Bringing the Bang Back

regional report 40 Dubai Realty Bringing the Bang Back 2013 saw the recovery of all sectors of the Dubai Real Estate market (residential, retail, hotel, industrial and offices). However, not all sectors performed similarly. While the residential, retail, hotel and industrial sectors witnessed strong and relatively broad-based growth, the recovery of the office sector remains more selective and concentrated in a few prime locations, with high vacancies and significant new supply depressing rental pressure elsewhere, observes a report by real estate investment and advisory firm Jones Lang LaSalle. Market Highlights Q4 2013 The year 2013 saw the recovery of all sectors of the Dubai Real Estate market (residential, retail, hotel, industrial and offices). However, not all sectors performed similarly. While the residential, retail, hotel and industrial sectors witnessed strong and relatively broad-based growth, the recovery of the office sector remains more selective and concentrated in a few prime locations, with high vacancies and significant new supply depressing rental pressure elsewhere. The Dubai economy ended the year 2013 on a positive note with real GDP growth estimated at 4.7 percent according to Dubai s Department of Economic Development (DED). This robust growth is mainly driven by the strong performance of sectors such as retail, transportation, manufacturing, tourism and real estate. The business outlook of Dubai continues to improve as expectations of better revenues, higher sales and increased profits remain high. The Department of Economic Development s composite Business Confidence Index (BCI) stood at 141.6 points in Q3-2013, up 17 percent Q-o-Q, with more businesses willing to invest in growth and expansion in coming months. The real estate investment market in Dubai saw a limited number of transactions in Q4 2013, as most sellers adopted a wait-and-see approach ahead of the results of the Expo 2020 bid. The main buy-

ers in the Dubai market continue to be the Gulf Arabs with an increased interest in land. The office leasing market witnessed more activity in Q4, boosted by seasonal factors as many corporates acted ahead of year end. Prime rents continue to improve as the flight to quality continues to increase demand for the best quality space. Elsewhere, average office rents have remained unchanged with increases in some projects being offset by declines in others. The residential market ended 2013 on a strong note, with prices increasing 22 percent Y-o-Y on average and rents improving 17 percent Y-o-Y. The recovery has been broad based and evident in prime as well as secondary and more affordable locations. While further growth in rents and prices is anticipated, 2014 is expected to see a slowdown in the unsustainable levels of growth seen in 2013. The retail market registered growth in 2013, with turnover and rents increasing in both primary malls and community based centres. Street shops have been also increasingly popular in select locations within Dubai in 2013. The hotel sector had a very positive year with record tourist arrivals. Despite a number of notable openings, the market registered remarkable occupancy rates (Year-to-Date of 80 percent) and high Average Daily Rates (Year-to-Date reaching $241). Securing the Expo 2020 bid is expected to give an additional boost to the sector and lead to further hotel developments in 2014 and beyond. The industrial market registered solid growth in 2013 with a number of infrastructure projects benefiting the sector. Demand continues to shift to newer areas to the south of Dubai, and this is expected to remain the case given the proximity of these areas to the Expo 2020 site. Talking Points Q4 2013 The Expo 2020 win for Dubai is expected to boost the Dubai economy, which is projected to have an annual average growth of 6.4 percent over the next three years. Dubai recorded real GDP growth of 4.7 percent in H1-2013, the fastest expansion in six years, with a similar rate of growth projected for the second half of the year. The strong performance was supported by the expansion of key sectors such as trade, industry and hotels. Dubai is expected to welcome around 25 million international visitors during the Expo event, while more than $8 billion will be spent on new infrastructure. The Expo win will lead to an acceleration of major infrastructure projects near Dubai World Central. Most notably these include the Al Maktoum International Airport and the expansion of the Dubai Metro Purple. Working for the Dubai bid committee, Oxford Economics estimate that securing the Expo will create more than 277,000 job opportunities in the UAE between 2013 and 2021. Most of the new jobs will be within the construction and tourism sectors. Dubai Roads and Transport Authority (RTA) has awarded an AED 500 million contract to a Turkish company for the construction of Phase 1 of the Water Canal project. The Canal will link Dubai Creek with the Arabian Gulf, passing beneath Sheik Zayed Rd and entering the sea to the South of the Jumeirah Beach Park. Dubai Land Department has launched a new online portal, emart, for the auction, sale, and rental of properties. The first online auction within this platform secured the sale of 17 residential and commercial properties. This initiative highlights Dubai s commitment to greater transparency and ease of business within the real estate sector. Following the Expo 2020 win, the developers of the world s tallest Macroeconomic Overview United Arab Emirates Indicator 2011 2012 2013 (f) Population (millions) 8.9 9.2 9.3 Real GDP Growth (Y-o-Y) 3.9% 4.4% 4.0% Consumer Price Index (% change) 0.9% 0.7% 1.2% Real Estate Mortgage Loans (millions AED) 161,500 159,800 N/A Dubai commercial tower (located in the DMCC Free Zone Business Park adjacent to the existing JLT) have changed the name of the announced project to Burj 2020. A new decree (Decree No.41 of 2013) has been issued to expand the holiday homes market in Dubai. The Department of Tourism and Commerce Marketing (DTCM) is established as the responsible entity for licensing and controlling the rental of furnished residences on a short-term (up to 12 months) basis. DAMAC has raised $348 million from its initial public offer (IPO) in London, down from an initial target of $500 million. The IPO is the first by a Dubai property developer since the property market crashed in 2008. Dubai Municipality has announced the construction of the AED 120 million Dubai Frame project next to Zabeel Park. The project consists of a 150 feet-high glass bridge with views of old and new Dubai. Emaar is banning the re-selling of off-plan properties until handover. This move is intended to reduce the flipping of off-plan units and hence limit speculative buying. Nakheel has launched more than 500 residential plots within the Al Furjan project. The developer also launched several new projects during Cityscape including a mixed used development in Deira, two beachfront projects on Palm Jumeirah and new hotels at Ibn Battuta, Dragon Mart and Palm Jumeirah. The second tower of the JW Marriott Population (millions) 2.0 2.1 2.2 Real GDP Growth (Y-o-Y) 3.7% 4.4% 4.7% Inflation (% Change) 0.5% -1.7% 1.2* Sources: IHS Global Insights (December 2013); UAE Central Bank; Dubai Statistics Center 2013 f: forecasted * Figure for January-November 2013 regional report 41

regional report 42 Marquis, the world s tallest hotel, is set to open in Q1, 2014. The new tower will see the addition of an extra 800 rooms along with further food and beverage options. Dubai Office Market Overview The total office stock within areas monitored by JLL at the end of 2013 stood at 7.3 million sq m. The last quarter of the year saw the completions of more than 32,500 sq m of office space, with the Opal Tower and the Oxford Tower, both in Business Bay, being the main completions. The total office space delivered in 2013 stood at 390,000 sq m, 34 percent less than the completions in 2012. Like in the previous years, a number of projects have been delayed at the final completion stage. While there is a total of more than 850,000 sq m of additional office space that could be completed 2014, in reality the supply pipeline is likely to be significantly lower. The CBD (DIFC, Burj Downtown and SZR) currently accounts for around 19 percent of the existing office stock. The fastest growing area is Business Bay, which accounts for almost 50 percent of the future supply expected over the next 3 years. According to developers, around 1.4 million sq m of additional office space could enter the market by 2016. Eagerly awaited projects include Central Park in DIFC, DTCD at the Dubai World Trade Centre, Jumeirah Business Center 6 in JLT, and the Dubai Design District by TECOM. Almost half of the proposed upcoming office supply (2014-2016) is located in Business Bay, with major completions including Tamani Art Offices, Bay Square by Dubai Properties, Capital Bay and Park Central by DAMAC and Bay View. Other areas proposed to witness significant completions by 2016 include DIFC, and JLT, along with two new emerging areas, the Dubai Design District and Dubai World Central. Major Office Completions: 2013/2014 The last quarter of the year typically sees a seasonal increase in take-up in the Dubai office market, as tenants seek to close deals ahead of their year end. 2013 was no exception with a significant increase in leasing activity recorded in the final quarter of Office Market Summary Indicator Level Comment / Outlook Current Office Stock Future Supply (2014-2016) CBD Single Ownership Vacancy Prime CBD Rental (excl. DIFC) Prime Capital Value Industry Examples of Recent Lease Acquisition Deals 7.3 million sq m 1.4 million sq m 29% AED 1,850/sq m AED 19,140/sq m the year. A continuing trend remains the flight to quality, with a number of companies relocating from older buildings and secondary locations towards prime areas and higher quality buildings. Another aspect of this trend has been for companies to consolidate their operations in one location. However there were few examples of this consolidation trend during Q4 Area Acquired sq m Location Consulting 5,000 Downtown Law Firm 300 DIFC Management Consulting 465 DIFC Financial Services 300 DIFC Law Firm 470 DIFC Real Estate 325 Downtown IT Software 750 TECOM FMCG 2,000 TECOM Hospitality 2,000 TECOM Technical Services 1,700 Business Bay Includes all grades within 20 sub-markets, monitored by Jones Lang LaSalle. Assuming that all pipeline supply tracked by Jones Lang LaSalle will complete. CBD vacancy levels dropped slightly but remain high at around 29%. The take up of office space continues to be counterbalanced by new supply entering the market. Prime rents continue to improve in the best quality offices in the prime locations. Secondary locations are seeing further downward pressure on rentals due to high current vacancies and additional future supply. Prime Capital Value refers to the market price for the best office space (excluding DIFC). Prime Capital Values increased in Q4 2013, reflecting the improvement in market sentiment. 2013. Companies continue to focus on optimising efficiency by redesigning office layouts and accommodating more people in less space. Single ownership buildings continue to account for the majority of demand, while strata projects remain less popular, especially amongst large global companies. Two aspects of location are becom-

Total Stock (million sq m) 10 8 6 4 2 0 6.3 ing increasingly important to occupiers, proximity to a metro station and the availability of car parking. Most of the demand in Business Bay is concentrated on those buildings facing SZR, especially those close to the metro station. Landlords remain more bullish in the most prime locations, being less flexible on rents or willing to offer rent-free periods. Landlords in secondary locations however remain flexible as they continue to struggle to attract tenants. Vacancy rates within the CBD have decreased slightly to 29 percent by year-end with a number of deals closing in the last quarter as corporates sought new space to align with their business strategies. Securing Expo 2020 has had no Dubai Office Stock (2011-2016) 0.9 6.9 7.3 7.3 0.5 0.1 2011 2012 2013 2014 2015 2016 Completed Stock Future Supply Breakdown of Expected Completions (2014-2016) by Sub Market 6% 5% 7% 4% 9% 3% 7% 9% 49% 8.1 Business Bay DIFC 8.6 Dubai Design District JLT Dubai World Central Greens Dubai Investment Park DTCD Others immediate impact on demand for office space in Dubai. While the office sector is likely to benefit from the overall increase in economic activity generated by winning Expo 2020, it remains unlikely that Expo will generate significant additional for office space in the short term. Rental Performance There was no significant change in office rents recorded in Q4 2013. While rents increased marginally in some prime buildings, they remained unchanged or dropped slightly elsewhere as landlords competed to attract occupiers seeking to sign deals ahead of their year-end. The positive vibe surrounding the Expo 2020 win did not impact office rents and is unlikely to affect the office market significantly in 2014. The top open-market rent in the DIFC remained unchanged in Q4 at AED 2,610 per sq m, while it improved marginally (less than 2 percent) to AED 1,850 per sq m elsewhere in the CBD. The average quoting rent across the broader market remained unchanged at AED1,390 per sq m in Q4 2013. The office market in Dubai continues to see a flight-to-quality, with the best performing locations being DIFC, Burj Downtown and TECOM A&B. Rental values in secondary locations remain under downward pressure. This two tier market is also evident within individual locations such as Business Bay and JLT. Prime rents (those for the best building) in Business Bay have improved by 21 percent Y-o-Y and 5 percent Q-o-Q. However, not all the commercial buildings in the area have seen such increases. Towers overlooking SZR, in proximity to the metro station and those with single ownership seem to be more popular. Prime rents in JLT remained stable in the last quarter, having witnessed a dramatic 75 percent increase Y-o-Y rise but once again this increase has Yearly Performance of Prime Rents in Selected Commercial Locations Areas DIFC 11% Burj Downtown 14% SZR 27% TECOM A & B 35% Business Bay 21% JLT 75% Downtown Jebel Ali 0% Yearly Change regional report 43

regional report Major Office Completions 2013/2014 SZR Al Yaquob Tower CBD SZR 48 Burj Gate Barsha API Trio Tower Business Bay Opal Tower, Oxford Tower Business Bay The Burlington, Prime Tower Silicon Oasis Donna Towers, The Lynx Completed Under Construction JLT JBC 4 been limited to the best quality buildings that have been able to capitalise on JLT s metro access and free zone status. 2014 is expected to see a continuation of the twotier office market in Dubai, with prime locations improving and secondary areas remaining under downward pressure. The strong supply pipeline will continue to apply a natural break to potential rental growth. Office Market Summary Indicator Level Comment / Outlook Current Office Stock Future Supply (2014-2016) CBD Single Ownership Vacancy 7.3 million sq m 1.4 million sq m 29% Includes all grades within 20 sub-markets, monitored by Jones Lang LaSalle. Assuming that all pipeline supply tracked by Jones Lang LaSalle will complete. CBD vacancy levels dropped slightly but remain high at around 29%. The take up of office space continues to be counterbalanced by new supply entering the market. 44 Dubai Residential Market Overview At the end of 2013, the total residential stock in areas monitored by JLL stood at around 365,000 units, with over 9,700 residential units delivered throughout the year, 26 percent less than the number completed in 2012. The last quarter of the year saw the handing over of around 950 residential units. Most of the projects delivered in Q4 were outside Central Dubai and included the Whispering Pines villas in Jumeirah Golf Estates, Cappadocia residences and the Dana Tower in Jumeirah Village, the City Oasis in Silicon Oasis, in addition to a number of buildings and villa compounds in Dubai Sports City. If all Prime CBD Rental (excl. DIFC) Prime Capital Value AED 1,850/sq m AED 19,140/sq m projects announced are delivered on time, there would be around 28,000 additional units completed in 2014, representing an increase of approximately 8 percent over the current stock. In reality some of these projects are likely to be delayed beyond Prime rents continue to improve in the best quality offices in the prime locations. Secondary locations are seeing further downward pressure on rentals due to high current vacancies and additional future supply. Prime Capital Value refers to the market price for the best office space (excluding DIFC). Prime Capital Values increased in Q4 2013, reflecting the improvement in market sentiment. their scheduled completion dates. Dubailand accounts for almost 33 percent of the announced future supply, with around 16,000 residential units expected before the end of 2016. Other areas that should see major residential completions

Number of Units (in '000s) 500 400 300 200 100 0 4% 4% 4% 5% 2% Dubai Residential Stock (2011-2015) 342 355 365 365 2011 2012 2013 2014 2015 2% 2% 5% 6% Completed Stock are Dubai Marina (4,200 units); Dubai Sports City (3,700 units); IMPZ (3,000 units); Business Bay (2,700 units) and Dubai Silicon Oasis (2,600 units). The positive sentiment prevailing in Dubai, coupled with the economic growth and the anticipated increase in demand, have led a number of developers to announce pre-sales within large-scale developments. Among these projects are Al Furjan Villas, the Deira Project and Al Warsan Village by Nakheel, while Emaar has announced 28 Future Supply Breakdown of Expected Future Completions 10% 6% 8% 9% 33% 393 Burj Vista, The BLVD, The Address Residences and The Opera District in Downtown, The Hills in Emirates Living and other projects in Arabian Ranches. DAMAC has also announced a number of projects in the pipeline such as AKOYA while Meydan and Meraas have also announced new residential projects in 2013. The residential sector in Dubai has ended the year 2013 on a very strong note, with both prices and rents on the rise, supported by an extra boost from 17 Dubailand Dubai Marina Dubai Sports City Business Bay IMPZ DSO Jumeirah Village SZR JLT Palm Jumeirah Jumeirah Park DIP Jumeirah Golf Estates Others the Expo 2020 decision. The REIDIN Sale Index improved by 22 percent Y-o-Y as of November 2013, with apartments outperforming the villa sector in 2013. The apartment sale price index increased by 25 percent Y-o-Y but is 6 percent less than the peak of August 2008. The villa price index went up by 15 percent Y-o-Y and is 9 percent below its peak value. Over the year 2013, prices improved the most in Palm Jumeirah, International City and Jumeirah Lakes Towers. On the leasing front, the REIDIN Rent Index went up by 17 percent Y-o-Y and 6 percent Q-o-Q. Apartments outperformed villas once again. The apartment rental index improved by 18 percent Y-o-Y but remains 14 percent lower than its record value of Q3-2008 while the villa rental index has reached its highest value since the creation of the index in January 2009 and has progressed by 13 percent Y-o-Y. Secondary locations have continued to recover and have outperformed some of the primary locations during Q4. As such, rental values have increased the most on a yearly basis in areas such as Sports City, International City and JLT while the percentage growth was lower in prime locations such as Dubai Marina or the Palm Jumeirah. The Dubai residential market ended the year 2013 with an increase in both rental values and sale prices across almost all areas. Success in securing Expo 2020 has further boosted sentiment that is causing rents and prices to increase at unsustainable levels. The rapid price growth, return of speculation and the dominance of cash buyers could translate into excessive price growth or over development that, if not managed carefully, could result in a bubble that would be harmful to the Dubai residential sector in the longer term. Our expectation is that while rents and prices will continue to increase during 2014, the rate of growth will decline from the levels witnessed during 2013. Dubai Retail Market OverviewRetail Mall Supply Having seen no new supply for the first 9 months of 2013, the Dubai retail market witnessed the completion of two significant projects in Q4, increasing the total stock of mall based retail space to approxiregional report 45

regional report 46 mately 2.9 million sq m. These completions in Q4 2013, were Phase II of Al Ghurair City (35,000 sq m) and Phase I of the Avenue by Meraas (12,800 sq m). 2014 is forecasted to see an additional 36,000 sq m of retail space enter the market. Most of this will be in community and neighborhood malls including the Jumeirah Park Community Center and the Discovery Gardens Retail Centre by Nakheel; the Beach by Meraas and the extension of the Mall of the Emirates. It is estimated that around 471,000 sq m of new retail space will enter the Dubai market by the end of 2016. This includes Phase II of the Dragon Mart, the Agora Mall in Jumeirah, the expansion of Ibn Battuta Mall (all scheduled for 2015); in addition to the Phase II of The Avenue and the expansion of the Dubai Mall (due for completion in 2016). The healthy performance of the retail market and the strong demand for retail space has led to a number of announcements recently. These include the 400,000 sq m Phoenix Mall in International City, Phase II of Dubai Outlet Mall, the Art Centre in Barsha, Al Furjan Community Centre, as well as Mall of the World as part of MBR City. A number of the mega projects unveiled during Cityscape Global last October include retail components, such as the Dubai Water Canal, which is expected to have around 450 F&B units, the Deira project by Nakheel, The Lagoons by Emaar and Dubai Holding, and AKOYA by DAMAC among others. Some of the existing shopping centres have been on board with redevelopment and expansion plans in order to compete with the new and modern malls. This is the case of Deira City Centre, Bur Juman and Wafi Mall which are revamping their facilities. The Dubai retail market continues to be dominated by the large super-regional and regional centres, even though the majority of the upcoming retail space will be constituted of community and neighbourhood centres. Residential Market Summary Indicator Level Comment/Outlook Current Residential Stock 365,000 Future Supply (2014-2016) 45,000 Apartment Rent Apartment Sale Price Villa Rent Villa Sale Price Rental Performance Estimated Rental Value (ERV) The retail market in Dubai continues to experience strong growth, supported by the overall optimism in the market, a growing number of tourists and an improved purchasing power. The Dubai Mall and the Mall of the Emirates have maintained their supremacy as market leaders, achieving the highest rents, occupancy rates and footfalls. The Dubai Mall has set an ambitious target of attracting 100 Around 9,700 units were added to Dubai s residential stock inventory in 2013. Assuming that all supply tracked by Jones Lang LaSalle will complete. In reality, some of the proposed projects may be delayed beyond their scheduled date. Asking rents went up by 18% Y-o-Y. The recovery is relatively broad-based, with the secondary and more affordable areas growing at faster pace than the prime locations. Asking apartment sale prices went up by 25% Y-o-Y. The growth has been noticeable in almost all areas of Dubai. Villa rents have increased by 13% Y-o-Y. Asking rents for villas in the secondary and more affordable locations have been increasing, sometimes at a faster rate than in the well established areas. Asking villa sale prices have increased by 15% Y-o-Y but overall prices are growing at a decelerating rate. Note: Direction arrows are based on the performance of the REIDIN monthly index. Retail Sector Summary Indicator Level Comment/Outlook Current Retail Space (GLA) Future Supply (2014-2016) Average Retail Rent in Primary Malls Average Retail Rent in Secondary Malls Average Regional Mall Vacancy 2,865,110 sq m 471,400 sq m AED 5,100/sq m AED 1,725/sq m 12% Two major new additions in Q4 2013: Phase II of Al Ghurair City and Phase I of the Avenue by Meraas. The main retail completions for 2014 will be Jumeirah Park Community Centre and the Discovery Gardens Retail Centre, both by Nakheel; the Beach by Meraas and the expansion of the Mall of the Emirates. Rents of prime units in better performing centres have improved slightly in Q4 2013. Rental growth is expected to continue in 2014 in most primary and modern secondary malls. Citywide retail vacancy has dropped slightly to 12% in Q4 2013 as demand for retail space remains strong and large primary centres are almost fully occupied. million annual visitors by 2020. The top open market net rent for a notional standard shop in prime super regional centres has increased by 3.5 percent in Q4 2013 to stand at AED 5,900 sq m. The average increase across Primary Super Regional

Malls has been somewhat less at 2.5 percent (to an average of AED 5,100 sq m.) With the Primary Super Regional Malls asking for high rental values and offering very limited vacant space, the community centres are gaining more importance. Those centres are becoming increasingly popular as they cater to the basic needs of the surrounding communities. In line with the growth of community centres, grocery stores and supermarkets such as ZOOM, Carrefour Express, Waitrose and Spinneys have been expanding. An increasing number of future retail projects are in the form of community malls. These include Jumeirah Park Community Centre and the Discovery Gardens Retail Centre (which is fully leased out). The newly announced 30,000 sq m Al Furjan retail space by Nakheel should serve residents of Al Furjan, Discovery Gardens and the Gardens communities. Street shops continue to be popular and demand has been high recently for retail space in prime streets such as Sheikh Zayed Road, the Marina Walk or the Sheikh Mohammed Bin Rashid Boulevard in Downtown. The retail mar- AED/sq m Primary Q4 2013 Secondary Super Regional 4,300-5,900 1,000-2,400 Regional 1,350-2,800 970-1,900 Community 1,300-2,400 1,100-1,350 Neighborhood 2,400-2,700 1,100 Convenience 1,500-1,900 1,300-1,400 Note: Based on a basket of malls of different sizes. (See definitions for further details) regional report GLA in '000s sq m Dubai Retail Stock (2010-2016) 3,200 184 3,000 36 2,800 3,085 2,600 2,775 2,817 2,865 2,865 2,901 2,400 2,649 2,200 2010 2011 2012 2013 2014 2015 2016 Completed Under Construction Breakdown of Under-Construction Retail Space by Type of Mall 2% 2% 3% Super Regional 14% Regional Neighborhood Community 79% Boutique 251 ket is expected to maintain its strong performance in 2014, in both the large primary and community malls. While the Expo 2020 win might not have an immediate impact on the sector, more retail projects might be announced in a couple of years to support the event. Dubai Hotel Market Overview The fourth quarter of 2013 saw a total of just over 1,000 additional hotel rooms enter the market in a number of openings, including the Mövenpick Hotel Jumeirah Lakes Towers, Novotel Al Barsha and the expansion of the Millennium Airport Hotel. The most renowned opening for the first quarter of the year will be the upscale Waldorf Astoria hotel on The Palm (319 rooms). A total of almost 5,500 additional rooms are scheduled for completion in 2014 including the Sofitel Dubai Downtown, the InterContinental Dubai Marina, the Double Tree Hilton Barsha, the Phase II of the JW Marriott Marquis in Business Bay and the Palazzo Versace which has been pushed back for the end of 2014. Several new hotel developments were announced during the last quarter of 2013, including a high-end hotel on Sheikh Zayed Road, the Mövenpick Hotel on Palm Jumeirah, the Tenora Hotel Apartments in Dubai World Central and the Opus Hotel under the ME by the Meliã brand in Business Bay. With Dubai winning the Expo 2020 bid, the Emirate now expects to attract 25 million total tourists between October 2020 and April 2021, 17.5 million of whom are expected to visit from abroad. The Expo is expected to spur hotel developments and help Dubai 47

regional report to reach its target of attracting 20 million foreign tourists by 2020. The Dubai government has introduced a number of new measures to accommodate the forecast increase in tourists. These include a twoyear tax exemption on new 3 and 4-star hotels, signalling a strategic shift towards increasing the supply of mid-priced hotel products. Hotel Performance Dubai received over 7.9 million tourists in the first nine months of 2013, registering a 10 percent increase over the same period in 2012. The city is expected to exceed 10 million visitors for the full year 2013. This continued growth in tourism demand has resulted in strong performance metrics. In addition to more visitors there has also been an increase in the average length of stay, from 3.5 nights in 2012 to 3.9 nights between January and September 2013. Airport arrivals from January to September 2013 registered a 16 percent increase compared to the same period in 2012. The fourth quarter also saw the opening of Al Maktoum International Airport in Dubai World Central for passenger traffic. Year-to-November occupancy rates have increased by 3.9 percent compared to the same period in 2012, reaching 80 percent on a city-wide basis. Average Daily Rates have reached $ 241 in YT November, marking a 5.2 percent growth rate from 2012. The resulting RevPAR showed an impressive 9.3 percent growth from the same period in 2012, reaching $ 193. No. of Keys Dubai Hotel Stock (2013-2016) 5,100 75,000 70,000 3,750 5,450 65,000 60,000 69,500 55,000 65,750 60,300 60,300 50,000 45,000 2013 2014F 2015F 2016F Current Supply Future Additions ADR (USD) 250 200 150 100 50 Dubai Hotel Performance (YT November 2010-2013) 80% 80% 77% 75% 75% 71% 70% 65% 60% 2010 YTD 2011 YTD 2012 YTD 2013 YTD ADR Occupancy Source: STR Global Occupancy 48 Industrial Supply & Demand The industrial sector in Dubai continues to perform well, supported by strong economic growth and solid infrastructure. The main contributors to the growth of the industrial and logistics sector in Dubai are the transportation, oil and gas, food, metal, automotive and aviation sectors. The Expo 2020 win is expected to boost the industrial and logistics sector in Dubai, benefiting mostly the areas located south of the city around the Expo site, such as Dubai Industrial City (DIC), Dubai Investment Park (DIP), and Jebel Ali Free Zone Authority (JAFZA). The Expo win will also trigger significant investment in airports, roads, ports and rail, which will all benefit the industrial and logistics segment. The Al Maktoum International Airport is undergoing an expansion of its passenger facilities and development of its cargo infrastructure. Expansion to the Dubai metro will also be fast tracked for the 2020 event, with the current Red metro line being expanded to the event site. Another infrastructure development is the creation of an integrated sea and air freight facility at Jebel Ali. The proximity of the new airport to one of the world s largest existing seaports at Jebel Ali allows for the creation of a single freezone for the shipment of goods, acting as a major boost to the already significant re-export sector of the Dubai economy. Another large infrastructure project that will affect the Dubai industrial market is the planned Etihad Rail. The rail network will span around 1,200 km across the Emirates and will have a stop in DIC. The Expo win will strengthen further the aviation sector in Dubai, as 70 percent of the 25 million predicted visitors to Expo are expected to travel from outside of the UAE. Activity in the industrial market continues to be strong in Q4 2013, especially in the new industrial areas and the free zones. Given the high demand in the newly developed locations such as DIC, DIP or Dubai World Central (DWC) and the free zones (JAFZA and

Industrial Supply & Demand Traditional Areas Free Zone Areas New Onshore Areas Overview of some of the main industrial areas in Dubai Area Age Land Area (sq m) Regulatory Status Selected tenants Al Quoz 1973 18,500,000 Onshore Fedex, Mercedes-Benz Al Qusais 5,450,000 Onshore Maxell, Sabco Umm Ramool 3,900,000 Onshore Ras Al Khor 1976 12,000,000 Onshore JAFZA 1985 JAFZA North 45,000,000 JAFZA South 35,000,000 Offshore DAFZA 1996 2,000,000 Offshore Dubai World Central 2009 105,000,000 Free Zone Areas Logistics and Aviation City only Jebel Ali Industrial Area 21,240,000 Onshore Al Futtaim, Al Ghurair Group, Al Habtoor Leighton Aramex, Total, Unilever, Easa Saleh Al Gurg Group DHL, Danube, LG, Kenwood, Heinz, Kraft, Mars, P&G Clarins, Rolls-Royce, National Foods Products Company, Fedex Logistics Dnata, RSA, Caliper Landmark Group, Jumbo, Bridgestone Dubai Investment Park 1997 16,500,000 Onshore Paris Group, Drake & Scull Dubai Industrial City 2004 52,000,000 Onshore Nestle, Baker Hughes regional report Main Recent Industrial Transactions Company Industry Location Size (sq m) Date Glanbeigh Storage DWC 6,500 sq m built-to-suit January 2014 Danway Engineering DIP N/A October 2013 Hotpack Packaging DIP 32,500 sq m September 2013 Hellman Calipar Healthcare DWC 12,500 sq m expansion September 2013 Total Freight Barloworld Logistics Freight/ Transport RSA Logistics Logistics DWC Al Islami Foods DWC 5,600 sq m July 2013 Logistics JAFZA 2,000 sq m July 2013 Food Production 9,500 sq m temperature controlled facility July 2013 DIP 1,100 sq m built-to-suit June 2013 Rolman Group Distribution JAFZA 33,000 sq m expansion June 2013 Arcelor-Mittal Steel JAFZA 86,000 sq m April 2013 DAFZA), those areas are expanding and developing their facilities. DAFZA has started its third-phase expansion while DIC (which is 95 percent occupied) will begin an expansion in 2014 with new warehouses, infrastructure and housing planned. The new areas capitalise on their large plots of land to attract heavy industries such the automobile sector. DIP for example has recently opened a new car showroom for both new and used cars and have around 14 automobile vehicle outlets and repair facilities, in addition to a number of service centres, workshops, spare parts and accessories outlets. JAFZA is also trying to impose itself as an automotive centre by attracting Chinese and other Asian automotive companies. JAFZA counts today more than 500 automotive companies such as Honda, Nissan, Ford, etc. A large number of enquiries for industrial space continues to emanate from food & beverage (F&B) companies. With the traditional onshore areas such as Al Quoz or Ras Al Khor being saturated and ageing, the trend continues to shift towards the newer areas such as Dubai Industrial City (DIC) and Dubai Investment Park (DIP) and the free zone locations such as the Jebel Ali Free Zone Authority (JAFZA) and Dubai Airport Free Zone Authority (DAFZA). Dubai industrial zones are being the centre of interest of a number of international companies, mainly from China, the USA, Switzerland and others. The Expo win will reinforce Dubai s position as a key economic and industrial hub and will benefit mostly the new locations such as DIP or DIC which are located near the exhibition site. More companies might be setting up their businesses in these areas soon, creating more need for shipping and logistic solutions. 49