Riyadh Real Estate Market Overview - Q1 2013 - JLL · Dubai Real Estate Market Overview Q1 2013...
Transcript of Riyadh Real Estate Market Overview - Q1 2013 - JLL · Dubai Real Estate Market Overview Q1 2013...
Dubai Real Estate Market Overview
Q1 2013
Riyadh
Macroeconomic overview
2
Indicator 2012 2013 (f) 2014 (f)
Saudi Arabia
Population (millions) 29.3 30.2 31.1
Real GDP Growth (Y-o-Y) 6.8% 4.2% 3.6%
Inflation (% Change) 4.5% 4.3% 3.8%
Budget Surplus (USD billions) 103 47 35
Riyadh
Population (millions) 5.6 5.8 6.0
Cost of Living Index (% change) 4.0% 3.8% 3.5%
Sources: Sama, Jadwa, IHS Global Insights April 2013, CDS , 2012
f:forecasted
Economic highlights – Q1 2013
3
Real GDP in KSA grew by 6.8% in 2012. High oil production and expansionary fiscal policy have kept the Kingdom’s growth at a high level.
Retail sales continued to increase, growing by 25% in Q1 2013 compared to the same quarter last year.
Bank lending to building and construction has increased by 27% in Q1 2013 from the same period last year. This reflects greater participation in infrastructure and housing projects.
To facilitate housing construction program, King Abdullah has approved the creation of a new USD 67 billion housing fund.
At 3.9% Y-o-Y, inflation increased for the third consecutive month in March. This was almost entirely due to higher rental inflation and increasing food prices.
Saudi banks increased their lending to real estate end users (mostly mortgages) by 30% in 2012, the largest increase during the last five years.
Property & project news – Q1 2013
4
• The Ministry of Housing has appointed a contractor to build 7,000 new
residential units on Othman bin Affan Road, north west of King Khalid
International Airport. The project will also include 24 mosques, schools
and other supporting facilities.
• The Shoura Council is considering taxing unused, large land plots, in a
move designed to bring forward development and ease the current
housing shortage in the Kingdom.
• Al Oula has taken full control of Thabat Real Estate Development
Company through the purchase of all shares of former partners,
including Egypt’s Tala’at Mustafa Holding Group.
• The Riyadh Development Authority (ADA), has approved a massive SAR
278 billion development plan including major new housing projects and
additional metro and railway lines. Designs were revealed for the new
stations from leading architects including Zaha Hadid, Gerber, and
Snohetta.
• Starwood debuts it Four Points by Sheraton brand in Riyadh, located in
the Khaldia Towers complex., it contains 376 rooms including 138
suites.
• Jabal Ali Industrial Company has announced a new industrial city south
of Riyadh on Al Kharj Road. The new city will offer serviced plots,
zoned for light or heavy industrial, commercial and hotel uses.
• Mizat Development Company has lunched two residential projects
(Hada 1 and 2) west of Riyadh, with a total of 86 units.
5
Riyadh prime rental clock
*Hotel clock reflects the movement of RevPAR.
Note: The property clock illustrates where Jones Lang LaSalle estimate each prime market is within its individual rental cycle as at end of relevant quarter.
Source: Jones Lang LaSalle
5
Riyadh office market overview
Office supply and demand
• Total stock of Grade A and B office space in locations monitored by Jones
Lang LaSalle has increased by around 61,000 sq m in Q1 2013 to stand
just short of 2 million sq m.
• Five new buildings were completed during Q1 2013, adding more than
61,000 of office GLA. The largest completion was Blue Tower (20,000
sq m) on King Fahd road.
• Several new Grade ‘B’ buildings have been completed on King Fahd Road
and Olaya Street over the last three years. The combination of vacant
space in these buildings and space being marketed in buildings currently
under construction provides tenants with a wide range of choice and is
resulting in more competition between owners to attract new tenants.
• Take up in Q1 2013 was led by the government sector, with the largest
deal being for around 10,700 sq m of space in Sultan Tower.
• New supply will increase substantially in 2013, with the completion of the
initial phases of the King Abdullah Financial District (KAFD), the IT and
Communications Complex (ITCC) and GOSI’s Olaya Towers at the
intersection of Tahlia and Olaya. These projects could add over 500,000
sq m of efficient high quality space within the CBD.
• More than 1 million sq m of new space is currently scheduled to be
delivered over 2013-14, but some of this space is likely to be delayed as
the market becomes oversupplied.
Source: Jones Lang LaSalle, Q1 2013
7
1,897 1,959
2,526 3,066
3,361
568
539 296
265
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2012 2013 2014 2015 2016
Tot
al S
tock
(sq
m G
LA in
000
's)
Riyadh Office Stock (2012 – 2016)
Completed Stock Future Supply
8
Major Existing & Future Office Projects
8
Major existing & future offices projects
1
2 3
1
2
1 Faisaliyah Center
2 Kingdom Center
3 Tatweer Tower
1 KAFD
2 ITCC
Existing
Future
3 Olaya Towers
3
4
4 Tamkeen Tower
5
5 Granada Business Park
6
6 The Business Gate
4
4 MIG Tower
Office rental performance
• The average quoted rents for completed Grade A & B buildings in
Riyadh has declined marginally (less than 1%) in Q1 to SAR 1,054
per sq m pa due to higher vacancies, particularly in B grade buildings
in the CBD and to the South of Riyadh.
• Quoted prime rents (for the best quality buildings) have reduced for the
first time in two years, falling by 2.6% over Q1 to SAR 1,850 per sq m
p.a. The average for Grade A and Grade B buildings currently stands
at SAR 1,291 and SAR 880 respectively.
• Vacancy rates have increased in Q1, with city-wide and CBD
vacancies both increasing to 18% and 19% respectively. There will be
further upward pressure on vacancy rates over the next 12 months
given the expected new supply entering the market.
• We expect that increased vacancy rates and the greater choice
available to tenants will maintain downward pressure on rental levels
during 2013, especially for Grade B properties.
Source: Jones Lang LaSalle, Q1 2013
9
Rental Performance (Q1 2012 – Q1 2013)
-
200
400
600
800
1,000
1,200
1,400
1,600
Average Grade A Average Grade B Average (completedGrade A and Grade B
buildings)
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
SA
R p
er s
q m
p.a
.
Office market summary
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Indicator Level Comment / Outlook
Current Office Stock 2.0 million sq m
Includes Grade A, B & C space within major precincts (see
definitions for further details). Total city-wide stock is estimated to
be above 3 million sq m GLA.
Future Supply (2013 – 2016) 1.7 million sq m
The Riyadh market will face a major supply shock over the next
two years with the release of space in projects such as ITCC,
KAFD and Olaya Towers.
City-wide Vacancy
CBD Vacancy
18%
19%
Average – Grade A Rental
Average – Grade B Rental
SAR 1,291 per sq m p.a.
SAR 880 per sq m p.a.
Riyadh residential market overview
Residential supply and demand
• Approximately 8,000 residential units were completed in Riyadh in
Q1. This brings the total residential stock in Riyadh to just over
917,000 units. The majority of the recent supply has been delivered
in small projects comprising less than 20 units.
• The major new announcement in Q1 was Al-Tahaluf’s residential
project Bayt Al- Hurr located in the west of Riyadh and expected to
deliver more than 200 units over the coming three years.
• An additional 129,000 units are due to enter the market from 2013 to
2016, with an annual supply of around 32,000 units.
• One of the more active developers is Al-Habib group, which is
currently building two residential projects. The first of these, Reem
Residences, is expected to deliver 500 units by the end of 2013.
• We are seeing an increase in the registration of off-plan sales
programmes with the Ministry of Commerce.
• The Ministry of Housing is planning to build 7,000 units in Riyadh that
will be delivered over the coming four years.
• Approximately 6,000 residential units are expected to be delivered in
expatriate residential compounds over the next five years. This new
supply is likely to reduce the current upward pressure on compound
rents.
• Data released by SAMA shows the Real Estate Development Fund
disbursed more than SAR 11 billion in loans during the first half of the
2012. These loans were to Saudi citizens to facilitate the building or
purchase of new homes.
Source: Jones Lang LaSalle, Q1 2013
12
909 917 940
971 1,008
23
32
37
37
800
850
900
950
1,000
1,050
1,100
2012 2013 2014 2015 2016T
otal
Sto
ck (
Num
ber
of u
nits
in 0
00's
)
Riyadh Residential Stock (2012 – 2016)
Completed Stock Future Supply
13
Major existing & future residential projects
1 Al Qasr Project
2 Balencya Project
3 Al Argan Project
1 Al Rabiah Project
2 Al Shams Arriyadh Project
3 Al Ghroub Project
4 Maskan Arabiah
4 Rafal Tower Project
1
1
2
3
2
3
4
4
Existing
Future
5 Akaria Village
6 Durrat Al Riyadh
5 6
Residential prices
14
Source: Jones Lang LaSalle, Q1 2013
Villa - Average Sales Price
3,600
3,700
3,800
3,900
4,000
4,100
4,200
4,300
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
SA
R p
er s
q m
• Average villa prices have increased across most districts of Riyadh by
an average of 2% in Q1 to SAR 4,250 per sq m due to significant
increases in the West of the city.
• Average prices in the Center of Riyadh have remained unchanged in
Q1 as most sales have been of older / refurbished projects due to the
lack of new product available for sale.
• Malaqa, Yasmeen, and Sahfa in the North, Al-Hada and Khuzama in
the West and Qurtaba and Ishbiliyah in the East are perceived as the
most attractive locations for villas.
• The new concept of mixing apartments with villas through a separate
access is becoming more popular in low end districts to the South and
West of Riyadh.
• The average price of apartments has also increased in districts to the
East, South, and West of Riyadh during Q1 2013.
• The average asking price for new apartments increased 4% during Q1
to SAR 2,915 per sq m (excluding branded apartments). Average
prices in the east increased by 7% as Al-Argan started selling
apartments.
• Al-Reem Residences and Phase 2 of Manazel Al-Qurtaba, currently
under construction are expected to deliver around 1,300 apartment
units. Once complete these projects will provide quality apartments for
end users.
• Currently, most apartments available for sale are located in the low
income areas of Qurtaba, Yarmouk, in the East and Shifa,, Badr, and
Suwaidi in the South.
2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
Apartment – Average Sales Price
SA
R p
er s
q m
Source: Jones Lang LaSalle, Q1 2013
Residential rentals - villas
• Villa rents have increased by 8% compared to the same quarter last
year. High income villas in the West and Centre have experienced
greater increases than other districts.
• Rents in residential areas such as Olaya, Sulemania in the center
and Hiteen and Nakheel in the west and Shumaisi in the south are
higher than those in surrounding neighborhoods..
• Due to more demand for apartments in the South, villa rents in this
area have not increased much during the last year
• Villas in expatriate compounds have shown a larger increase in rents,
reflecting the long waiting lists for access to this kind of
accommodation.
• The availability of new villas for lease is greatest in areas such as
Qurtaba and Monisia in the East , Malaqa, Sahfa and Yasmin in the
North.
• Villa occupancy in districts between the North Ring Road and Prince
Salman street is increasing rapidly and this area is expected to attract
more attention from Saudi families when government offices move
towards the north of Riyadh.
Source: Jones Lang LaSalle, Q1 2013
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
North South East West Center
Villa - Average Annual Rent
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
15
SA
R p
er a
nnum
Residential rentals - apartments
• Apartment rents have increased at a lower rate than villas, growing
by 6% in the year to Q1 2013 and now stand at approximately SAR
31,000 p.a. for an average 2 bed unit.
• Apartment rents in areas such as Wazarat and Malaz in the South
Olaya in the Center, Diplomatic Quarter in the West and Yarmuk and
Qurtaba in the East are higher than those in other districts.
• Due to high occupancy rates, and the concentration of private
schools and hospitals, rents in areas such as Warooud, Malaz, Olaya
and Sulaimania continue to grow at higher levels.
• Given the lack of labour accommodation within the industrial cities,
districts like Batha, Manfoua, Khalediyah and Amal have a high
concentration of apartment buildings used as labor accommodation.
• The government is planning to move many government of its offices
towards the north of Riyadh and large expat schools are also
moving in this direction. This is likely to result in stronger future
rental growth in the North and Centre than in other areas.
Source: Jones Lang LaSalle, Q1 2013
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
North South East West Center
Apartment - Average Annual Rent
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
16
SA
R p
er a
nnum
Residential market summary
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Indicator Level Comment / Outlook
Current Residential Stock 917,000 units Based on the National Housing Census (2010) and units completed
since in areas monitored by JLL.
Future Supply (2013 – 2016) 129,000 additional units in
all projects Includes all of types of housing.
Average 2 Bed Apartment Rent SAR 30,900 p.a. Apartment rents expected to increase further during
2013, especially in North and Central areas.
Average 2 Bed
Apartment Sale Price SAR 2,915 per sq m
Apartment prices has witnessed major increase during
the last four quarters.
Average 4 Bed Villa Rent SAR 118,700 p.a. Villa rents are expected to increase further in 2013.
Average 3 Bed Villa Sale Price SAR 4,250 per sq m Villa prices are expected to increase further, especially in
the East and North districts.
Riyadh retail market overview
Retail supply and demand
• There was one medium size addition to mall based retail space in Q1
2013, with Ethra Mall (36,000 sq m) opening in the Southern Riyadh
suburb of Sweiidi.
• This completion has increased the stock in major retail malls (those
over 10,000 sq m in size) across Riyadh, to approximately 1.25 million
sq m.
• Outside of the mall sector, Sheta and Saif (electronic retailer) was the
major completion in Q1 (approximately 2,000 sq m of GLA).
• Fawaz Al-Hokair is planning an aggressive expansion in Riyadh. In
addition to Nakheel Mall, two other centers have been announced,
which will add approximately 174,000 sq m of GLA to their retail
portfolio.
• Total mall based retail supply is expected to reach around 1.8 million
sq m by the end of 2016. This includes around 188,000 sq m of retail
space in mixed use projects such as KAFD and ITCC.
• The repositioning of non performing retail centers also continues.
Bustan Centre has been taken over by the Maqrin Group and will be
positioned as male only retail space. Al-Harm Plaza has been closed
after a recent fire.
Source: Jones Lang LaSalle, Q1 2013
19
1,200 1,250 1,370
1,550 1,700
118 177
158 71
-
500
1,000
1,500
2,000
2012 2013 2014 2015 2016
Tot
al S
tock
('0
00 s
q m
)
Riyadh Retail Stock (2012 – 2016)
Future Supply Completed Stock
20
Major existing & future retail malls
1 Riyadh Gallery
2 Sahara Mall
3 Hayat Mall
4 Khurais Plaza
5 Al Otheim MAll 2
1
3
6
4 5
7 8 6 Granada Mall
7 Rimal Center
8 Panorama Mall
Existing
Future
1 KAFD Retail
1
9
9 Al-Qasr Mall
2
2 Nakheel Mall
Rental performance
• Average retail rents have remained stable across all categories
(super regional, regional and community malls) during Q1 2013. This
has kept the average rent across all types of centers unchanged at
SAR 2,562 per sq m p.a.
• Most of the super regional malls have high occupancy rates and rents
are expected to increase during 2013.
• However, we anticipate limited increases in rents in regional and
community shopping malls given the availability of space and
continued downward pressure on rentals in poorer performing malls.
• There remains demand for retail space outside of organized malls.
Standalone centers remain a popular option, with the opening of
Sheta and Saif new electronics store on Anas Bin Malik street in the
north of Riyadh (their 7th store in Riyadh) during Q1.
21
-
500
1,000
1,500
2,000
2,500
3,000
Super Regional Regional Community
SA
R /
sq m
Average Retail Rentals (Q1 2012 - Q1 2013)
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
Source: Jones Lang LaSalle, Q1 2013
Retail sector summary
22
Indicator Level Comment / Outlook
Current Retail Space* (GLA) 1.25 million sq m Existing stock within organised retail malls over 10,000 sq m GLA.
Ethra Mall was the major completion in Q1 2013.
Future Supply (2013 – 2016) 525,000 sq m KAFD and Nakheel Mall are the next major quality retail projects
expected to be delivered in 2013 and 2014 respectively.
Average Estimated Rental
Value SAR 2,562 per sq m p.a.
Average rentals for speciality stores in major malls
have remained stable in Q1 2013.
Average Regional Mall Vacancy 10%
Vacancies remained largely unchanged, ranging
from 0-30% in major malls.
Riyadh hotel market overview
Hotel supply
• The total room supply in Riyadh as at end of Q1 2013 was around
8,500 hotel rooms.
• While there have been no new projects completed in Q1, the
existing Mena Grand Hotel in Khaldia Tower has been converted
into the first Four Points by Sheraton in Riyadh. This has
introduced another major player in the branded midscale segment.
• Other hotels scheduled to open towards the end of 2012 such as
the Hilton Garden Inn and the Holiday Inn Meydan Olaya have
now been shifted towards the end of 2013.
• Among the other projects scheduled for completion in 2013 are
the Hyatt Regency, Crowne Plaza and the iconic Kempinski Burj
Rafal. Upon completion this will be one of the highest towers in
Riyadh and a landmark in the city.
• In reality, it is likely that a number of the projects currently
scheduled for completion this year may not open until 2014,
adding to the already significant level of proposed completions in
2014.
• Recently announced projects include the Grand Melia (which will
be the first Melia hotel in KSA. There are also Indigo and
InterContinental hotels proposed within the King Abdullah
Financial District (KAFD).
Source: Jones Lang LaSalle, Q1 2013
Riyadh Hotel Supply (2012 – 2015)
24
8,400 8,400 9,950
13,250
1,500
3,300
2,700
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2012 2013F 2014F 2015F
No.
of R
oom
s
Current Supply Future Additions
Hotel performance
• The Riyadh hotel market is showing signs of stability, following a
period of declining performance as arrivals failed to keep pace
with the significant increase in supply recorded in 2011 and 2012.
• Occupancy levels have declined significantly from their peak of
72% in 2008 to 57% in 2012. The market is now showing signs of
stability, with average occupancies remaining largely unchanged
over the first quarter, down from 64% in Q1 2012 to 63% in Q1
this year.
• Average room rates (ADR’s) have decreased by 2.2% since 2008.
Rates have also now stabilised, with a marginal (0.7%) increase
being recorded on a YTD basis with Average Daily Rates of
USD 273 in Q1 2013.
• The same trend is true of RevPAR, which declined by 11.8% in
2012 but has now stabilised, remaining largely unchanged at
USD 173 in the year to March 2013.
Riyadh Hotel Performance (2008 – YT March 2013)
25
266 266 255 272 260 271 273
72%
62% 60% 62%
57%
64% 63%
30%
40%
50%
60%
70%
80%
90%
0
50
100
150
200
250
300
2008 2009 2010 2011 2012 YTD2012
YTD2013
Occ
upan
cy(
%)
AD
R (
in U
SD
)
Average Daily Rate Occupancy Rate
Source: Jones Lang LaSalle, Q1 2013
Hotel market summary
26
Indicator Level Comment / Outlook
Current Hotel Supply 8,450 rooms After the addition of about 1,200 rooms in 2011, the only internationally
branded hotel to enter the market in 2012 was Ibis Olaya.
Future Supply (2013 – 2015) 7,500 rooms Some of the new supply scheduled to enter the market in 2012 have now
been shifted into 2013.
2013 (YT Mar) Occupancy 63% Slightly decline in YTD levels of occupancy as compared
to same period 2012.
2013 (YT Mar) ADR USD 273
Slight ADR increase of 0.7% in comparison to YT March
2012, however a reducing occupancy has declined the
RevPAR (by -0.5%) in YT March 2013 compared to YT
March 2012.
Definitions and methodology
27
Residential: • The supply data is based on the National Housing Census
(2010) and our quarterly survey of major projects and stand
alone developments in selected areas of Riyadh.
• Completed building refers to a building that is handed over for
immediate occupation.
• Residential performance data is based on two separate
baskets one for rentals in villas and apartments and another
basket for sales performance for both villas and apartments in
selected locations across Riyadh.
Retail: • Retail supply data covers the GLA (Gross Leasable Are)
within organized malls over 10,000 sq m.
• Classification of Retail Centres is based upon the ULI
definition as published in Retail Development, 4th Edition
published by ULI.
• Rent represents the average quoted average rent for line
stores in the major shopping malls in Riyadh.
Office:
• The supply data is based on our quarterly survey of the Grade
A and B office space located in CBD, North and East Ring
roads, Khurais, Mazer, and Sitteen Streets.
• Completed building refers to a building that is handed over for
immediate occupation.
• Prime Office Rent represents the top open-market rent that
could be expected for a notional office unit of the highest
quality and specification in the best location in a market, as at
the survey date (normally at the end of each quarter period).
The Prime Rent reflects an occupational lease that is standard
for the local market. It is a face rent that does not reflect the
financial impact of tenant incentives, and excludes service
charges and local taxes.
Hotels:
• Hotel room supply is based on existing supply figures
provided by Saudi Commission for Tourism and Antiques as
well as future hotel development data tracked by Jones Lang
LaSalle Hotels. Room supply includes all graded supply and
excludes serviced apartments.
• STR performance data is based on monthly survey conducted
by STR Global.
www.jll–mena.com
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Contacts:
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John Harris
Co-Head
Riyadh
Craig Plumb
Head of Research
MENA
Peter Bibby
Co-Head
Jeddah
Fayyaz Ahmad
Associate Director, Advisory
Saudi Arabia
Andrew Williamson
Head of Retail
MENA
Diyaa Ayoub
Senior Analyst
Saudi Arabia
Gabriel Matar
Director, MEA
Hotels & Hospitality Group