starting to create strong national brands and forge themselves into cultural and leisure destinations that are not defined by iconic real estate offerings but are complemented by them. Given these changes, developer brands are going to have to proactively connect with and listen to their end customers — both prospective clients and current residents. Those who will best manage their reputations and build real trust in this period of difficulty will ultimately succeed and endure. We hope you enjoy reading this report. We’d love to have your thoughts and comments on our findings and insights! Cover image courtesy of Katarina Premfors katarinapremfors.com

GULF REAL ESTATE STUDY 3 COntents ShaRE yoUR commEnTS: futurebrand.com/gres or Twitter: #gRES yEaR in REviEw 2009 FacTS anD FinDingS Examining DUBai ThE FUTURE The Highs & The Lows 7 Impact of the Downturn 49 Dubai Marina 75 The Rise of Abu Dhabi 89 News & Noteworthy 9 Developer Recognition 50 Villas 77 Portfolio Rationalization 90 2009 Notables 21 Developer Reputation 51 Apartment Transactions 78 Financial Innovation 93 2009 Trends 23 Developer Preference 52 Dubai vs. NYC 79 Breaking the Silence 94 Developer Outlook 53 A New Dialogue 97 REgion aT a gLancE Developer Image 55 EmERging TREnDS Delivering the Promise 98 Saudi Arabia 27 Preferred Locations 65 Fact or Fiction - The Credibility Crisis 82 Qatar 31 Preference Drivers 67 From Concept to Completion 84 Bahrain 35 Breakdown by Transaction Type 69 UAE 39 Breakdown by Nationality 71

GULF REAL ESTATE STUDY 5 2009: year In reVIeW This past year has witnessed the greatest highs and lows of the past decade in the Gulf real estate market. In the same year that the tallest tower in the world was completed, the global financial crisis eclipsed many of the extraordinary achievements in the region. Developer brands went through flux and, in many cases, reputation crises; investors suffered heavy losses; and expatriates left the region. The last twelve months also had cause for celebration, with the inauguration of The Palm monorail and the Dubai Metro, new pieces in the infrastructure of Dubai that will serve as a blueprint for the future of the region’s infrastructure. These valuable investments in the region will create better, more comfortable and sustainable cities in the long term, so while the real estate sector is down, it is not out for the count.

GULF REAL ESTATE STUDY 7 tHe HIGHs tHe lOWs In 2009 we celebrated some milestone events that placed the region in the global spotlight. Institutional and foreign investors left the region during the last twelve months, precipitating The Dubai Mall opened to great fanfare, the first F1 Etihad Airways Abu Dhabi Grand Prix was a slump in demand, that was followed by sharp drop in speculation. Unlucky investors successfully staged at Yas Marina Circuit and The Pearl Qatar opened. The inaugural Dubai who had bought properties at the peak of the real estate market were left with depreciated World Championship at Jumeirah Golf Estates created a new blockbuster sporting event for values and without prospective buyers. Investor confidence reached an all-time low, and the region, which will contribute to the rise of the region as a center for sporting excellence. leaders of developer brands refused to give a clear account of events, creating a detrimental Dubai’s airport announced a year-on-year growth of 9.2% in passenger numbers during 2009 information famine. with a record 40.9 million passengers, the fastest growth in passenger numbers among the world’s busiest airports.1 Houses, shops, offices, hotels and restaurants that had been built on aggressive and optimistic demand projections faced the sobering reality of oversupply and the transition from a seller’s The inaugurations of The Palm monorail and the Dubai Metro were significant landmarks of to a buyer’s market. With developers slow to react to the change in the market conditions, infrastructure investment in Dubai, setting an example for the rest of the region. Developers many completed buildings were left empty with for lease/sale signs on their facades. in other GCC countries are following Dubai’s lead in creating sustainable transportation links and connecting new developments such as Masdar City in Abu Dhabi to the wider public Developers could not access the necessary capital to pay contractors and manage their transport network, thus creating more comfortable, better connected and more pleasant cities staggering debts, while investors and buyers suffered the disappearance of financing products for the future. Qatar and other countries in the region are investing heavily in their tourism and increasingly complex requirements for those that remained. Market demand evaporated, infrastructure and cultural centers — the Museum of Islamic Art in Doha, which opened in further contributing to the overall economic stagnation. December 2008, and the bold projects planned for Saadiyat Island are prime examples — thus improving the quality of the countries both as destinations to visit and places to live. With the fundamentals of business in disarray, companies looked to cut operational costs with rounds of redundancies; triggering an exodus of expatriates and sensationalized news of abandoned cars and unpaid personal credit card bills. This was followed by a number of project cancellations, delays, indefinite postponements and reevaluations. Many organizations either collapsed or were forced to merge to consolidate their portfolios and international footprints. The Dubai World debt default announcement in November sent shock waves through the global financial markets and triggered fears of a second global financial crisis — one with its source in the region. The resulting damage to the real estate sector’s credibility has left legions of disgruntled — and vocal — investors and workers in its wake.

GULF REAL ESTATE STUDY 9 neWs & nOteWOrtHy State of the Market A survey in March 2009 found that investors in the GCC see Abu Dhabi as the region’s strongest-performing real estate market in the Middle East North Africa (MENA) region during 2009–2010. Abu Dhabi (at 26%) is closely followed by Saudi Arabia (25%) and Qatar (19%).4 State of the Market It is estimated that more than 15,000 apartments in Qatar are vacant.5 Despite growing demand in the housing sector, sale prices in the Saudi real estate sector are typically 58% below the In Dubai’s central business district (between the World Trade Center and Interchange 1), MENA average.2 office rents in September 2009 averaged between AED 225–275/square foot, as compared to AED 375–400/square foot in November 2008. In Abu Dhabi, office rents averaged AED 230/ square foot in September 2009, a fall from AED 280/square foot in November 2009.6 Developers claim that Bahrain will need 80,000 housing units targeting the middle and lower-income market segments to meet demand by 2020. The Bahraini government has State of the Market announced plans to build 50,000 low-cost housing units by 2014.7 By the end of 2008, Dubai’s hospitality sector was reporting Analysts forecast that the Kingdom of Saudi Arabia will have to build 1.5 million new homes an average occupancy level of 79%, the lowest in five by 2015 to meet its housing demand. Projections estimate that at current levels of supply, years.3 the KSA market will see a shortage of 150,000–800,000 housing units by 2012.8 Projects in Bahrain currently hold a cumulative worth of over $36 billion. Since the start of the economic crisis, 54 projects have been cancelled or put on hold, while construction and planning continue on 148 projects.9

GULF REAL ESTATE STUDY 11 neWs & nOteWOrtHy State of the Market His Highness Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai and Vice-President of the UAE, was quoted as saying that the worst of the crisis had passed and the emirate was well poised to recover, as real estate does not constitute the mainstay of Dubai’s economy.11 State of the Market Dubai World, which owns the property unit Nakheel, has asked creditors to allow the firm to delay debt payment until May 2010 at the earliest. The Dubai government announced that One in four homes and a quarter of all office space in Dubai it had borrowed $5 billion — half of the $10 billion it initially planned to raise by the end of is currently unoccupied. Oversupply has created a glut 2009 — from Abu Dhabi’s government-controlled banks.12 in the market, and an additional supply coming onto the market is expected to further depress prices.10 The Dubai government announced that it would not guarantee Dubai World’s debt of $59 billion and that lenders must bear part of the responsibility.13 As part of an initiative to protect property investors, the Dubai Land Department is working on drafting a new law that would further regulate the relationship between developers and investors.14 Due to a new supply of hotel rooms, the average occupancy rate has dropped below 70% from peaks of over 87% experienced between January and June 2008.15

GULF REAL ESTATE STUDY 13 neWs & nOteWOrtHy Market CorreCtion Property prices for undeveloped land in Kuwait have fallen by 40%–50%, and built properties have seen devaluations of up to 30%.18 By the end of 2008, Dubai’s commercial sector reported a 16% vacancy rate, up 7% from six months earlier.19 MARKET CORRECTION A 400-square-meter villa in Qatar was for sale at $549,390 in September 2009, down from In January 2009, 500 developers were officially registered $824,085 in September 2008.20 with RERA, down from 800 in November 2008.16 Qatar’s current projects have a cumulative worth of over $42 billion. Since the start of the economic crisis, seven projects have been cancelled or put on hold, while construction and planning continues on 124 projects.21 Market CorreCtion Delays By the end of 2009, the $220 billion worth of projects have been put on hold or cancelled in the GCC since the start number of developers had of the global economic slowdown, with 91% of the cancellations announced in Dubai. Besides been reduced to 473. 17 the announced postponements and cancellations, 54% of all announced projects in the GCC, totalling $1.05 trillion in projected costs, are under threat of being put on hold or cancelled.22

GULF REAL ESTATE STUDY 15 neWs & nOteWOrtHy SALES & MARKETING Saudi Arabia has banned off-plan sales and promotions without prior approval from a commission that has yet to be established.26 INFRASTRUCTURE MERGERS & CoNSoLIdATIoNS Qatar will spend $17 billion over the next five years to boost The government of Qatar ordered Barwa Real Estate and Qatar Real Estate (Alaqaria) to its tourism infrastructure.23 merge operations in early 2009. The two companies are in the final stages of merging their non-competing portfolios, which will result in a real estate giant with a market capital- INFRASTRUCTURE ization estimated at $3 billion.27 Infrastructure projects worth $28.5 billion are currently Amlak and Tamweel declared in November 2008 that they would initiate a merger between under construction in the UAE, with another $76.9 billion themselves and two other government-owned banks, which was to have been completed by worth of projects planned for the coming decades.24 Q1 2009. The global real estate crisis and deepening recession have negatively affected both lending institutions, and the nationwide steering committee responsible for seeing through the merger is still reviewing the plans.28 In March 2009, Qatar’s Ezdan Real Estate Company — the country’s largest property firm, with market capital of $2.6 billion — revealed that it was looking into the possibility of merging INFRASTRUCTURE with the Group of International Housing Co. to help both companies weather the economic slowdown.29 Though $62 billion worth of public works projects were put on hold or cancelled between October 2008 and April 2009 After months of talks about combining Deyaar and Union Properties into a single company, in Saudi Arabia, the government awarded $137 billion in the merger was scrapped because the new entity would not be able to secure financing in the new public-sector contracts over the same period.25 tough real estate climate.30

GULF REAL ESTATE STUDY 17 neWs & nOteWOrtHy CommerCial In the Jeddah office market, rents continue to decrease and vacancy levels continue to rise with the arrival on the market of new, better-equipped office spaces.32 commERciaL Average Dubai office prices were down 58% and office rents fell 44% in Q3 2009 as Abu Dhabi’s prime office sector saw compared with the same period in 2008.33 a year-on-year drop of 40% in office rents. Office rents in Dubai’s free zones have fallen by as much as 63%. While Dubai International Finance Centre (DIFC) continues to command the highest rates in Dubai (AED 280–325/ square foot), Jumeirah Lale Towers (JLT) has seen a significant drop in asking prices, down In Q3 2008, prime from AED 240–280/square foot in Q3 2008 to AED 70–120/square foot in Q3 2009.34 rental rates stood at AED 5,000/square reTail meter. Retail rents in Dubai have fallen by 18% in the past year due to an oversupply of stock and lack of demand.35 Since then prices have dropped to AED 2,900/square meter.31

GULF REAL ESTATE STUDY 19 neWs & nOteWOrtHy Mortgages and Financing In recent months, banks in the region have introduced stringent rules for lending. It is estimated that 70% of banks in MENA have restricted mortgage loans to individuals earning more than $5,450 per month. Of those surveyed, 77% of lenders are still financing residential properties; and 40% of these limit financing to one property per applicant.37 UAE Central Bank figures show that mortgages provided by the nation’s 52 national and foreign banks rose by AED12 billion from January to June in 2009, as compared to AED44 billion for the same period in 2008.38 Layoffs LayoFFs In December 2008 Dubai Properties laid off an estimated 600 staff members, while Damac let 200 In December 2008, Nakheel made 500 staff members, or 15% of its work force, redundant, workers go at around the same time.36 while its sister company Istithmar World cut almost 10% of its work force. Facing continuing cancellations and project delays, Nakheel cut another 400 staff members in July 2009.39 Deyaar laid off 20% of its work force in October 2009, days after posting a 74% drop in Q3 profits as compared to the same period in 2008.40

GULF REAL ESTATE STUDY 21 2009 nOtables TRanSpoRTaTion nETwoRkS Dubai Metro began operations in 2009. The project will serve as a litmus test for other GCC governments interested in developing domestic and regional transportation infrastructure. Despite the economic downturn, Nakheel launched its Palm Jumeirah Monorail this year, and others in the region (such as Masdar) appear committed to providing internal transportation networks that link to the greater public transportation grid. REgULaToRy aUThoRiTiES Following the launch of RERA (Real Estate Regulatory Authority) in 2008, ARERE (Ajman Real Estate Regulatory Establishment) was launched in January 2009. Various regional governments, including Saudi Arabia, have announced plans for establishing similar entities to provide greater transparency and stability. pRojEcT cancELLaTionS anD DELayS The increase in the number of project delays and cancellations has further dented investor confidence. Conflicts between investors and developers, master developers and third-party developers, and tenants and landlords are becoming increasingly common as a result. changES To ThE UaE FREEhoLD pRopERTy ownERShip LawS The UAE government issued a federal law to clarify the issuance of visas to foreign nationals owning freehold property in the UAE. The multiple-entry, six-month visa for those whose properties are worth over AED 1 million and who have a monthly income of no less than AED 10,000 has had a lukewarm reception. It continues the trend of new regulations affecting investors’ assessment of the market.

GULF REAL ESTATE STUDY 23 2009 trends aFFoRDaBLE hoUSing Perhaps in reaction to the oversaturation of luxury products, developers are starting to cater to the middle to lower-income brackets. Governments (Bahrain, Saudi Arabia) as well as developers and financial institutions (Aldar, Saudi Binladin, Kinan, Islamic Development Bank) have all announced products to serve a previously neglected market segment. FLExiBLE LEaSing agREEmEnTS anD BUying opTionS Indicative of the shift in the dynamics of supply and demand, landlords are now offering and accepting multiple cheques for annual leasing agreements, in contrast to the previous practice of taking single cheques. Additionally, alternative payment options such as “rent to own” programs have become more commonplace as developers try to spur the market. TRaDing Up Falling prices have empowered various segments of the rental market to move into bigger or better properties at the same or lower cost as their previous tenancy. This has led to some noticeable shifts in the demographics and concentration of different neighborhoods. This trend is also affecting the commercial real estate market, albeit at a slower pace. FaiLURE oF aUcTionS Once an attractive way to achieve record-high prices, two property auctions held in Dubai during 2009 have been largely considered failures, with many of the available plots failing to meet the reserve prices.

GULF REAL ESTATE STUDY 25 reGIOn at a GlanCe

GULF REAL ESTATE STUDY 27 Saudi arabia With a current project portfolio worth over $387 billion, Saudi Arabia remains a compelling market. This is the sole market where overall housing demand fundamentals such as the growing youth population and lack of inventory appear to point to a bright future. However, the lack of clarity on ownership laws and the delays in the approval of financing dampen the market’s potential.

GULF REAL ESTATE STUDY 29 saudI arabIa UpDATES & MiLESTonES Dar Al Arkan launched the mixed-use Shams Al-Arous project, a $2 billion project which will Kingdom Holdings deferred the Kingdom Tower project — projected to become one of the create 10,000 residential units as well as commercial outlets and public amenities including world’s tallest towers — for an undetermined period.45 parks, schools and mosques.41 Many projects announced in Jeddah during 2007-08 are showing little or no progress as In the largest-ever redevelopment program undertaken in the Kingdom, the government has companies scale back the momentum of construction. Sama Dubai, Damac and Diamond unveiled plans to reinvigorate the underdeveloped residential districts of Mecca and Medina Tower along the Corniche are prime examples.46 and the holy sites of Mina, Arafat and Muzdalfa.42 Saudi Arabia has revealed plans to develop “airport cities” in Jeddah, Riyadh and Dammam. Located in Medina, the recently launched $1 billion Knowledge Economic City aims to attract The three new airports will anchor distinct cities that will offer commercial offices, hotels and knowledge-based industries in the medical sciences and biotechnology sectors by offering residential units, as well as schools and shopping complexes.47 research centers and scientific development companies and organizations. The project will also develop housing for 150,000 residents and create 20,000 jobs.43 Facing a growing population and rising demand for accommodation in the Kingdom, the Saudi government is set to build 8,143 new housing units across 16 cities and governorates.48 The Riyadh office market has been buoyed by news that the GCC Monetary Union Central Bank will be located in the King Abdullah Financial District, which is currently undergoing site preparation.44

GULF REAL ESTATE STUDY 31 Qatar The government of Qatar is firmly committed to investing in the country’s tourism and infrastructure and has made bids to host international sporting competitions in the future. Projects such as The Pearl Qatar have added a new dimension to the real estate sector. The market has witnessed a drop in prices across all real estate segments, but the government is exerting further controls in a bid to stabilize it.

GULF REAL ESTATE STUDY 33 Qatar UpDATES & MiLESTonES The first phase of development for Lusail City is currently under way and set for completion Qatar launched Qatar Railway with an initial capital of $100 million to spearhead government in 2011. Once complete, Qatar’s largest new development will house 455,000 people in 17 plans to connect regions to each other and to link Qatar to neighboring countries. The first mixed-use districts connected by a light rail network.49 phase of the countrywide railway project will begin in 2012 with a monorail linking the towers in the West Bay area of Doha.52 Work has begun on the $5.5 billion Dohaland project. Slated for completion in 2016, the project aims to reinvigorate the center of Doha and reinstate it as the social and commercial A new law in Qatar has addressed tenant uncertainty by decreeing that a landlord must give heart of the city while creating housing for 27,000 people.50 six months notice to a tenant in order to recover the rented property. Furthermore, a tenant can be removed from a property only if the housing unit will be used by the landlord or his/ New retail complexes such as Lagoona Plaza and Salam Bounian’s The Gate will soon be her legal dependents.53 complete. In a traditionally undersupplied market, retail market rents are set to dampen as the cumulative shopping mall supply increases by an expected 100% between Q1 2009 House prices fell by 20% in Q1-3 in 2009 and are expected to fall a further 15% in 2010 and Q4 2010.51 due to more housing units coming onto the market.54

GULF REAL ESTATE STUDY 35 Bahrain The Ministry of Information noted that nationals accounted for 90% of real estate transactions in the country. Despite the apparent drop in influence on the market by speculators, the country’s real estate market has nevertheless slowed due to the economic crisis. Considering its small population, the Bahraini authorities appear to have adopted a reactive stance, waiting for overall market conditions to improve before making any decisive policy changes.

GULF REAL ESTATE STUDY 37 baHraIn UpDATES & MiLESTonES Manara Developments unveiled Nurana, a $1 billion waterfront reclamation mega project Eskan Bank’s planned Seef Garden project has been postponed indefinitely. The project was with 60% of the project site allocated for residential units. In addition, it has announced to bring 670 apartments and 42 villas to the market.58 the development of Kenaz Homes, a plan for 75 semi-detached houses that will be sold exclusively to GCC and Bahraini nationals.55,56 First Bahrain postponed its 21,000-square-meter development in Seef district, which was to have featured commercial and residential towers, a five-star hotel, and serviced apartments.59 Marsa Al Reef, a waterfront project spanning 2.6 million square meters that will offer residential, retail and leisure elements, was announced in April 2009.57 The $2.65 billion Uptown Bahrain project, which was due to start construction in Q1 2009 and was to become the new commercial and residential hub of Bahrain’s Seef area, has been put on hold indefinitely.60

GULF REAL ESTATE STUDY 39 UaE The contrast between the two largest markets in the UAE, Dubai and Abu Dhabi, is becoming increasingly distinct. Once the flagship of the region’s real estate potential, the Dubai market suffered the brunt of the economic crisis with falling prices, cancelled projects and mergers dominating the headlines. Although not without its own challenges, Abu Dhabi reported increases in prices and progress on its major developments.

GULF REAL ESTATE STUDY 41 uae UpDATES & MiLESTonES In an event that closed a tough year for the UAE real estate market, Emaar Properties All major projects in Abu Dhabi, such as Saadiyat Island, Al Sowwah, Reem Island, Yas launched the world’s tallest structure at 828 meters. In a surprise move, the tower was also Island and Masdar, are in progress, with a demonstrated commitment by the government to renamed and will henceforth be known as Burj Khalifa. It is named after the current UAE see them through to completion in their initially envisioned form.65 President and Ruler of Abu Dhabi.61 Residents of Discovery Gardens, a Nakheel property, have asked the Ruler’s Court in Dubai to In Q2 2009, Hydra Properties declared that it is considering delaying, canceling or selling freeze their service fees to the developer in light of substandard building maintenance and a many of its scheduled developments. With sales of less than 10% in some developments, general failure to develop common areas. The residents insist that the newly increased annual Hydra has begun an internal assessment of its project portfolio to evaluate which develop- service charges ($5,948 for every 1,000 square feet) are unjustified because the services ments are worth completing. Developments in Abu Dhabi, Dubai, Kuwait, Libya, Pakistan and they are being charged for are either poorly maintained or do not exist.66 Mexico could be affected.62 Manarat Al Saadiyat, a 15,400-square-meter visitor center that will host a gallery and special The $5.4 billion Awali City project could be scaled back to half its original size. Most events, is scheduled to be opened at the end of the year on Abu Dhabi’s Saadiyat Island. The investors have defaulted on their monthly payments for the past eight months, and the redevelopment of the natural island, which has been undertaken by the Tourism Development developer is re-evaluating plans to continue with the entire project.63 and Investment Company (TDIC), is set for completion in 2018 and will promote Abu Dhabi as a world-class cultural destination.67 In Ras Al Khaimah, Rakeen bought the La Hoya Bay project from a private developer to maintain confidence in the RAK market during the economic crisis.64

GULF REAL ESTATE STUDY 43 uae UpDATES & MiLESTonES Emaar Properties’ US development arm, John Laing Homes — a company it bought for $1.05 In Q3 2009, commercial rates in prime office locations around Abu Dhabi fell by around billion in 2006 and into which it poured another $614 million during subsequent financial 40% as compared to the same period in 2008.72 troubles — was written down as a loss. John Laing Homes initiated bankruptcy proceedings in 2009.68 In Q3 2008, the average lease rate for residential properties in Dubai was AED 110–120,000 per year; a year later rates had dropped to AED 55–65,000 per year.73 The UAE Minister of Economy has reported that the government will soon be amending the laws governing foreign ownership of businesses located outside designated free zones. In Office lease rates in Dubai have fallen below 2006 levels. Since Q3 2008, rates in Dubai’s the hope of attracting a wider range of foreign investors to the country, the government may CBD have seen a decrease of 55% year-on-year, while other business districts as well as choose to allow 100% foreign ownership of businesses across the UAE; currently foreign newly developed commercial areas have seen an average fall of 67%.74 investors may own a 100% stake in a company only if it is located within a free zone.69 Though Dubai house prices are currently 47% lower than in Q3 2008, transaction volumes in As part of the Abu Dhabi 2030 plan, the Abu Dhabi government has launched a media production Q3 2009 rose 64% in comparison to the previous quarter.75 free zone, twofour54, which aims to become a regional hub for Arabic-language content production.70 A tenfold increase over Q2 and Q3 2009 was noted in active and potential demand for Abu Dhabi’s TDIC has launched the first phase of the Desert Islands project by inaugurating commercial office space in Dubai.76 Sir Bani Yas Island. As part of a larger plan to develop the Al Gharbia region of Abu Dhabi, the government plans to develop the Desert Islands project as a showcase for sustainable, Dubai is set to see an influx of 50,000 housing units in 2010, of which 20% are expected to eco-friendly developments. Work continues on two other islands as part of the Desert Islands be villas and only half of which are expected to be available for rent.77 project: Dalma Island and Discovery Islands.71

GULF REAL ESTATE STUDY 45 uae 2009 UpDATES & MiLESTonES Abu Dhabi saw the fifth-fastest fall in office rents as compared to other cities in the world. The UAE jumped from 31st to 18th rank in a global property opportunity index designed to With a 39% decrease in commercial rents in Q3 2009 as compared with 2008, Abu Dhabi’s inform the expansion plans of property developers.81 office real estate also faces a 6% vacancy rate.78 Masdar’s eponymous $22 billion green city has decided to focus on the first phase of its Office space in Dubai is facing a 40% vacancy rate, with over 10 million square feet unused project, due for completion by 2013, while relaxing its 2016 deadline to complete the as demand has dried up. Analysts predict that 150,000 white collar jobs would need to be whole project.82 created in Dubai to fill the office space that is currently available.79 With a third of the 29 stations planned on Dubai Metro’s Red Line operational and the Dubai tops the list of the world’s cities that have experienced housing price declines in 2009. remainder set to open by April 2010, the Dubai Roads and Transport Authority now faces Dubai was the worst performer on a list that surveyed 42 cities, with the emirate suffering a a contractual dispute over overdue back payments with the consortium building the rail 47% year-on-year decrease.80 network. The consortium has declared that it is stopping all work on the network and is focusing on securing back payments. The RTA has dismissed the reports.83

GULF REAL ESTATE STUDY 47 FaCts and FIndInGs To better understand homebuyer attitudes and perceptions, FutureBrand worked with an independent market research firm to conduct a quantitative study of approximately 200 recent and prospective home purchasers in Saudi Arabia, Qatar and the UAE, the same markets as the 2008 study. Identical homebuyer specifications for 2008 and 2009 allow direct comparisons of data between the years, enabling us to see what a difference a year has made. This year it was also important for the research to measure the impact on homebuyer perceptions and to ascertain attitudes toward the Gulf real estate market moving forward. Consistent with 2008 findings, this year’s study provides insights into what motivates buyers; what factors drive their purchase decisions; their familiarity with and perceptions of leading developers and location preferences.

GULF REAL ESTATE STUDY 49 ImpaCt OF tHe dOWnturn Based on the research, the principal impact of the economic downturn can be seen in the People are almost 70% more likely to see value in investing right now than they are to feel lack of trust homebuyers have for developers. Heightened awareness of risk, the potential for less likely to buy or invest in the region ever again. A significant majority—approximately monetary loss, loopholes and corruption all speak to a weakening of homebuyer confidence. two-thirds of homebuyers—see value in the Gulf real estate market and intend to purchase in Perhaps most interesting is that this new wariness does not seem to affect homebuyer the future. attitudes towards purchase. Changes in Consumer Attitudes toward the Gulf Real Estate Industry Belief that Property Prices in the Future Likelihood of Investing in Region Today Offer Good Value for the Region I am more aware of risk now 56.4% the Money I am less likely to buy or invest in the Believe Likely region again 22.6% I see great value and opportunities to buy a home here right now 38.0% I am disappointed with the way the region 69% 63% responded to the downturn 24.6% I now have more fear/concern of losing money 45.7% I feel less urgency in finding a home to buy here 28.1% 15% 16% 22% 15% I now have less trust in the developers to deliver what they promise 38.6% I am more aware of loopholes and Unsure Don’t Believe Unsure Unlikely corruption 49.9% I believe prices will decline further 52.9% 0% 15.000% 30.000% 45.000% 60.000%

GULF REAL ESTATE STUDY 51 deVelOper reCOGnItIOn deVelOper reputatIOn Emaar remains the most recognized developer brand, although its lead over Nakheel has Emaar, again, remains the most highly esteemed developer brand, but the dramatic rise of decreased. Beyond the jumps made by Barwa, Aldar and United Development Company Aldar, Dar Al Arkan, Barwa, Dubai Properties and UDC has closed the gap significantly. (UDC), the big story is the decline of Damac. In 2008, Damac had risen to share the #2 position in recognizability with Nakheel. Today, Damac is almost 70% less familiar than Nakheel. Top 2 Box* Familiarity Across the Top 2 Box* Familiarity Across the ∆ Vs. 2008 2008 ∆ Vs. ExcellentExcellent Overall Rating (Top Box)* Overall Rating (Top Box)* ∆ Vs. 2008Vs. 2008 ∆ UAE, Saudi Arabia and Qatar Qatar UAE, Saudi Arabia and Emaar 69% Emaar 69% 0.31 0.31 -8% -8% Emaar Emaar 56% 56% 0.44 -14% 0.44 -14% Nakheel 41% Nakheel 41% 0.59 0.59 +9% +9% Aldar Aldar 41% 41% 0.59 0.59 +28% +28% Barwa 18% Barwa 18% 0.82 0.82 +8% +8% Dar Al Arkan Al Arkan Dar 37% 37% 0.63 0.63 +33% +33% Aldar 17% Aldar 17% 0.83 0.83 +3% +3% Barwa Barwa 32% 32% 0.68 0.68 +25% +25% UDC 15% UDC 15% 0.85 +7% 0.85 +7% Dubai Properties Properties Dubai 31% 31% 0.69 0.69 +29% +29% Damac 13% Damac 13% 0.87 -19% 0.87 -19% UDC UDC 26% 26% 0.74 +19% 0.74 +19% 13% Dubai Properties Properties Dubai 13% 0.87 No0.87 No Change Change Nakheel 20% Nakheel 20% 0.8 -5% 0.8 -5% Dar Al Arkan Al10% Dar Arkan 10% 0.9 +1%0.9 +1% Sorouh 18% Sorouh 18% 0.82 N/A0.82 N/A Sorouh 5% Sorouh 5% 0.95 0.95 N/A N/A Damac 14% Damac 14% 0.86 -12% 0.86 -12% 0% 0%25% 25% 50% 50% 75% 75%100% 100% 0% 0% 38% 38% 75% 75% 113% 113% 150% *Top 2 Box*Top 2 Box the percentagepercentage of respondents the rated the *Top 2 Box identifies the of respondents who rated who rated the identifies identifies the respondents who developer as the one as the one with whom they are most oror second-most familiar. developer with whom they are most or second-most familiar. familiar. developer as the one with whom they are most second-most *Top Box is *Toppercentagepercentage of therated the developer Excellent. *Top Box is the percentage who developer Excellent. Excellent. the Box is the of who rated who rated the developer

GULF REAL ESTATE STUDY 53 deVelOper preFerenCe deVelOper OutlOOk Similar to reputation, Emaar’s once unassailable lead in the GCC has greatly diminished. In terms of how developers are expected to do in the current economic climate, Emaar is still Aldar, Dar Al Arkan and Barwa are now preferred at levels that are beginning to rival Emaar. the dominant developer brand in the region. In the Current Economic Situation, Which Developer Will... Most Want to Buy Ato Buy A Home Most Want Home ∆ Vs. 2008 2008 ∆ Vs. From (Top Box)* Box)* From (Top In 50% Current Economic Situation, Which Developer Will... the 50% 38% Fare The Best Emaar Emaar 52% 52% 0.48 0.48 -3% -3% 50% 50% 25% 38% Fare The Best Aldar Aldar 40% 40% 0.6 0.6 +27% +27% 13% 10% 7% 6% 6% 5% 4% 7% 4% 1% 25% Dar Al Arkan Al Arkan Dar 34% 34% 0.66 +29% 0.66 +29% 0% 10% Emaar Emaar Aldar Aldar Nakheel Nakheel Barwa Barwa Dubai Properties Dar Al Arkan Arkan Damac Damac UDCUDC UDC Sorouh Sorouh ofNone of These 13% Dar Al Arkan Arkan 7% 6% 6% 7% Properties 5% 4% 4% Nakheel Barwa Barwa 30% 30% 0.7 0.7 None ofNone of +27% +27% 1% Sorouh Sorouh Damac Damac Emaar Emaar Barwa Barwa Dubai Dubai NoneThese These Aldar Aldar UDC 0% Dar Al Dar Al Nakheel Dubai Properties These Dubai Properties Properties Dubai 28% 28% 0.72 +21% 0.72 +21% Properties %0 UDC UDC 24% 24% 0.76 +17% 0.76 +17% %31 3% 3% 4% 4% 4% 1% Nakheel 19% Nakheel 19% 0.81 0.81 +1% +1% 10% 12% %0 %52 14% 3% 3% 4% 4% 4% 1% Sorouh 16% Sorouh 16% 0.84 N/A 0.84 N/A %31 %83 10% 12% %52 14% Damac 11% Damac 11% 0.89 0.89 -8% -8% %05 44% %83 Fare The Worst 0% 0% 38% 38% 75% 75% 113% 113% 150% 150% *Top Box is the percentage of respondents who agree completely with the %05 44% statement, “This is the developer I would most want to buy a home from.” Fare The Worst

GULF REAL ESTATE STUDY 55 deVelOper ImaGe If “room to improve” and “parity at the top” were the two key takeaways in the 2008 Innovative Innovative examination of developer brand image, in 2009 the themes would touch on “weakening” AverageAverage B- Grade: Grade: B- and “decentralization.” Perhaps not surprisingly, given the downturn-fueled events of 2009, Emaar Emaar 4.4 4.4 ratings of developers across measures have declined, typically by between 5% and 10%. This is compared with the 2008 performance figures that had room to improve. Overall, the average grade fell from a B to a C+/B-. The other big story of 2009 is the continued decline Aldar Aldar 4.1 4.1 of the Nakheel brand, the dramatic fall of Damac and the rise of non-Dubai-based developer brands including Abu Dhabi’s Aldar, Saudi Arabia’s Dar Al Arkan and Qatar’s Barwa. Nakheel Nakheel 4.1 4.1 Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior), Damac Damac 3.9 3.9 among home buyers familiar with the developer. Dar Al Arkan Al Arkan Dar 3.8 3.8 3.6 3.8 3.6 43.8 4.24 4.4 4.2 4.4 High-Quality Construction High-Quality Construction Builds Great Places to Live to Live Builds Great Places Average Grade: Grade: B- Average B- AverageAverage B- Grade: Grade: B- Emaar Emaar 4.4 4.4 Emaar Emaar 4.3 4.3 Aldar Aldar 4.2 4.2 Aldar Aldar 4.1 4.1 Dar Al Arkan Al Arkan Dar 4.2 4.2 Dar Al Arkan Al Arkan Dar 4.0 4.0 Nakheel Nakheel 4.0 4.0 Nakheel Nakheel 4.0 4.0 Dubai Properties3.9 Dubai Properties 3.9 Damac Damac 3.9 3.9 3.8 3.95 4.1 4.25 4.4 3.8 3.95 4.1 4.25 4.4 3.8 3.925 4.05 4.175 4.3 3.8 3.925 4.05 4.175 4.3

GULF REAL ESTATE STUDY 57 Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior), among home buyers familiar with the developer. Easy to Work With With Easy to Work Good Value for the Money Money Good Value for the Average Grade:Grade: B- Average B- AverageAverage C+ Grade: Grade: C+ Emaar Emaar 4.3 4.3 Emaar Emaar 4.1 4.1 Aldar Aldar 4.2 4.2 Aldar Aldar 4.0 4.0 Dar Al Arkan Arkan 3.9 Dar Al 3.9 Dar Al Arkan Al Arkan Dar 4.0 4.0 Dubai Properties 3.9 Dubai Properties 3.9 Nakheel Nakheel 3.8 3.8 Nakheel 3.9 Nakheel 3.9 Damac Damac 3.8 3.8 3.8 3.925 4.05 4.175 4.175 4.3 3.8 3.925 4.05 4.3 3.6 3.725 3.85 3.975 4.1 3.6 3.725 3.85 3.975 4.1 Experienced in Real EstateEstate Development Experienced in Real Development Provides Homes Homes that Are a Good Investment Provides that Are a Good Investment Average Grade:Grade: B- Average B- AverageAverage C+ Grade: Grade: C+ Emaar Emaar 4.4 4.4 Emaar Emaar 4.2 4.2 Aldar Aldar 4.2 4.2 Aldar Aldar 4.0 4.0 Dubai Properties 3.9 Dubai Properties 3.9 Dar Al Arkan Al Arkan Dar 3.9 3.9 Nakheel 3.9 Nakheel 3.9 Nakheel Nakheel 3.9 3.9 Damac Damac 3.9 3.9 Dubai Properties Dubai Properties 3.8 3.8 3.8 3.95 3.8 4.1 4.25 3.95 4.1 4.4 4.25 4.4 3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2

GULF REAL ESTATE STUDY 59 Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior), among home buyers familiar with the developer. Luxurious Homes Homes Luxurious Reasonably Priced Priced Reasonably Average Grade: Grade: B- Average B- AverageAverage C Grade: Grade: C Emaar Emaar 4.3 4.3 Emaar Emaar 4.0 4.0 Aldar Aldar 4.1 4.1 Dubai Properties Dubai Properties 3.8 3.8 Dar Al Arkan Al Arkan Dar 4.1 4.1 Dar Al Arkan Al Arkan 3.7 Dar 3.7 Nakheel Nakheel 4.1 4.1 Barwa Barwa 3.7 3.7 Damac Damac 3.9 3.9 Nakheel Nakheel 3.7 3.7 3.8 3.925 4.05 4.175 4.3 3.8 3.925 4.05 4.175 4.3 3.6 3.7 3.8 3.9 3.6 3.7 3.8 43.9 4 Environmentally Oriented Environmentally Oriented Financially Sound Sound Financially Average Grade: Grade: B- Average B- AverageAverage B- Grade: Grade: B- Emaar Emaar 4.3 4.3 Emaar Emaar 4.3 4.3 Aldar Aldar 4.2 4.2 Aldar Aldar 4.1 4.1 Dar Al Arkan Al Arkan Dar 4.0 4.0 Dar Al Arkan Al Arkan Dar 4.0 4.0 Dubai Properties Dubai Properties 3.9 3.9 Nakheel Nakheel 3.9 3.9 Barwa 3.7 Barwa 3.7 Damac Damac 3.9 3.9 3.6 3.775 3.95 4.125 4.3 3.6 3.775 3.95 4.125 4.3 3.8 3.925 4.05 4.175 4.3 3.8 3.925 4.05 4.175 4.3

GULF REAL ESTATE STUDY 61 Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior), among home buyers familiar with the developer. Premium Amenities Premium Amenities Responsive Customer ServiceService Responsive Customer Average Grade: Grade: B- Average B- AverageAverage C+ Grade: Grade: C+ Emaar Emaar 4.3 4.3 Aldar Aldar 4.2 4.2 Aldar Aldar 4.1 4.1 Emaar Emaar 4.2 4.2 Dar Al Arkan Al Arkan Dar 4.0 4.0 Dar Al Arkan Al Arkan Dar 3.8 3.8 Nakheel Nakheel 4.0 4.0 Nakheel Nakheel 3.8 3.8 Dubai Properties Dubai Properties 3.8 3.8 Damac Damac3.7 3.7 3.6 3.775 3.95 4.125 4.3 3.6 3.775 3.95 4.125 4.3 3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2 Well-Planned Units Units Well-Planned Government Affiliated Government Affiliated Average Grade: Grade: B- Average B- AverageAverage C Grade: Grade: C Emaar Emaar 4.3 4.3 Emaar Emaar 4.2 4.2 Dar Al Arkan Al Arkan Dar 4.2 4.2 Dubai Properties Dubai Properties 3.8 3.8 Aldar Aldar 4.2 4.2 Aldar Aldar3.7 3.7 Damac Damac 4.0 4.0 Barwa Barwa3.7 3.7 Nakheel Nakheel 3.9 3.9 Nakheel Nakheel3.7 3.7 3.8 3.925 4.05 4.175 4.3 3.8 3.925 4.05 4.175 4.3 3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2

GULF REAL ESTATE STUDY 63 Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior), among home buyers familiar with the developer. Trustworthy Trustworthy Communicates Progress Communicates Progress Average Grade: Grade: C+ Average C+ AverageAverage C+ Grade: Grade: C+ Emaar Emaar 4.2 4.2 Emaar Emaar 4.2 4.2 Aldar Aldar 4.1 4.1 Aldar Aldar 4.2 4.2 Dar Al Arkan Al Arkan Dar 3.9 3.9 Nakheel Nakheel 3.9 3.9 Nakheel Nakheel 3.9 3.9 Damac Damac 3.9 3.9 Damac Damac 3.8 3.8 Dubai Properties3.7 Dubai Properties 3.7 3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2 Desirable Locations Desirable Locations Delivers on Time Time Delivers on Average Grade: Grade: B- Average B- AverageAverage B- Grade: Grade: B- Emaar Emaar 4.3 4.3 Emaar Emaar 4.4 4.4 Aldar Aldar 4.1 4.1 Dar Al Arkan Al Arkan Dar 4.1 4.1 Nakheel Nakheel 4.0 4.0 Aldar Aldar 4.1 4.1 Dar Al Arkan Al Arkan 3.9 Dar 3.9 Damac Damac 3.9 3.9 Damac Damac 3.9 3.9 Nakheel Nakheel 3.8 3.8 3.8 3.925 4.05 4.175 4.3 3.8 3.925 4.05 4.175 4.3 3.6 3.8 3.6 43.8 4.24 4.4 4.2 4.4

GULF REAL ESTATE STUDY 65 preFerred lOCatIOns This chart illustrates the performance of cities in the region in driving preference. The Most Desired Locations The Most Desired Locations 2009 2008 2009 2008 50.0000% 50.0000% 43.5% The 43.5% Most Desired Locations 2009 2008 37.5000% 36.1% 37.5000% 36.1% 25.0000% 23.0% 25.0000% 23.0% 12.5000% 11.5% 12.5000% 11.1% 11.5% 11.1% 9.4% 9.2% 9.4% 9.2% 9.9% 9.9% 6.8% 7.3% 6.8% 7.3% 6.8% 6.8% 5.9% 5.9% 4.5% 4.5% 4.7% 4.7% 3.1% 3.1% 1.6% 2.1% 2.1% 1.6% 2.1% 2.1% 0.8% 0.8% 0.4% 0.8% 0.8% 0.4% 0% 0% 0% 0% 11.5% 11.1% Dubai Abu Dhabi Doha DubaiJeddah Abu Dhabi Muscat Doha Riyadh Jeddah Manama Muscat Kuwait City Riyadh RAK Manama SharjahKuwait City Fujairah RAK Sharjah Fujairah 9.4% 9.2% 9.9% 6.8% 7.3% 6.8% 5.9%

0 0.2 High Quality Construction 18.8% Innovative 15.6% GULF REAL ESTATE STUDY Builds Great Preference Drivers Places to Live 6.8% Easy to Work With 6.7% preFerenCe drIVers Experienced in Real Estate a homebuyer’s predisposition toward a developer. 6.3% Development Provides Homes That Are a Good 5.7% Investment Good Value 5.3% for the Money Luxurious Homes 5.2% Environmentally Oriented 4.6% This graph depicts the relative importance of key attributes in terms of their ability to predict 0 0.2 Reasonably Priced 4.2% Financially Sound 3.8% Premium Amenities 3.2% Well-Planned Preference Drivers (Continued) Units 2.6% Responsive Customer Service 2.5% Government Affiliated 2.3% Trustworthy 2.0% Desirable Locations 2.0% Delivers on Time 0.2% 67

GULF REAL ESTATE STUDY 69 breakdOWn by transaCtIOn type Breakdown by value of transaction type (AED Millions) Breakdown by number of transactions 400,000 372,823 300,000 300,000 285,331 225,000 213,560 Number of Transactions 69% 63% 223,528 Value (AED) 200,000 150,000 69% 63% 100,000 75,000 69,367 34,432 28,320 27,576 17,92912,225 9,134 8,615 2,216 7,153 2,575 177 56 24 45 1 0 0 Mortgage Sales Valuation Granted Leasing Other Inheritance Rent Investment Compensation Mortgage Sales Valuation Granted Leasing Other Inheritance Rent Investment Compensation *data as of January 31st, 2010 *data as of January 31st, 2010 This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department

GULF REAL ESTATE STUDY 71 breakdOWn by natIOnalIty Breakdown by value (AED) Breakdown by value (AED) Breakdown by value (AED)Breakdown byft.) (sq. ft.)Breakdown by price per squareper square footft.) price per square foot (AED/sq. ft.) Breakdown by area (sq. area Breakdown by area (sq. ft.) price footBreakdown (AED/sq. ft.) Breakdown by (AED/sq. by Iran Iran Iran Kuwait Kuwait Kuwait KSA KSA KSA Kuwait Kuwait Russia Kuwait RussiaOman 1% Oman 1% Russia 1% Oman 10% 10% 9% 9% 10% Russia9% Russia Russia 17% 17% 9% 9% 17% 9% 37% 37% 37% Pakistan 3% 3% 3% Breakdown by value Russia Pakistan Pakistan Breakdown by value (AED) Russia (AED) Breakdown Breakdownareaarea (sq. ft.) Breakdown by by (sq. ft.) by value (AED) Russia Breakdown by price per per square foot (AED/sq. ft.) by price per square foot (AED/sq. ft.) Breakdown byby area (sq. ft.) (AED/sq. ft.) Breakdown price square foot Breakdown 12% 12% 7% 12%7% KSA KSA 7% KSA Iran Iran KSA KSA 10% 10% Iran KSA 10% KSA Russia KSAKuwait1% Oman Kuwait Russia 1% Oman Canada KSA Canada Russia Kuwait 1% Oman Canada 10%10% 10% Kuwait Kuwait 6% 17%17% Kuwait 9% 9% 6% 12%6% 12%17% 12% 9% Kuwait 9% Kuwait RussiaRussia 9% Kuwait 37%37% Russia 37% 9% Pakistan Pakistan 5% 5% Pakistan 3% 3% 5% 3% Russia Russia Russia 12%12% 12% 7% 7% Oman Iran KSA63% KSAIran 7% Iran KSA 69% 69% Oman 69% 6% 10%10% 6% 63% Oman 6% 63% KSA KSA 10% Canada Canada KSA Canada 4% 4% 4% Iran 6% 6% Iran 12%12% Iran6% 12% Kuwait Kuwait Kuwait Oman Oman11% 11% Oman 11% USA USA USA UK UK Canada 5% Canada UK 5% Canada 5% 3% 3% 3% 4% Oman 4% Iran Iran 63%63% 4% Oman Pakistan Iran 12% 12% 12% 21% 21% 69%69% USA21% OmanUSA Pakistan 6% Pakistan USA 69% 63% 6% 6% 4% 4% 4% 4% 8% 8% 4% 8% 4% USA Canada USA Iran Iran Canada USA Canada Iran 2% Oman 2% 11%2% Oman 2% 11% 2% Oman USA USA 11% 2% USA UK UK Canada CanadaUK Canada 3% 3% Pakistan Pakistan 3% India 12% Pakistan 4% 4% 21%Pakistan UK 12% India India 12% 21%21% USA USA Pakistan UK India 4% India Pakistan USA UK 10% India 10% 10% 8% India 8% 12% 8% USA USA Canada 10% 10% 10% India India 4% 4% 12% 17% 4% 17% Canada 12% 2% 2% 2% 2% 17% UK USA Canada 2% UK UK 24% 24% 24% 12% 2% 12% 12% Pakistan Pakistan Pakistan UK UK UK 10% 10% IndiaIndia 10% India IndiaIndia India 10%10% 10% IndiaIndia 12%12% India 17%17% 12% UK UK 17% UK 24%24% 24% 12%12% 12% *data as of January 31st, 2010 *data as of January 31st, 2010 This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department

GULF REAL ESTATE STUDY 73 examInInG dubaI Dubai has been put under a magnifying glass across the globe. When news spread of the Dubai World default, people feared a second global economic crisis, with its epicenter in the Dubai real estate market.

GULF REAL ESTATE STUDY 75 dubaI marIna The graph below shows the fluctuation of the average value of a 1 bedroom apartment in the Average price per square foot for a 1 bedroom apartment Marina from January in Dubai Marina 2003 to November 2009. 2000 Brand Dubai has been closely associated with its real 1750 estate offerings and series of iconic buildings — from sail- 1500 Average Price (AED/sq. ft.) to palm-tree-shaped residential developments to the world’s 1250 tallest supertower. The real estate crash, here more than anywhere, has inspired equally sensational newspaper 1000 headlines around the world. The following analysis attempts 750 to reveal the state of the real estate market in hard facts 500 and statistics. The case study takes a wide-angle view that 250 considers foreign investment, the rise and fall in prices of residential property, and the number of transactions year by 0 year to give a more measured view of the situation. January 2003 June 2003 October 2003 February 2004 June 2004 October 2004 February 2005 June 2005 October 2005 February 2006 June 2006 October 2006 February 2007 June 2007 October 2007 February 2008 June 2008 October 2008 February 2009 June 2009 October 2009 This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department

Average 500 GULF REAL ESTATE STUDY 77 250 VIllas 0 January 2003 June 2003 March 2004 July 2004 January 2005 June 2005 May 2006 December 2006 November 2007 February 2008 May 2008 August 2008 December 2008 April 2009 July 2009 October 2009 Even at the higher end of the spectrum with four bedroom villas in Emirates Hills, there is a similar rise and fall of the average price back to 2006 levels. Average price per square foot for a 4 bedroom villa in Emirates Hills Average price per square foot for all types of villas in Emirates Hills 1,500 1500 1,250 1250 Average Price (AED/sq. ft.) Average Price (AED/sqft) 1,000 1000 750 750 500 500 250 250 0 0 January 2003 August 2003 January 2004 June 2004 November 2004 April 2005 September 2005 February 2006 July 2006 December 2006 May 2007 October 2007 March 2008 August 2008 January 2009 June 2009 November 2009 January 2003 June 2003 March 2004 July 2004 January 2005 June 2005 May 2006 December 2006 November 2007 February 2008 May 2008 August 2008 December 2008 April 2009 July 2009 October 2009 Average price per square foot for A REIDIN.comof villas in Emirates Hills This data is contributed by DUBAIFocus – all types product powered by Dubai Land Department This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department 1500

GULF REAL ESTATE STUDY 79 apartment transaCtIOns dubaI Vs. nyC The graph below shows all apartment transactions between January 2003 and This graph shows the comparative value between two bedroom apartments in Dubai Marina November 2009. and the 10010 zip code in New York City. Avg. price per sq. ft. for NY 10010 and Number of apartment transactions broken down by unit type 2 bedroom apartment in Dubai Marina 30000 5,000 Dubai Marina NYC 10010 25000 4,375 Average Price (AED/sqft) 3,750 Average Price (AED/sqft) 20000 21,038 21,109 3,125 15000 2,500 1,875 10000 8,113 1,250 5000 625 2,992 0 0 January 2003 June 2003 November 2003 April 2004 September 2004 February 2005 July 2005 December 2005 May 2006 October 2006 March 2007 August 2007 January 2008 June 2008 November 2008 April 2009 September 2009 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedrrom This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department This data is contributed by DUBAIFocus – A REIDIN.com product powered by Dubai Land Department New York City Data from Zillow.com – http://www.zillow.com/local-info/NY-10010-home-value/r_61624/ #metric=mt%3D11%26dt%3D1%26tp%3D6%26rt%3D7%26r%3D61624

GULF REAL ESTATE STUDY 81 emerGInG trends

GULF REAL ESTATE STUDY 83 EmERging TREnDS “We remain committed to our projects and optimistic about the long-term outlook for FaCt Or FICtIOn - tHe CredIbIlIty CrIsIs the real estate sector. Most of our developments are long-term, large-scale projects, constructed over eight years on average, so we can adjust the pace of development taking into account market conditions, which will inevitably fluctuate in that time.” amBigUoUS Much of the angst voiced and documented over the past year has centered not only on the Limitless on Arabian Canal86 falling prices of investments but also on the continued ambiguity of project progress and completion dates. The shifting completion target dates coupled with the reluctance of developers “Shifting away from the fast-track development of its Jumeirah Gardens project and in to commit to a definite time scale has resulted in the diminishing of their brands’ credibility. light of rapid change in the real estate market and global economic conditions, Meraas Development is now focusing on adapting its master plan, designs and product mix to Real estate brands are now faced with the same issues of trust as the credibility crisis suffered suit market conditions.” by financial institutions in the aftermath of the global economic crisis. This sentiment has Meraas statement87 affected the entire sector regardless of individual performances and past records. “The tower [Nakheel Harbor & Tower] will be delayed until the market changes. You can’t Emaar remains a highly regarded brand in the region. Despite the global downturn and some build something like that in this kind of market. Whatever is under construction will international downsizing, it still delivered significant retail and hospitality offerings in 2009. be continued. Whatever is planned will be shelved, delayed. Anything committed to we cancELLaTion? However, the rescheduling and renaming of the world’s tallest tower from September 9, 2009 to shall finish; everything that cannot currently be financed will be delayed.” December 2, 2009, and eventually to January 4, 2010, raised eyebrows in a market looking for Sultan Ahmed bin Sulayem, Chairman of Dubai World88 any signs of trouble and eager to assume the worst. “I am hoping we can restart work on the project within the next two years, but it all Regaining credibility and trust will be the major issue in the upcoming year as brands look to depends on the market situation. At the end of the day, the ball is in Nakheel’s court. correct their course and adjust to the new realities. You’ve got to see what the market demands, and restarting a project of that nature in this region at this stage doesn’t make much sense.” amBigUoUS conTinUE Donald Trump Jr., on the status of Trump Tower89 “Our projects in Dubailand are ongoing as planned. Nothing has changed.” Mohammed al Habbai, Senior VP of Dubailand84 “This year we will be revisiting our operations. Revisiting depends on many parameters and the world financial problem also dictates that ... we have to look into phasing of the project and timing of the project.” Salem Al Moosa, Chairman and CEO of Falcon City of Wonders85

GULF REAL ESTATE STUDY 85 EmERging TREnDS FrOm COnCept tO COmpletIOn By the end of 2009, you could watch the reflection of the rising sun on the world’s tallest In a region where the change from new to old is measured in months rather than years, it is tower. You could live, dine and relax on a man-made island in the shape of a palm tree. From easy to lose sight of these monumental feats. With each completed project and each home the backyard of your luxurious villa, you could watch the world’s top 60 golf players compete handed over, the successes of the region’s real estate market provide a counter argument to the in a season-ending tournament. From the deck of your yacht, you could toast the Abu Dhabi critics and skeptics. F1 Grand Prix Champion under a night sky bright with the colorful illumination of a newly built hotel. Families could enjoy a walk along the new boardwalks that fringe the coastline As new communities start to live, work and play in what once was merely a vision, the role of and seek shelter from the summer heat in megamalls. Nowhere else in the world could all the destination brand must evolve from promotion to engagement. The criteria for long-term these destinations and events be built from scratch in such a time frame. success will now be the building of strong community brands - not just iconic structures. Brands that promote their neighborhood identity while forming strong connections to their immediate surroundings will instill a sense of pride and ownership for the residents who will become ambassadors for these new communities.

tHe Future

GULF REAL ESTATE STUDY 89 ThE FUTURE tHe rIse OF abu dHabI Major real estate developments and country branding initiatives in emerging markets are inextricably linked. An awe-inspiring mega project can generate tourism, and a city’s successful tourism promotion program can generate demand for property. Dubai’s meteoric real estate success and rise as an international tourism destination is a prime example of the impact that one can have on the other. With The Palm, Burj Khalifa, Dubai Shopping Festival and a spectrum of other projects and government initiatives, it was no surprise that Dubai dominated and led the emergence of the region’s real estate sector. Since the global financial crisis, however, no other city has suffered a more dramatic fall from grace than Dubai. Emerging to take its lead is its neighboring city, the Emirate of Abu Dhabi. As the future home of the Guggenheim and the Louvre, host of the F1 Grand Prix at an immaculate new racecourse, and the rising prominence of Masdar in the global discussion of alternative energy; Abu Dhabi is putting on an impressive — albeit more reserved — and diversified bid to claim the title of the new capital of the Middle East. With its financial strength and its rise as a destination of note, Abu Dhabi is best-placed to lead the region’s real estate recovery. It is also poised to be the first place in the region to attract foreign investment and partnership opportunities in the future, should the Emirate seek these.

GULF REAL ESTATE STUDY 91 ThE FUTURE pOrtFOlIO ratIOnalIzatIOn The steady flow of news of various cancellations, delays and re-evaluations have left investors, the media and industry analysts confused as to the true scale and scope of both tier 1 and tier 2 developers. Many developers remain silent about the true situation of many of their projects, with many continuing to market though their websites developments that have been suspended, cancelled or delayed. Whether through financial constraints or imposed mergers, consolidations or downsizing, developers are faced with difficult business and brand decisions regarding the optimization of their portfolios in reaction to the new economic reality. While it might initially appear to harm the brand’s status to reduce the size of the active portfolio, being more transparent with information on project timings and each project’s primacy to the developer’s value proposition will yield greater dividends and optimize the outlook for the future.

GULF REAL ESTATE STUDY 93 ThE FUTURE FInanCIal InnOVatIOn Demand is at an all-time low as an increasing amount of property is flooding the market. Surprisingly, the region has been slow in enacting some of the financial measures put in place in Europe and the US to stabilize and boost the real estate sectors. Mortgage rates (from those institutions that still offer mortgages) remain high, with no signs of relief for those burdened with properties decreased in value. In an unfortunate state of affairs, the banks and lending institutions are often treating existing and potential customers as potential liabilities and defaulters rather than as prized clients. Through closer partnership with financial institutions or state-backed offerings, new and innovative financial products will be critical to generating any real boost in demand.

GULF REAL ESTATE STUDY 95 ThE FUTURE breakInG tHe sIlenCe The ways of communicating to end users have never been more varied. The emergence and ease of use of social media and other Web 2.0 applications have provided a very effective megaphone to the masses. Reflective of the overall market sentiment, it is often the most disgruntled (from irate groups of foreign investors to the outraged tenants of a particular community) who use these outlets to vocalize their frustrations and mobilize like-minded people. A region still dogged by a lack of transparency and a silent media, both of which foster unabated and uncontested attacks on a brand’s reputation, is ripe for this trend. Instead of ignoring these voices or the new media available, it is imperative for brands to embrace them. If nothing else, it can serve as a valuable way to better gauge the brand’s performance and take the pulse of market sentiment. Brands should look to develop strategies to engage their audiences in a positive dialogue.

GULF REAL ESTATE STUDY 97 ThE FUTURE a neW dIalOGue Across the region many units are being completed and handed over to residents (whether rental tenants or owners), and people who live in the developments are finally emerging as an important audience. To date, this large audience has been neglected or siloed as a concern for the facilities management company. During times when long queues at sales launches were commonplace, the focus was on converting potential buyers into actual customers. Once the sales agreement was executed, customers were no longer of primary importance unless they remained potential buyers of future properties. Worse still, rental tenants were completely disregarded, as they were not considered direct clients of the developers. Tenants and residents represent the largest group of potential brand detractors or brand ambassadors, and they will wield significant weight in shaping the public perception of the brand. How effectively and innovatively developer brands can connect with the residents, tenants and the wider community will be a critical element in building brands of the future.

GULF REAL ESTATE STUDY 99 ThE FUTURE delIVerInG tHe prOmIse As every brand’s action or inaction is scrutinized more than ever before, there will be an increased emphasis on companies on the delivery of measurable results. The market will insist on seeing tangible and real supporting evidence for each promise, projection or claim. The days when business needs set marketing deadlines with no correlation to the development timeline have past. This spells doom for those brands that maintain hype-driven, empty promises. In this environment of rigorous analysis, companies that operate in an integrated and holistic fashion (aligning business, marketing and development timelines) will be better positioned to survive. Crisis management teams that involve the full spectrum of the organization need to be seriously considered as a vital part of the organizational structure of the future. Even though most players in the region are private entities, adapting the PR practices of publicly listed companies in managing crises will help them better weather the storms that might lie ahead.

GULF REAL ESTATE STUDY conTacTS William Shintani Jae Hwang FutureBrand Dubai FutureBrand Dubai P.O. Box 502162, Dubai, UAE P.O. Box 502162, Dubai, UAE 971.4.367.8285 971.4.367.1624 contact-dubai@futurebrand.com www.futurebrand.com mEDia paRTnER conTEnT paRTnER Arabian Business website and magazine is REIDIN.com is a Real Estate Information the comprehensive guide to Middle East Company focusing on Emerging Markets. business and industry news. SoURcES For a complete list of all sources contained in this document, visit http://www.futurebrand.com/gres/sources Chapter break photography courtesy of Mike Sheehan Disclaimer: All material presented herein is intended for informational purposes and has been compiled from sources deemed reliable including developers, sales staff, published data and secondary sources. Though content is believed to be correct, material presented is subject to errors, omissions, changes or withdrawal without notice. ©2009-2010 FutureBrand 2 / 02.02.2010

www.futurebrand.com/gres

FutureBrand's Annual Gulf Real Estate Study

by FutureBrand on Feb 02, 2010

Accessibility

Categories

Tags

Upload Details

Usage Rights

1 Embed 12

Statistics

FutureBrand’s Annual Gulf Real Estate Study — Presentation Transcript