MENA

Real Estate
Overview
office | residential | retail | hospitality

research | F I RS T Q u a rt e r | 2010

www.colliers-me.com
 mena real estate overview FIRST Quarter 2010

Independent Consultants
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Colliers International has been providing the full

breadth of real estate consultancy services on a
global scale for over 20 years. Today the company
has over 290 offices in more than 60 countries
spread over six continents covering every major real
estate market.

Colliers International has been supporting client

decision-making in MENA real estate markets
since 1996, and has provided strategic advisory,
market research, asset management, agency,
property valuation and capital investment
services throughout the region.

Contents
Abu Dhabi Office Occupancy Survey 4

Dubai Office Occupancy Survey 5

Abu Dhabi Real Estate Market Overview 6

Dubai Real Estate Market Overview 10

Doha Real Estate Market Overview 14

Riyadh Real Estate Market Overview 18

Jeddah Real Estate Market Overview 22

Eastern Province Real Estate Market Overview 26

Amman Real Estate Market Overview 30

Cairo Real Estate Market Overview 34

Tripoli Real Estate Market Overview 38

Damascus Real Estate Market Overview 42

Available Market Studies & Contacts 46

www.colliers-me.com

 Colliers International
 mena real estate overview FIRST Quarter 2010

Abu Dhabi Office Market - Rumour Calculations and Preparing For Change

Colliers International, with an established presence in the Abu

commercial villas
Dhabi market of over 14 years, has looked closely at the potential
changes affecting the office leasing sector – and how these changes
would impact the Abu Dhabi market.
17%
In two parts Colliers looked at first the changing nature of the Others
occupational market and then at potential impact of possible legal
changes on the supply and demand dynamic.

Occupiers – Present and Future

83%
With a large volume of space due to enter the market Colliers Office
conducted a survey of 15 existing office buildings in Abu Dhabi to
establish current and forthcoming occupancy profiles.

current occupier space profiles

Of the total amount approximately 83% are used as offices, while
the remainder comprised uses such as nurseries, schools, pharmacies,
Less than medical centres, fashion and beauty centres etc.
300m2
20% Colliers estimates that a potential domestic demand of up to
125,000 m2 of office space could be generated from the “commercial
Exceeds
500m2 villa sector”. The likely impact on the market is subject to a number
55% Between of key underlying assumptions, foremost of which are;
301-500m2
25% • Abu Dhabi Municipality is indeed considering removing
commercial uses on residential villas.
• Should the change of use (back to residential only) come into
effect by the end of 2010 - tenants in the commercial villas will
be given until end of 2011 (a 1 year period) to vacate.
occupier space requirements
Given this scenario, Colliers anticipates this additional demand
accounting to 125,000 m2 will be then absorbed into the existing
Exceeds supply in 2012, thereby minimizing oversupply of commercial space
500m2 in the Emirate.
20%

Less than
300m2 commercial villas
Between 50%
301-500m2
30% 3,000,000

2,500,000

2,000,000
m2 GLA

1,500,000
Colliers then looked at both current requirements in the market place
and existing tenants currently occupying office space. It was here 1,000,000
that the changes to occupiers profile are apparent. 50% of tenants
500,000
surveyed indicated requirements for space of less than 300 m2. 30%
of the tenants are seeking office space between 301 m2 and 500 m2, 0
while only 20% are looking for office space exceeding 500 m2. 2007 2008 2009 2010 2011 2012 2013

Potential New Demand Demand Demand Supply

There has been discussion and rumour within the Abu Dhabi market
of the Municipality looking to end the long standing practice of
allowing residential villas to be used for commercial office premises.
What was a practical response to a clear undersupply, Colliers
examined this possible domestic source of demand and what impact
it may have in minimizing future oversupply in Abu Dhabi.
Colliers research has established that there are approximately 600
villas currently registered with commercial uses.
(excluding villas) (including villas)
In conclusion, whilst it will be good news for purpose built offices
the effect will not be a cure all to the market place, forthcoming
oversupply and landlords will need to remain competitive in their
terms to attract tenants. Further, developers and landlords need to
start planning for sub division of floor space to match supply with
market demands.

Colliers International 
mena real estate overview
Abu Dhabi Office Occupancy Survey – Q1 2010
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Hamdan Street Khalifa Street
Office occupancy rates are a key indicator of
a city’s economic vitality. This is certainly the
case in Abu Dhabi, where commercial office
space enjoyed 100% occupancy in a historically
undersupplied market. However, following
the global economic downturn and falling real
estate prices, Colliers instigated a market watch
last year, focusing on a sample of office buildings
in the emirate – the intention being to monitor
the performance of these buildings in the light
of global conditions. The initial survey was
700
600
500
US$ per m2 pa
400
300
200
100
0
Hamdan Street
Average rental rate, covering the surveyed areas
currently stands at US$ 465 per m2 per annum,
a 5% drop from Q4 2009. Declining rental
rates in Abu Dhabi are due to, among other
reasons, the Emirate’s price sensitivity towards
falling prices in neighboring Dubai. The largest
decrease in rental rates was registered in Salaam
Street, which dropped by 19%, from Q4 2009 to
Q1 2010 and is currently standing at US$ 460
per m2 per annum. Najda Street was the only
 Colliers International
FIRST Quarter 2010
average occupancy survey q1 2010
Liwa Street Najda Street Salam Street
Q4 2009 Q1 2010
conducted in Q4 2009 and was tracked again in
Q1 2010.
The average occupancy currently stands at
99%, dropping a marginal 1% from a fully
occupied market in Q4 2009. The results from
the occupancy survey show Khalifa, Liwa and
Salam Street consistently achieving 100%
occupancy while Hamdan Street consistently
achieved 99% occupancy during Q4 2009 and
Q1 2010. The high occupancy rates in these
average rental rates
Khalifa Street Najda Street Salam Street
Q4 2009 Q1 2010
area failing to witness a decline in rental rates.
Khalifa Street and Hamdaan Street witnessed a
4% and 9% decline in annual rents respectively.
Annual rents in Hamdan Street remained the
highest at US$ 570 per m2 per annum. While
primary grade office space witnessed a decline of
9% between Q4 2009 and Q1 2010, secondary
grade office space dropped a marginal 2% during
the same period.
areas reflect an undersupplied market. Najda
Street witnessed a 5% drop in occupancy rates
from 100% occupancy in Q4 2009. Office space
surveyed in Najda Street includes primary
grade office space, which contrary to market
conditions, failed to witness a decline in rental
rates between Q4 2009 and Q1 2010. The drop
in occupancy levels in this area is likely to be
attributed to existing tenants either downsizing
their current operations or relocating to less
expensive commercial space available in the
Emirate.
The overall results exemplify the present
undersupplied market for office space in Abu
Dhabi. Despite high occupancy levels across the
market, and a current supply of approximately
1.6 million m2 of NLA, the office market is
expected to reach equilibrium during 2010
with an oversupply by the end of the year, due
to a lower demand rate than a forthcoming
supply rate. The outlined oversupplied market
condition, however, is only possible provided
construction timelines are met.
Despite the limited availably of commercial
office space in the capital, changes in the global
economic climate and falling real estate prices in
Dubai are forcing landlords to lower their asking
prices in Abu Dhabi, in order to retain existing
tenants. With an expected forthcoming supply
of approximately 435,000 m2 of NLA scheduled
to be released this year, rental rates in the capital
are anticipated to decline further.
 mena real estate overview FIRST Quarter 2010

Dubai Office Occupancy Survey – Q1 2010

new commercial districts: average occupancy

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
JLT DSO
Q1 2009 Q3 2009
A market watch instigated by Colliers in 2009,
focused on recently delivered office space
in Dubai with the intention to monitor the
effect and performance in the light of global
conditions. The initial survey conducted in Q1
2009, was reviewed in Q3 2009 and again in Q1
2010.
Colliers followed occupancy rates, fit-out levels
and rental rate trends for specific buildings in
new commercial districts, such as Jumeirah
Lake Towers (JLT), Dubai Silicon Oasis (DSO),
Dubai Investment Park (DIP), Jebel Ali, Dubai
Outsource Zone (DOZ), Al Barsha, TECOM A
and C, and Dubai International Finance Centre
(DIFC). The survey limited new office space in
TECOM and DIFC to commercial buildings
delivered by private developers.
Tecom C Tecom A
Q1 2010
The average occupancy rate, in new commercial
districts reached 32% in Q1 2009, 23% in Q3
2009, followed by 42% in Q1 2010.
The survey for new office space showed the
highest average occupancy rate consistently
achieved in TECOM A, which currently stands
at 40%. Other free zone areas such as JLT, DSO
and TECOM C saw Y-O-Y increases of 10%,
7% and 1% respectively. Downtown Jebel Ali
(DTJA) witnessed the highest YOY increase from
15% in Q1 2009 to 73% in Q1 2010. TECOM
C continues to witness comparatively lower
occupancy rates, which among other reasons
is likely due to a majority of buildings under
construction in the area discouraging potential
tenants occupying vacant space. Average
occupancy levels in older, more established
commercial districts such as Bur Dubai, Deira,
SZR and Downtown Dubai dropped from highs
of 97% in Q1 2009 to 90% in Q1 2010. Deira
and Bur Dubai witnessed the highest occupancy
rates of 93% and 91% respectively. Downtown
Dubai witnessed a 5% decline in occupancy
rates between Q3 2009 and Q1 2010, while
increasing a marginal 1% Y-O-Y. Occupancy
levels in Sheikh Zayed Road witnessed a 3%
drop from Q1 2009 to Q1 2010, but increased
2% from Q3 2009 to Q1 2010.
Colliers International observed an overall
10% YOY increase in occupancy levels across
new commercial districts, while occupancy
levels in the older, more established districts
dropped by 7% during the same period. The
movement of commercial tenants is believed to
be a direct result of the lower rental rates and
other incentives, such as rent-free fit-out periods
offered by landlords in the newer commercial
districts, in order to magnetize tenants from
older, established office space in an already
oversupplied office market.
Average occupancy levels across Dubai, covering
both new and established commercial office
space, reached 71% in Q1 2010. The overall
occupancy rate was calculated by collating
occupancy rates of each commercial district
in Dubai with its corresponding NLA, and
calculating the weighted average in accordance
to each districts’ contribution to the total NLA
of office supply available in Dubai.

new commercial districts: average rental rates

700 in newer areas. The largest decrease in rental

600 rates was registered in Bur Dubai, dropping by
500
55% between Q1 2009 and Q1 2010. Deira and
US$ per m2 pa

Downtown Dubai dropped by 52% and 47%

400
respectively. SZR held strongest amidst declining
300
rentals, dropping 32% between Q1 2009 and Q1
200
2010, primarily due to its close proximity to the
100
Dubai International Finance Centre (DIFC).
0
JLT DSO Tecom C Tecom A The already oversupplied office market, which
currently constitutes of 3.7 million m2 of NLA, is
Q1 2009 Q3 2009 Q1 2010
expected to increase by 46% by the end of 2010.
Average rental rate in new commercial 2009 and Q1 2010. Average rental rates in JLT The Dubai office sector is currently oversupplied
districts currently stands at US$ 265 per m2 per witnessed a YOY drop of 59% and fell a marginal by 1.3 million m² of NLA. This requires an
annum. The largest decrease in rental rates was 8% from Q3 2009 to Q1 2010. increase in the workforce by 125,800 white collar
registered in DSO, dropping 61% between Q1 workers to obtain market equilibrium. Provided
2009 and Q1 2010, and 42% between Q3 2009 Current average rental rate in more established demand remains unchanged and supply timelines
and Q1 2010. TECOM A held strongest amidst commercial districts stands at US$ 407 per are met, rental rates and occupancy levels in
declining rentals, dropping 28% between Q1 m2 per annum, 35% higher than rental rates Dubai are anticipated to decline further.

Colliers International 
 abu dhabi OFFICE FIRST Quarter 2010

Abu Dhabi CUMULATIVE OFFICE SUPPLy

3,000,000

2,500,000

2,000,000

m2 NLA
1,500,000

1,000,000

500,000

0
2007 2008 2009 2010 2011 2012 2013

Office space in Abu Dhabi is fragmented
from both a location and tenant profile
perspective. The majority of Abu Dhabi’s
marginal primary grade office space
is dispersed between buildings on the
Corniche, Salam Street, Hamdan and
Khalifa Street, and a number of buildings in
High occupancy rate, currently
the Tourist Club Area, including the East
standing at 99%, reflects the
level of unsatisfied demand and West Towers of the Abu Dhabi Mall.
for office accommodation Secondary and tertiary grade office space
is located within the adjoining districts
AVERAGE rentals q1 2010 of Khalidiyah and Tourist Club Areas on
either side of Al Markaziyah. This includes
1200
dedicated buildings with moderate quality
1000
finishing and limited dedicated parking
US$ per m2 pa
price sensitivity in Abu Dhabi. There is
also the threat of an oversupply of office
space looming and the market is adjusting
for this.
Colliers has qualified the provision of a total
of 1.2 million m2 NLA of office space to be
delivered between 2010 and 2013, leading
to cumulative office supply of 2.8 million
m2 in 2013. The largest forthcoming office
stock is scheduled to enter the market in
2010, amounting to approximately 434,000
m² NLA, a Y-O-Y increase of 27%. For the
purposes of the forthcoming supply study,
Colliers has only included developments

800
600 facilities, mixed-use buildings with office that have ‘broken ground’ and verified
400 components in high density districts of the all completion estimates with concerned
200
city, and residential villas converted into developers. Forthcoming office supply over
0
office space in the low density districts. the next three years will be concentrated
Khalifa Street

Hamdan street
Corniche

Airport Street

Tourist Club Area

Liwa Street

Electra Street

Despite numerous cancellations and delays,
additional planned office stock scheduled
to enter the market this year constitutes of
Q1 2009 Q1 2010
approximately 434,000m² NLA, leading to
a cumulative supply of approximately 2.0
Average asking rental rate has decreased
by 38% between Q1 2009 and Q1 2010
million m² NLA by the end of 2010.
Post the global economic downturn, the
PERFORMANCE indicators office sector in Abu Dhabi has registered
Average Rent: US$ 570 per m² pa significant decreases in rental rates,
Premium Rent: US$ 650 per m² pa sales prices and absorption rates, despite
Average Sales Price: US$ 4,490 per m² limited supply of vacant office space. The
average yield: 11% compounded average growth rate (CAGR)
Vacancy Rate: 1% of 40% achieved for rental rates between
2004 and 2008 was followed by a Y-O-
Average sales price, specifically office Y decrease of 11% in 2009, with current
space on Al Reem Island, has decreased average rental rates at US$ 505 per m2.
by 14% between Q1 2009 and Q1 2010 Average asking sales price is currently US$
Despite 186,000m2 NLA of office 4,490 per m2, representing a Y-O-Y decrease
supply currently scaled back due to either of 13%. This is despite the high occupancy
development cancellation or construction rate of 99% across the market. The primary
delays, the market may still anticipate
reason for this decline in prices can be
the beginning of an oversupplied office
market by late 2010 / early 2011 attributed to the large decreases in rental
rates and sales prices in Dubai and higher
within the existing city. According to the
Abu Dhabi Plan 2030, the Urban Planning
Council envisages the consolidation of office
space into two main areas, the financial
services oriented Al Suwwah Island, and
the Capital District, the complementary
counterpart to Al Suwwah, providing
medical centers, higher education facilities
and government buildings.
The currently undersupplied office market is
expected to reach market equilibrium during
2010, and an oversupply by end of 2010,
provided scheduled timelines are met. Due
to a lower demand rate than a forthcoming
supply rate, a continuous oversupplied
office market throughout end of 2010 to
2013 is anticipated. Consequently, the
average occupancy rate is likely to follow
the same downward trend reaching levels of
90% within the next three years. Due to the
expected outcome, the oversupplied market
is likely to translate into decreasing rental
rates, as supply outstrips demand.

 Colliers International

Abu DHABI cumulative RESIDENTiAL SUPPLY
250.000
Number of Units
200.000
150.000
100.000
50.000
0
2007 2008 2009
As of end of 2009, an estimated total of
185,000 residential units exist within the city
of Abu Dhabi. A supply survey, conducted by
Colliers International, shows that 48% of the
existing stock is high-end residential units
while the remaining comprises of middle-
income housing. Residential locations
with a greater proportion of high income
apartments include Corniche, Khalifa
Street, Electra Street, sections of Khalidiya
and Hamdan Street, and Salam Street
close to the Sheraton Corniche. Middle
income housing units are mainly located
on Deffance, Khalidiyah, Najda Street,
Airport Road, Muroor Street and Al Falah
Street. The middle-income category has
been undersupplied for many years and the
demand for affordable housing has increased
significantly since mortgage lending was
curtailed in the UAE. Currently there are
two freehold affordable housing projects;
Al Reef and Hydra Village, developed by
Manazel and Hydra Properties respectively.
Following the global economic downturn
and a decreasing demand for residential
units in Abu Dhabi, caused by the low
rental rates in Dubai, aggregated market
rent demonstrated a decline of 19% between
Q1 2009 and Q1 2010, while dropping 38%
from 2008. Residential sales prices in Abu
Dhabi have decreased by 42% from the peak
in Q4 2008 to a current rate of US$ 3,675
per m2. Current occupancy rates continue
to remain close to 100% whilst rental yields
have fallen from 9% in 2009 to 8.5% in Q1
2010. Asking prices have turned into an
inaccurate measurement tool of price levels
in the market, with buyers and researchers
reporting a possible discount of about 15%
of asking prices.
abu dhabi reSidential FIRST Quarter 2010
2010 2011 2012 2013
Colliers expect the supply of residential
units to increase to approximately 209,000
by 2013 with primary tier developers such
as Aldar, Sorouh, Tamouh and Reem
Investments controlling the majority of
As of end of 2010 Abu Dhabi
forthcoming supply. The largest stock
residential sector will consist of
of residential units is expected to be
approximately 198,000 units,
delivered in 2010, amounting to 46% of an increase by 7% over 2009
total forthcoming supply between 2010
and 2013. As a considerable amount of
additional supply enters the market in the PERFORMANCE indicators
medium term it is likely that there will be Average Rent: US$ 350 per m² pa
a shift in lease terms in favour of tenants as Premium Rent: US$ 560 per m² pa
landlords become increasingly competitive. Average Sales Price: US$ 3,675 per m²
Initial estimations regarding forthcoming Average Yield: 8.5%
Vacancy Rate: 3%
supply, in freehold developments, between
2009 and 2013 were expected to amount to
Despite an undersupplied residential
29,370 units, however the amount has been
sector in Abu Dhabi, average
scaled back by 52% due to development
rental rate has decreased by 9%
delays and projects put on hold due to the
between Q1 2009 and Q1 2010
financial downturn.
Average sales price for Al Reem
Based on Colliers’ projections, an estimated
Island decreased by 14% between
251,000 units will be required in Abu
Q1 2009 and Q1 2010
Dhabi by the end of 2013. As mentioned, a
cumulative supply of 209,000 units is to be
average rentals q1 2010
expected, indicating a possible undersupply
of 42,000 units. This will manifest itself 350
in a softening of rental values for existing 300
250
developments that have enjoyed sustained
US$ per m2 pa
200
value appreciations due to a market
150
undersupply rather than a superior product
100
offering. However, due to a significant
50
undersupplied market, an economic 0
recovery in Abu Dhabi will most probably 1BR 2 BR 3 BR
lead to an increase in rental rates and
sales prices, provided the number of newly Similar to the office sector, developments
established companies increase, resulting in offered for freehold ownership will start
to enter the market this year, assuming
a higher inflow of expatriates, and thus an
no further development delays
increasing population.
Colliers International 
 abu dhabi retail FIRST Quarter 2010

abu dhabi cumulative shopping mall supply

1,600,000

1,400,000

1,200,000

1,000,000

m2 GLA
800,000

600,000

400,000

200,000

0
2009 2010 2011 2012

Shopping being a major leisure activity in
the UAE, is also one of the most popular
attractions for tourists visiting the country.
Despite large discounts, retailers Historically, Abu Dhabi’s retail offering
are still recording a drop in sale
was limited to ‘high-street’ facing outlets
As of end of 2010 Abu Dhabi’s and a number of secondary facilities spread
retail sector will consist of across the city, with Gross Leasable Areas
approximately 739,500 m² of GLA, (GLA) ranging between 1,500m2 and
an increase by 85% over 2009 8,000m². Over the past seven years, Abu
Dhabi has seen a marked change to its retail
landscape, moving from a market with no
SHOPPING MALL SUPPlY GROWTH
major retail malls to one with considerable,
Year m² GLA and successful, primary grade retail space.
1985 - 1999 58,353 The current supply of shopping mall space
2000 8,129 in the city reached over 398,800 m² GLA,
2001 187,195 with a 95% occupancy rate across market,
2006 5,574
and full occupancy in new generation
2007 115,960
2009 23,600
shopping malls incorporating leisure
Total 398,811 amenities.
Whilst global market conditions at present
Line store retail rents for established are expected to impact negatively on
and successful shopping malls spending power and consumer confidence,
remain high at US$ 864 per m2 the extent of the retailer cash-flow crunch
pa, while units in newer shopping is expected to be less marked than in
malls are offered at US$ 580
neighbouring Dubai, primarily due to a
per m², a decrease of 32%
retail market driven by UAE National
spending power rather than tourism
AVERAGE rentals q1 2010 inflows and expatriate spending, making
it less susceptible to the current economic
1000
downturn and fickle consumer behaviour.
900
800 The rapid success enjoyed by retail malls
700
in Abu Dhabi is reflected in the relatively
US$ per m2 pa
Dhabi are around 53% lower than of those
paid by line outlets in Dubai.
The leasable area in the Emirate of Abu
Dhabi is set to increase from over 398,800
m² at the beginning of 2010 to 1.4 million
m² by 2012, representing a 253% increase
and a projected 0.9 m² of GLA per capita.
Danet Abu Dhabi Mall, 4,820 m² GLA,
scheduled for completion in 2011 and
Yas Mall, 296,000 m² GLA, scheduled for
completion in 2012 are the two largest
forthcoming malls. Current retail GLA
per capita in the city is just 0.5 m2, while
retail GLA per capita in the neighbouring
emirate, Dubai, exceeds 1m2. Based on
these figures, it is likely that latent retail
demand remains in Abu Dhabi.
Analysis conducted by Colliers International
suggests that retail spending per m2 will begin
to decline significantly in 2010, mainly due
to the 70% increase in retail space. Provided
scheduled construction targets are met and
keeping the total income of Abu Dhabi
residents as a constant throughout the
next three years, retailers can expect lower
revenue per m2 of retail space. However,
keeping in-line with standards set by
the International Council of Shopping
Centres (ICSC) and government population
estimates outlined in the Abu Dhabi 2030

600
500 high rental levels commanded by recently plan, Abu Dhabi’s retail market remains
400 completed malls. Annual rents for large undersupplied. Despite immediate concerns
300
anchor tenants average US$ 176 per m², of low footfall levels in smaller shopping
200
100 whilst average rates for line stores are centres and current economic conditions,
0 almost US$ 845 per m² per annum. Despite we remain bullish on the Abu Dhabi retail
Line Store Anchor Store
Established and Successful New Release
the high rental rates, line rentals in Abu market over the long term.

 Colliers International
 abu dhabi hospitality FIRST Quarter 2010

Abu dhabi cumulative HOTEL room SUPPLY

30,000

25,000
Number of Rooms

20,000

15,000

10,000

5,000

0
2009 2010 2011 2012 2013

The majority of hotels, until recently, are
located at the northern end of the island, as well
as the Western Corniche, Eastern Commercial
District (Salam Street), and Eastern Corniche
(Tourist Club Area). The Eastern Commercial
District and Eastern Corniche areas currently
have the highest concentration of hotels. This
is primarily due to their proximity to the main
commercial areas of the city. Abu Dhabi is
also served by approximately 3,300 serviced
apartments, in many cases forming part of a
slightly higher at 78%. RevPAR for 2009
reached US$ 215, accounting for a 1.7%
Y-O-Y decrease, while ARR increased by
4.7% during the same period. Despite the
decrease in occupancy rate, an increase in Abu Dhabi’s focus on business
average room rate ensured the capital city’s visitors might reduce the anticipated
RevPAR 74% higher than the regional long-term effect of the crisis
average. However in Q1 2010, hotel revenues
have more than halved with RevPAR
PERFORMANCE INDICATORs (Y/E 2009)
dropping to US$ 142 compared to US$ 300
durig the same period last year. Occupancy MARKET OCCUPANCY: 75%

4-star or 5-star hotel. rates in Q1 2010 also declined significantly 5-star OCCUPANCY: 78%

to 56% compared to 81% achieved during ARR: US$ 286

Demand for hotel accommodation in the
city is driven predominantly by corporate
tourism, accounting for 85% of overall
hospitality market demand. According to
the most recent figures released by ADTA,
approximately 1.5 million guests stayed
in hotels throughout the emirate in 2009,
a 2% rise from 2008. Given the present
market conditions, however, Middle East
hospitality is facing two major challenges.
Firstly, the global economic downturn has
the corresponding period in 2009. REVPAR: US$ 215
The major growth areas for hotel developments
Abu Dhabi’s top 3 source markets
in the immediate term are the Airport Road and
for international hotel guests
Bain el Jesrain (Between the Bridges). Over the
are the UK, USA and India
longer term, the focus of hotel development will
be on leisure facilities on the Al Yas, Saadiyat
and Lulu Islands, in line with the ADTA’s Hospitality Sector: occupancy trend
objective of increasing the overall leisure
market share to 40% by 2015. Based on our 2009 90%
80%
Hotel Survey, coupled with the qualification of 70%

led to a decline in bookings from Europe and hospitality components within forthcoming 60%
50%
other regions to the Middle East. Secondly, master-planned developments, we expect hotel 40%

being pegged to the appreciating dollar has supply to increase by 133% between 2009 and 30%
20%
become more expensive for travellers from 2013 from approximately 10,700 in 2009 to 10%

the UK, leading to a choice of alternative
holiday destinations.
Colliers’ survey of hotels in Abu Dhabi
suggests that occupancy levels increased
steadily from 2003 to 2005. Despite an
average occupancy rate of 80% between
2006 and 2009, average occupancy rate
across all hotel categories dropped to 75%
by the end of 2009. Average occupancy
levels experienced by 5-star hotels were
24,900 in 2013. The largest increase in hotel
room supply is expected between 2011 and
2012, amounting to 43% of forthcoming supply.
Given the fact that most of the city’s existing
hotels are functionally full at present, there is
potential for the market to absorb a fairly large
number of additional rooms while remaining
profitable. Nevertheless, a supply increase of
this scale is highly likely to have a considerable
dampening effect on both occupancy rates and
ARRs in the medium term.
0
2000 01 02 03 04 05 06 07 08 2009
Abu Dhabi Tourism Authority
(ADTA) indicates, that of
the 13,000 hotel rooms they
plan to license by 2012,
approximately 58% will be in
the 5-star category, highlighting
considerable oversupply risks in
this segment over the longer term

Colliers International 
 Dubai
A decreasing demand for office
space, leading to a decline in
occupancy levels, have changed
the demand-supply dynamics
in favour of the tenant.
average rentals q1 2010
1,200,00
1,000,00
US$ per m2 pa
800,00
600,00
400,00
200,00
0
JLT
DSO
SZR
DIP
Asking Rent
Average asking rental rate has
decreased by 28% between
Q3 2009 and Q1 2010
PERFORMANCE indicators
AVERAGE RENT: US$ 415 per m2 pa
PREMIUM RENT: US$ 860 per m2 pa
SALES PRICE: US$ 4,870 per m2
AVERAGE YIELD: 8.5%
VACANCY RATE: 10%*
(established buildings) & 58% (newly completed buildings)
* This does not include recently completed office
buildings, which are currently recording an average
occupancy rate of 41%
Average sales prices
decreased by 27% between
Q1 2009 and Q1 2010
Despite project cancellations and
delays, office supply is expected
to double in the next two years.
10 Colliers International
OFFICE FIRST Quarter 2010
DUBAI CUMULATIVE OFFICE SUPPLY
7,000,000
6,000,000
5,000,000
4,000,000
m2 NLA
3,000,000
2,000,000
1,000,000
0
2008 2009 2010 2011 2012
The supply of office space in Dubai rose to suffered a decrease in Q3 2009. Its location
approximately 3.6 million m2 by the end of and overall quality of the developments
2009, an increase of 20% over the previous year. together with the supporting residential and
Demand remained weak and showed no signs retail amenities are all factors contributing to
of recovery, as companies continue to downsize the attractiveness and sustainability of the new
and implement cost cutting measures. Overall CBD.
office occupacy rates in Dubai average 71%.
Occupancy rates in old Dubai (Deira, Bur Dubai Dubai office sales prices have continued to
and Sheilh Zayed Road) average 90% while decline, decreasing by 27% over the last 12
occupancy rate in new office district is 42%. months. No price increases were recorded in
any of the office projects in Dubai during this
Because of the oversupply, owners of newly period. Before the global financial crisis hit
completed buildings must attract tenants and Dubai demand for both office and residential
are doing so by offering rent free fit-out periods, properties had been driven mainly by speculative
flexible rental structures and favourable lease transactions. This increased prices with little,
terms. This greater availability of space in new if any underlying appreciation in value. When
buildings coupled with low rental rates appears
DTJA
DOZ
Burj Dubai
Al Barsha
Tecom C
Tecom A
DIFC
Business Bay
the global credit crisis and economic downturn
to be driving a trend whereby tenants are
hit Dubai markets in Q3 2008, speculative
relocating from established buildings to newly
demand dried up. This resulted in a sharp and
Achieved Rent completed buildings. Whilst there is therefore a
severe correction of market prices.
movement of tenants, it is between established
buildings and newly completed buildings, and Since then, corporate downsizing and business
nothing that will ultimately improve average closures, coupled with new buildings being
occupancy levels in the city. released onto the market have further reduced
demand for and increased supply of office
Dubai remains the principal centre of
space. These have driven office prices and
business in the region and houses the regional
headquarters of most of the multinational rentals down even further and are expected to
corporations operating in the Middle East and continue into the immediate future.
North Africa. For companies that are planning Despite the various announcements about
to expand into the region, Dubai remains an project cancellations and delays, the supply
attractive choice for the establishment of of office space currently under construction
a regional office, supported by its advanced in Dubai is expected to increase by more than
infrastructure and, particularly now, its greater double by 2012. With no anticipated increase
affordability. in demand, this huge increase in supply will
Dubai’s new central business district, comprising further exacerbate the existing oversupplied
the Sheikh Zayed Road, Dubai International position in the market. It is accordingly
Financial Centre (DIFC) and Downtown Dubai expected that both rental rates and selling prices
precincts, is currently achieving the highest will continue to decline for the foreseeable
occupancy levels in the city. Following the future. Recovery of the economy should lead
inauguration of Burj Khalifa, occupancy levels to corporate expansion and stimulate demand
in Downtown Dubai have increased, having for office space.

DUBAI CUMULATIVE residential SUPPLY
450,000
400,000
350,000
Number of Units
300,000
250,000
200,000
150,000
100,000
50,000
0
2008 2009 2010
The total supply of residential space in Dubai
exceeded 330,000 units at the end of 2009
and despite project cancelations and delays,
is expected to increase by more than 12% to
371,000 units by the end of 2010, Occupancy
levels currently stand at 80% which means the
market is oversupplied by around 65,000 units
with a further 37,000 due to enter the market by
the end of this year.
Prior to the downturn at the end of 2008, the
residential property market, just like the office
market, had to the largest extent been driven
by speculator demand. Other factors that
underpinned demand were the buoyant economy
and rapidly growing population. The credit
crisis and downturn in the economy however
eliminated speculative demand, whilst at the
same time forcing companies to downsize their
operations. This led to large scale redundancies
and thousands of expatriate workers returning to
their countries of origin. Demand for residential
property slumped and led to the precipitous
declines in rental rates as well as selling prices.
The impact of this is still felt in the current
market where rental rates and selling prices have
continued to decline.
Rental rates declined by 25% in the period
between Q2 2009 and Q1 2010, but over the past
two quarters certain select developments have
indicated that rentals have started to stabilise
and in certain instances have staged a marginal
recovery. A full recovery of the residential rental
market will however depend upon an increase in
population, which can only occur on the back
of a recovered economy creating employment
opportunities to draw expatriate workers back
into the country.
Residential property prices in Dubai dropped
by almost 50% during the first half of 2009,
reflecting the erosion of demand through the non-
Dubai reSidential FIRST Quarter 2010
2011 2012 2013
availability of mortgage finance and the economic
downturn. It was not, however, a gradual or even
decline. Prices dropped very sharply during Q1
2009 but the rate of decline eased during Q2
2009. In Q3 2009 prices appeared to bottom
out and the Colliers House Price Index (HPI)
indicated 7% growth over average prices for Q2 At the end of the third quarter of 2009,
2009. This trend continued during Q4 2009 as residential sales prices started to increase.
the HPI registered further growth of almost 1%
over Q3.
PERFORMANCE indicators
What became clear from the HPI results for Q3
Average Rent: US$ 226 per m² pa
and Q4 2009 was that prospective purchasers
Premium Rent: US$ 284 per m² pa
were being very selective in the properties they
Average Sales Price: US$ 2,909 per m²
bought. The properties that enjoyed favour with
Average Yield: 7.8%
the market were properties in large community VACANCY Rate: 20%
developments where the developers are known
entities with proven track records. These
developments would also generally offer additional The oversupply in the market has
value in the form of amenities such as sport and caused rental rates to decline by 25%
leisure facilities, convenience retail, proximity to between Q2 2009 and Q1 2010
schools, landscaped gardens and public spaces.
The rate of decline in rental rates
Significantly, because these developments has slowed down in Q1 2010.
enjoyed greater demand, financial institutions
were also more inclined to provide funding for
properties in these developments. The prospect Average apartment rental rate Q1 2010
of purchasers being able to get loan finance in
400
those developments further stimulated demand. 350
US$ per m2 pa
300
At the other end of the spectrum are developments 250
that don’t offer the additional value or the 200
comfort of a branded, known developer. Such 150
100
developments generally enjoy less favour in the 50
market. The result is that, because of reduced 0
Studio 1BR 2BR 3BR
demand, banks are very reluctant to lend on
such developments which further stifles demand. Q2 2008 Q4 2009 Q1 2010
Inevitably, prices in such developments have
continued to decline. Construction of more than 80,000
residential units scheduled for
It must therefore be concluded that whilst certain completion between 2009 and
areas of the market have shown growth over the 2012, have been put on hold.
past six to nine month period, there remains
downward potential in respect of others.
Colliers International 11
 Dubai
Shopping mall space is
set to increase by 9%
between 2009 and 2010,
increasing the total supply
to 2.4 million m2 GLA
NEW SHOPPING MALL SUPPLY*
Project Year m² GLA
Bay Avenue 2010 18,000
Sunset Mall 2010 10,683
Mirdiff City Center 2010 180,000
* This table does not constitute an exhaustive list of forthcoming supply
The majority of shopping
malls still continue to maintain
high occupancy levels
average rentals q1 2010
1,400
1,200
US$ per m2 pa
1,000
800
600
400
200
0
Line Store
Rental rates in shopping
malls have remained
relatively stable between
Q3 2009 and Q1 2010
12 Colliers International
retail FIRST Quarter 2010
DUBAI CUMULATIVE retail SUPPLY
3,500,000
3,000,000
2,500,000
m2 GLA
2,000,000
1,500,000
1,000,000
500,000
0
2008 2009
The effects of the global economic downturn
that impacted the retail industry in Dubai
were primarily the following:
• A reduction in the number of tourist arrivals
during the first half of 2009, although this
was reversed during the second half of the
year, when tourist numbers increased again,
According to tourism authorities the total
number of tourists during 2009, recorded at
6.9 million, equalled that of tourist arrivals in
2008.
• Consumer insecurity flowing from
widespread redundancies and job losses as
well as the recession in general. Anecdotal
evidence suggests that spending patterns
became more reserved and that a greater
percentage of income was being saved in
case the breadwinner lost his/her job.
• Decline in population numbers as
unemployed expatriates returned to their
country of origin. Although no official
statistics are available in this regard,
reports of major job losses, coupled with
increased residential and office vacancies,
and reduced foot traffic in shopping malls
support this contention.
Throughout the first half of 2009, retailers
reported that there had been a decline
in transaction volumes and basket sizes,
downgrading by consumers from more
expensive brands to less expensive brands
Anchor Store
of the same item, a sharp decline in non-
discretionary spend by consumers particularly
on luxury goods and, also a drop in tourist
sales because of fewer tourists with reduced
budgets. Trading densities (turnover per
square metre of shop space) declined and
turnovers suffered.
The second half of 2009 however was
characterised by improved consumer
2010 2011 2012 2013
confidence evidenced by increased residential
property transaction volumes, and a return of
tourist arrivals to pre-downturn levels.
Whilst rentals payable under new leases
negotiated during 2009 showed a decline of
around 18%, average rentals in formal shopping
mall space have remained relatively stable.
Current line shop rentals in shopping malls
are approximately US$ 1,310 per m² with large
space occupiers (anchor tenants and department
stores) at approximately US$ 210 per m².
Average occupancy levels in malls remained
high at 99% during 2009, and mall owners
advise that there continues to be a healthy
interest in available mall space. Developers
of new shopping malls have however noted a
slow-down in the take-up (absorption) rate of
space in malls currently under construction,
although this might be attributed as much to
shortcomings in the developments themselves
as to prevailing economic conditions.
The total supply of shopping mall retail space
in Dubai stood at 2.2 million m² at the end of
2009. Forthcoming supply due to enter the
market by the end of 2010 should increase
the total to 2.4 million m², an increase of 9%.
A further 400,000 m² is schedule for release
between 2011 and 2013.
Using the International Council of Shopping
Centres (ICSC) supply yardstick of 1.1 m²
of mall space per member of population and
Dubai Government population projections
of around 1.7 million people at the end of
2009, the Dubai population could absorb
approximately 1.9 million m² of retail space.
However, taking into account Dubai’s
transient tourist population of around 7.0
million people per year, many of whom come
to Dubai with the express purpose of shopping,
it will be fair to conclude that Dubai is by no
means oversupplied in terms of retail space.

DUBAI CUMULATIVE hotel room supplY
40,000
35,000
Number of Rooms
30,000
25,000
20,000
15,000
10,000
5,000
0
2008 2009
Despite the global downturn tourism inflows
for 2009 remained unchanged compared to
2008. According to official figures, Dubai
received 6.9 million tourists in 2009, which
is the same number of tourists that was
recorded in 2008. Whilst tourist inflows from
Europe and other Western countries showed
a decline, Dubai was able to attract tourists
from new markets, mainly from other GCC
countries and the MENA (Middle East and
North Africa) region.
Nonetheless, industry performance indicators,
such as occupancy rates and RevPAR
(Revenue per Available Room), have shown a
decline. This could be attributed mainly to the
additional new room supply which entered the
market. To counteract the increase in supply,
hotels lowered room rates in an attempt to
increase occupancy rates. This however had a
negative impact on RevPAR.
In the 4 and 5-star hotel categories, occupancy
levels dropped to 69% compared to 77% in
2008, simply because of the availability of a
greater number of rooms for the same number
of tourists. In order to boost occupancy rates,
hotels started to offer reduced room rates.
The average room rates (ARR) dropped by
24% to US$235, compared to US$309 in
2008. The decline in occupancy rates and
the ARR compressed the RevPAR, which
is the main indicator of hotel performance.
The RevPAR declined by 31% to US$162,
compared to US$237 in 2008. However in
Q1 2010 indicators have shown a considerable
improvement in hotel performance. Occupancy
rate increased to 79% and average room rate
reached US$ 252, which consequently led to
an increase in RevPAR to US$ 199.
The supply of hotel rooms increased by 3% in
2009 and is expected to increase by a further
12% by the end of 2010. This will increase
Dubai hospitality FIRST Quarter 2010
2010 2011
the cumulative stock of 4 and 5-star hotel
rooms in Dubai to 31,586. The number of
beach hotels is also set to increase with the
opening of three new hotels in Jumeirah
Beach Residence.
Revenue per available room
In terms of tourist attractions, the opening of
(RevPAR) has declined as
Burj Khalifa, the tallest tower in the world,
a result of an 8% drop in
with its supporting retail and leisure amenities
occupancy as well as room rates
is expected to be a major drawcard for tourists.
Another great attraction is the Meydan
Racecourse, a state of the art horse racecourse,
market PERFORMANCE (Y/E 2009)
which recently opened. Meydan will be the
venue for the Dubai World Cup, the most Market Occupancy: 69%
expensive horse race in the world. Dubai ARR: US$ 235
furthermore remains a major destination for RevPAR: US$ 164
shoppers from around the world. The MICE
and trade tourism market is also expected to
remain buoyant as Dubai is home to many 31% decrease in RevPAR in 2009,
major exhibitions and conferences in the attributable to a 23% decline in
region. ARR and a 69% drop
in occupancy level
Apart from the tourist attractions, prices of
goods in Dubai have not increased as is evident Despite the global recession,
from the decline in the consumer price index. tourist arrivals in 2009 has
Coupled with the decline in the cost of hotel remained the same as in
accommodation Dubai is set to be positioned 2008, namely 6.9 million.
as a more affordable tourism destination.
Greater affordability might increase the
existing beach hotel vs. city hotel
average length of stay of tourists and increase
the average expenditure per tourists which
30,000
will benefit retail sector and the economy as
Number of Rooms
25,000
whole. 20,000
15,000
However, the sector still faces many challenges. 10,000
The current global economic conditions 5,000
are expected to affect the global tourism 0
2008 2009 2010 2011 2012
market for years to come as individuals are Beach Hotel City Hotel
cut spending and increase savings. Another
challenge facing the market is the expected
future supply. Unless this supply is met with The number of hotel rooms
increasing number of tourists and, therefore, is expected to increase by
increased occupancy rates, the hotel market 12% by end of 2010.
in the city will become oversupplied.
Colliers International 13
 doha OFFICE FIRST Quarter 2010

doha CUMULATIVE OFFICE SUPPLY

1,800,000

1,600,000

1,400,000

1,200,000

m2 NLA
1,000,000

800,000

600,000

400,000

200,000

0
2008 2009 2010 2011 2012

The majority of Doha’s grade A office space
is located in West Bay and along Grand
Existing supply amounts to 1.06
Hamad Avenue. The remaining office stock
million m2 of NLA, of which
in Doha is generally of sub-standard quality
70% is located in West Bay
and in need of upgrading. Colliers estimates
the current total supply of A and B grade
average rentals q1 2010 office space in Doha to be approximately 1.06
800 million m2 NLA, which includes secondary
700
600 space in locations such as the A, B, C and D
US$ per m2 pa
Over the same period office space sales prices
dropped by around 15% YOY to approximately
US$ 4,670 per m². Although sales prices
and rental rates have dropped, a compressed
interest yield indicates that the office market
is maturing. Furthermore, a decrease in sales
prices will entice potential investors to acquire
office space at a reduced rate. Currently
the Doha office market is witnessing a 90%

500
Ring Roads and Grand Hamad Avenue. occupancy rate, which indicates that the
400
300 market is not oversupplied and that a healthy
200 Demand for office space in the West Bay appetite for office space exist as local business
100
0
area has to a large extent been driven by the continue to grow and international businesses
relocation of many government departments
A&B
Ring Roads

C Ring Road

D Ring Road

Grand
Hamad Ave

West Bay

expand their operations in Qatar.

to the area. This created a need amongst large
2006 2007 2008 2009 Q1 2010
corporations who deal with the government
on a frequent basis to establish themselves in
West Bay as well. With so many government
Average annual rental rate
departments and large corporations basing
decreased by 20% between
themselves in West Bay, major banks and
Q1 2009 and Q1 2010
financial institutions also opened offices and
branches in West Bay to service the banking
PERFORMANCE indicators requirements of major clients.
AVERAGE RENT: US$ 500 per m2 pa The strong demand for office space in West
PREMIUM RENT: US$ 595 per m2 pa
Bay drove rentals to amongst the highest in
AVERAGE SALES PRICE: US$ 4,670 per m2
AVERAGE YIELD: 11% the city, at around US$ 595 per m² per annum.
VACANCY RATE: 10% The global economic downturn in 2009
however caused average rental rates to decline
by approximately 20% to US$ 495 per m². In
Average sales price has registered the rest of the city, Grand Hamad Avenue and
a YOY decrease by 15% the C Ring Road areas saw rental rates drop by
Cumulative supply to reach approximately 25%, whereas the A and B Ring
1.65 million m2 of NLA by Road areas, because rental rates were already
2012, an increase by 55% lower than those in other parts of the city, saw
over existing supply a more modest decline of only 7%.
Projects currently underway and scheduled for
completion during 2010 should see additional
office space of approximately 335,600 m² being
released into the market. This represents a
32% increase over existing supply, taking
total office space supply to approximately 1.4
million m² by the end of 2010. This number is
forecast to increase to around 1.65 million m²
by 2012, representing a total increase of 55%
over the preceding three year period.
Demand for office space is currently 1.68
million m2. Despite the increase in supply by
end of 2010, the office sector will continue
being undersupplied by approximately
284,000 m2 of NLA. Whilst the office market
is currently still undersupplied, the additional
supply is likely to lead to a excess of supply
over demand, resulting in a more competitive
market position with rental rates softening
and landlords having to offer a variety of
incentives to attract tenants.

14 Colliers International
 doha reSidential FIRST Quarter 2010

doha CUMULATIVE residential SUPPLY

120,000

115,000

110,000
Number of Units

105,000

100,000

95,000

90,000

85,000
2008 2009 2010 2011 2012

Historically , the city centre was the most sought
after location for housing in Doha. However, as
the city grew and spread away from the centre,
areas around the C, D and E Ring Roads grew
in popularity. The West Bay CBD, in addition
to its commercial demand, has also become a
sought after high-end residential area. These
changes in residential trends came about largely
because of the suburban quality of the outlying
areas as well as the reduced traffic congestion on
improved road systems.
Doha’s residential sector has been plagued over
the past three years by an acute housing shortage
due to increasing demand not being met with
adequate increases in supply. Although the
position has eased somewhat most of the new
supply is still under construction.
The current population of Doha stands at around
841,000 people and with an average household
Despite the global economic downturn, rental
rates in Doha have continued an upward trend
reaching a level of US$ 415 per m2 per annum,
which translates into a 68% increase over Q1
2009. Three bedroom apartments are currently
achieving the highest rental rate at US$ 515 per
m2 per annum, while rental rates for one and two
bedroom apartments are below market average.
Premium rental rates are attained in the Pearl at
US$ 590 per m2 per annum, 42% above market
average. Unlike rental rates, the economic
downturn has however had an effect on sales
prices, which have declined by 9% over Q1
2009, and is currently US$ 4,130 per m2. Viva
Baharia is selling at a premium of US$ 6,320 per
m2. The large increase in average rental rate and
the decrease in average sales price led to average
investment yield to change from 6% in Q1 2009
US$ per m2
Existing residential supply comprises
approximately of 102,500
apartment and villa units
PERFORMANCE indicators
Average Rent: US$ 415 per m² pa
Premium Rent: US$ 590 per m² pa
Average Sales Price: US$ 4,130 per m²
Average Yield: 10%
VACANCY Rate: 10%
Whilst sales prices decreased by
9% YOY, rental rates increased
by 68% over the same period,
leading to an increase in cap rates
average sales price q1 2010
7,000
6,000
5,000

4,000
size of 5.9 people, this translates into an overall to 10% in Q1 2010. 3,000

demand of 142,600 housing units. With existing Provided scheduled completion dates are met,
2,000
1,000
supply at around 102,600 units, the market is Doha residential supply is expected to increase 0
Lusail Porto Viva West
significantly undersupplied by around 40,000
by 6% in 2010, leading to a total supply of Arabia Baharia Bay

residential units.
Demand for additional housing is not just
confined to the immediate Doha area but
includes the population of the Al Rayyan area,
which makes up greater Doha.
The type of housing needed to meet this additional
around 108,200 residential units. The supply Provided completion dates are
is forecasted to continue to increase and reach met, supply is expected to grow by
a total of 117,600 units in 2012, an increase of 15% between 2009 and 2012
15% over the preceding three years. Average annual apartment rent Q1 2010
The projected growth in supply of residential 900
800
accommodation between now and 2012 will not
US$ per m2 pa

demand will vary depending on nationality, 700

satisfy even current demand. This position is likely 600
income, and household size. For Qataris, villas 500
will form the bulk of required accommodation, to deteriorate further as the population grows on 400

whereas for expatriates the provision will mainly the back of projected economic growth in Qatar. 300
200
consist of family housing and apartments ranging The Doha residential market may therefore be 100

from low to high-end, depending on their skill expected to remain in a strongly undersupplied 0
Old Al Saad West West Lagoon
base and income bracket. position for the foreseeable future. Airport Bay Bay Plaza

1 BR 2 BR 3 BR

Colliers International 15
 doha retail FIRST Quarter 2010

doha CUMULATIVE shopping mall SUPPLY

1,000,000

900,000

800,000

700,000

600,000

m2 GLA
500,000

400,000

300,000

200,000

100,000

0
2009 2010 2011 2012

Doha currently has a total supply of formal 2010 (provided scheduled completion dates
Doha currently has approximately retail space of around 444,500 m² GLA are met), which represents a 39% increase
444,500 m² of GLA comprising (Gross Leasable Area). Historically the in supply. By 2012 total supply is expected
shopping centres spread across market has been undersupplied and despite to exceed 826,000 m² GLA, which is a 94%
extensions by a number of existing shopping increase on existing supply.
the capital city, which is
centres in recent times, demand continues to
expected to double by 2012 As new supply is delivered, market conditions
exceed supply. This is supported by the high
are likely to become more competitive and
Rental rates in shopping malls absorption rates experienced by developments
absorption rates along with rental rates
currently averages US$ 677 such as the Villagio Mall and the Pearl.
are expected to drop. With most of the
per m2 pa, with premium rent The global economic downturn in 2009 had forthcoming supply aimed at the upper end of
at US$ 785 per m2 pa being a very limited effect on the Qatar economy the market the impact of the additional supply
achieved by Doha City Centre and the country has continued to experience will be greater in this sector.
strong economic growth. Per capita GDP,
As retail markets grow so does the demand for
AVERAGE REnTAls Q1 2010 which for some years has been the highest
new brands in the new developments. Better
in the world, grew from US$ 80,000 to US$
900 marketing and management strategies will be
800 86,000 between Q1 2009 and Q1 2010. This
critical if the older centres are to continue
700
translates into high discretionary disposable
to offer competition to new developments.
US$ per m2 pa

600
500 incomes and a strong purchasing power for
Diversification is the most obvious way in
400 Qatari residents.
300 which retailers are seeking to minimize the
200
Retail rental rates in Doha are currently risk of potential over-supply. Management
100
0 amongst the highest in the Gulf region. teams from Grade B developments are turning
Average rental rates for line shops currently towards markets traditionally under-catered
City Center Doha

Hyatt Plaza

Royal Plaza

The Mall Shopping

Complex

Landmark
Shopping Mall

VIllagio

Al Asmakh
Center Point

stand at around US$ 677/m² per annum, which for and attempting to create a new breed of
represents a 17% increase over Q1 2009. mall aimed at Qatari nationals at the lower
The highest rental rates are currently being and medium end of the market. The trend
achieved by the Doha City Centre, which is a towards diversification can also be seen in
existing supply snapshot
reflection of the popularity and therefore the the new development of shopping centres
Shopping Mall m² GLA Number
of Units commercial strength of the centre. in regions outside Doha. One of these new
Doha City Centre 303,000 380 projects, the Al Khor Mall by EMKE Group,
There are however a number of large retail
Villagio 140,000 200 will cater to the Al Khor municipality and
Porto Arabia 90,000 350 developments currently under construction
other northern municipalities.
Landmark Shopping Mall 58,000 120 in Doha, such as the Barwa Commercial
Avenue, that have the potential of bringing
Barwa Commercial about a change in the current supply/demand
Avenue is expected to fundamentals in the market. Colliers research
add 100,000 m2 GLA to indicates that around 175,000 m² GLA is
expected to be delivered to the market in
current supply by 2012

16 Colliers International
 doha hospitality FIRST Quarter 2010

doha CUMULATIVE hotel room supplY

16,000

14,000
Number of Rooms

12,000

10,000

8,000

6,000

4,000

2,000

0
2009 2010 2011 2012 2013 2014

Demand for hotel rooms in Doha is driven by
the key factors of economic and population
growth, and is underpinned by a range of
government-implemented initiatives aimed at
attracting investment and creating demand.
Building on an estimated influx of 962,000
tourists in 2006, the tourism authority in
Qatar has defined objectives which include
the development of the Meetings, Incentives,
Conferences and Exhibitions (MICE) market
in particular, given that 95% of current visits
to Qatar are believed to be at least partially
business linked.
The Doha hospitality sector is changing
significantly. Doha currently has approximately
9,000 hotel rooms in the 5-star and 4-star
categories. With almost 6,500 hotel rooms,
5-star hotels have a clear majority of existing
hotel rooms in the two mentioned categories.
Except for 2008, average room rate in Doha
has witnessed a continuous increase post 2004,
The number of hotel rooms in Doha is
expected to increase to almost 13,000
rooms by 2012, representing an increase of Over 2,100 hotel rooms to be
approximately 3,930 rooms, or an increase added to the market by end of
of 43%. Additional supply is scheduled for 2010, provided no delays occur
completion post 2012, amounting to 1,880
hotel rooms and 64% increase over the next PERFORMANCE INDICATORS (Y/E 2009)
five years. Total forthcoming supply by 2014 is
Market Occupancy: 50%
expected to reach approximately 5,600 rooms
ARR: US$ 327
of which 74% is within the 5-star category,
RevPAR: US$ 164
leading to a cumulative supply of over 14,800
hotel rooms by 2014. Note that forthcoming
supply included in the hospitality sector only
denotes 4 and 5-star hotels. Despite 20% increase in ARR,
revPAR declined by 16% due to
Qatar Tourism Authority had initially 30% decrease in occupancy rate
forecasted 1.5 million visitors in 2010. Due
to decrease in number of tourists in 2009 by
160,000 visitors, the forecasted goal is unlikely trend hotel performance
to be achieved. Planned forthcoming hotel
350 90%
supply is thus based on an unsustainable goal, 300 80%
which will most likely lead to an oversupply 70%
250
in the hospitality sector in the short term. 60%
US$

200 50%
amounting to a CAGR of 18% between 2004 The risk for oversupply is significantly higher 40%
150
and 2009. ARR increased by 20% between within the 5-star category due to the large 100
30%
2008 and 2009 and is currently at US$ 327. share of existing supply and the share of 50
20%
10%
Although ARR witnessed an intensifying forthcoming supply, which amounts to 74% of 0 0%
2004 2005 2006 2007 2008 2009
trend, occupancy rate has registered a more forthcoming supply.
volatile trend. Doha average occupancy rate ARR RevPAR Occupancy Rate

registered its highest decrease in 2009 over

2008, amounting to 30% and leading to
Hotel room supply expected
current rate at 50%. A clear indication to
to increase by 64%,
the high decrease in occupancy rate, which
spread over five years
has put the occupancy at the lowest rate in 6
years, is the decrease in inflow of tourists from
approximately 960,000 in 2008 to 800,000
tourists in 2009 and the high increase in
ARR. Despite the increase in ARR, the
large decrease in occupancy rate led to 16%
decrease in RevPAR, which currently stands
at US$ 164.

Colliers International 17
 riyadh office FIRST Quarter 2010

riyadh cumulative office supply

3,000,000

2,500,000

2,000,000

m2 GLA
1,500,000

1,000,000

500,000

0
2008 2009 2010 2011 2012 2013

Riyadh’s office market experienced key projects are expected to compete with
considerable growth with 369,000 m2 of existing supply located in the city’s primary
Office space grew by over
additional office space delivered in the city’s CBD.
369,000 m2 between Q1
2009 and Q1 2010. core business artery during 2009 and into
Many landlords, supported by the recent
Q1 2010; however, the majority of space
Demand for office space largely has been within grade B whilst demand is government leasing pattern are seeking
stems from the government to lease only to large companies looking
primarily for grade A space.
sector during the past year for multiple floors. With the shortage
The city’s office stock is expected Demand in the main business district has of available grade A space smaller scale
to grow by over 436,000 m2 of net stemmed from the Government Sector tenants are facing difficulties sourcing
leasable space by the end of 2010 during the past year. Some non-CBD areas appropriate accommodation within grade
and the East Ring Road have witnessed A stock but are reticent about moving to
the construction of Government owned grade B offices.
PERFORMANCE indicators
purpose built offices and public agencies. In
Average Net Rent: US$ 310 per m² pa
addition, semi government agencies have On the back of increasing demand and
Premium Net Rent: US$ 413 per m² pa
also been the largest tenant, leasing deals limited supply of Grade A offices, rental
Average Sales Price: US$ 2,716 per m²
within the city with large lettings to among rates remained stable at US$ 413 per m2
Average yield: 11.5%
others, the Human Rights Commission and per annum excluding Kingdom Tower and
Vacancy Rate: 24%
The National Water Company. Al Faisaliah Centre. Meanwhile, rents of
grade B office space softened by an average
AVERAGE REnTAls Q1 2010 New low-rise office buildings are being
of 15% in Q1 of 2010 compared to the
constructed in the commercial districts of
350 previous year. Vacancy levels increased by
300 Maather and Malaz to south of the CBD.
7% reaching 24% while net stock absorption
250 However, the momentum of the city’s
US$ per m2 pa

200
development continues to be to the north, fell by 2% compared to previous year.
150
100 where a number of large new business parks Colliers foresees that this is only a short term
50 have started construction. issue as the volume of new space entering the
0
market will force landlords to change their
King Fahad
Road

Al Maather
Street

Al Dabab
Street

Olaya
Street

Demand and supply dynamics in Riyadh’s

Existing Supply m2 NLA
Al Anoud Tower 10,000
Adex Business Centre 15,000
Radix Tower 20,880
Tatweer Tower 25,000
Al Faisaliah Centre 35,400
Kingdom Centre 60,000
*This table does not constitute an exhaustive list of current supply
commercial market are set to change as an
increasing number of developments in the
pipeline adopt the office district concept
currently observed in Western countries
and also Bahrain and Dubai. Notable
examples are King Abdullah Financial
District with 750,000 m2 GLA and the King
Saudi University Endowment Project with
290,900 m2 GLA. Once delivered, these
strategy in the light of new competition.
The city’s office stock is expected to grow
by over 424,000 m2 of net leasable space
by the end of 2010. We anticipate that
the office leasing landscape will change
during the forthcoming 12 months from a
landlord’s market to a tenant’s market with
an increase in incentives and a softening of
rental rates.

18 Colliers International

RIYADH forthcoming residential supply
2000
1800
1600
Number of Units
1400
1200
1000
800
600
400
200
0
Jana 4 Al Qasr
Riyadh’s residential market continues to
be marked by an undersupply especially
in affordable houses. The Escrow Law
has polarised effects on the residential
market: although it has induced end-
buyer’s confidence, it also inhibited delivery
of supply with most master-planned
developments put on hold or delayed.
Mid-scale and individual developers are
currently the most active in terms of
construction activity. These developers
focus on mid-scale to high-scale residential
developments that are less than 100 units.
Low-end villas are at an average sales price
of over US$ 490 per m2 and have an average
built up area of 300 m2. Riyadh’s median
monthly household income stood at US$
1,602 in 2009 which underscores that
affordability remains to be a major challenge.
With the cost of land remaining high as
a component of the villa development
process, plot and end unit sizes have been
reduced in an attempt to bring down the cost
of completed units. Conversely apartment
sizes delivered in Q1 2010 have been larger
as they seek to bridge the gap by offering an
affordable and desirable alternative to villa
accommodation.
With market correction attributed to,
among others, the global economic slump,
rents and sales prices of residential units
dropped at an average of 8% and 22%
respectively in 2009. However, increasing
demand on the back of limited supply looks
to support market recovery. The freehold
RIYADH reSidential FIRST Quarter 2010
Manazel Qurtoba Burj Rafal
market witnessed a 12% YOY price increase
in Q1 2010 reaching an average sales price Mid-scale and individual developers
of US$ 755 per m2. The rental market are currently the most active in
observed a YOY increase of 6% reaching an terms of construction activity
average rent of US$ 60 per m2 per annum.
Increasing construction activities in
areas such as Al Yasmin and Al Rabih
Previously, construction of residential was
concentrated in North Riyadh—the city’s
most developed area. However, increases PERFORMANCE indicators
in land prices within these locations have Average Rent: US$ 66 per m² pa
driven development further north to Al Premium Rent: US$ 72 per m² pa
Yasmin, Al Rabih, and Al Nafel Districts. Average Sales Price: US$ 730 per m²
We anticipate city peripheral and suburban Average Yield: 7.5%
schemes will continue to attract developers Riyadh residential market requires an estimated
and occupiers alike as they take advantage 30,000 units per annum to address demand
of lower land purchase entry costs.
average sales price q1 2010
There is an increasing number of residential
790
units currently in the pipeline that adopt 780
the semi-gated community and master 770
US$ per m2
760
planned development concepts Blncyah
750
and Dar Al Arkan’s Al Qasr Project being 740
the most visible. 730
720
The long overdue mortgage law is still under 710
700
consideration and its implementation is VIllas Apartments
anticipated the market by encouraging both Although new regulations are aimed to ease loan
developers and purchasers alike. measures and are expected to stimulate demand,
effects are yet to be tested in the market
average rentals q1 2010
80
70
60
US$ per m2 pa
50
40
30
20
10
0
Villas Apartments
Colliers International 19
 RIYADH retail FIRST Quarter 2010

riyadh cumulative shopping mall supply

3,000,000

2,500,000

2,000,000

m2 GLA
1,500,000

1,000,000

500,000

0
2008 2009 2010 2011 2012 2013

Following a sustained period of economic which were available and currently

stability over the past 5 years, Riyadh’s
retail market experienced considerable
The retail sector registered its
slowest growth GLA growth growth, with GLA supply growing by 40%
in 2009, amounting to 10% in 2006 while the number of international
over the previous year retailers increased on the back of high
levels of consumer spending. However,
Hard voids grew by 2.5%
growth of supply was minimal in the past
while soft voids declined by
1% over the previous year year compared to recent historical trends
with an additional 10% of floor space
delivered.
Existing Supply m² GLA
Khayma Mall 36,000 The city’s current leading malls are
Al Othaim Khurais Mall 15,000 Riyadh Gallery, Hayat Mall and Granada
Khurais Plaza 59,400
Mall all with an estimated average daily
Sahara Mall 69,500
footfall of 31,000. These malls have
differentiated themselves from other
Salaam Mall 70,000
existing supply by securing strong anchor
Hayat Mall 126,400
stores and by providing a greater variety
riyadh gallery 130,000
of entertainment activities that appeal to
*This table does not constitute an exhaustive list of current supply
different age ranges. Retail footfall of these
malls grew by 2% in Q1 2010 compared
Riyadh’s retail supply is expected to the previous year while market-wide
to increase by 19% reaching footfall declined by 1.9% highlighting their
over 2.3 million m2 of gross
differentiation within the market. Overall
lettable area by 2013
the increase in footfall can be attributed
Rentals have remained stable to the longer summer vacation which last
for grade B malls while rents of year also coincided with Ramadan.
grade A malls increased by 7%
Over the past year, Riyadh’s retail market
has proven resilient to the on-set of the
AVERAGE rentals q1 2010
global economic downturn; rentals have
700 remained stable while the number of retail
600
voids experiencing minimal decline.
US$ per m2 pa
trading, declined by 1%. Average retail
occupancy in Q1 2010 stood at 89%. Net
lettable stock absorption in Q1 2010 has
experienced a 2.3% decline compared to
the previous year as some major retailers
discontinued their agreements with newly
delivered and forthcoming malls.
Big Box tenants in Riyadh have an average
area size of 18,000 m2 and an average
lease rate of US$ 133 per m2 per annum.
Due to their positive effect on footfall
and the size they occupy, big box tenants
have benefitted from reduced service and
electricity charges, offered as incentives by
landlord. Line shops have an average unit
size of 120 m2 and were rented at an average
of US$ 640 per m2 per annum exclusive of
service and electricity charges.
As retail is one of the few leisure activities in
Saudi Arabia where all members of a family
can go, recent structures have exhibited a
tendency to develop the malls in Riyadh
as destination retail venues. Despite
improving entertainment provisions,
shopping malls in Riyadh are still not in
par with regional counterparts or even
some of the premier malls in Jeddah.
Riyadh’s retail supply is expected to
increase by 19% reaching over 2,300,000
m2 of GLA by 2013. Forthcoming retail
development will be located in peripheral

500
400 Hard voids-units that are empty but areas and around the Ring Roads Retail
300
200
available for occupation, grew by 2.5%, space will be opened up for new brands to
100 attributed partly to the entry of Panorama enter the Kingdom, but older malls require
0
Anchor Store Department Store Line Shop
Mall and other small scale retail supply repositioning and revamping in order to
in early 2010. However, while soft voids stay competitive.

20 Colliers International

riyadh cumulative HOTEL room SUPPLY
10,000
9,000
8,000
7,000
Number of Rooms
6,000
5,000
4,000
3,000
2,000
1,000
0
2008 2009 2010
Compared to the rest of Saudi Arabia,
hotel construction in Riyadh has been
slow with the city’s hotel supply growing at
a CAGR of 6.5% between 2005 and 2008
compared to Al Khobar and Dammam’s
13% YOY growth. Currently room supply
is over 8,300 which constitutes only
6.5% of the total hotels in Saudi Arabia.
However, despite hotel room undersupply
especially in the 5-star segment, Riyadh
carries 20% of the Kingdom’s premier
hotels. Much of the forthcoming supply
of premier hotels in the capital is within
mixed use developments reflecting the
cities current top offerings which are
similarly configured.
Initiatives from the Government and the
private sector such as the Global Economic
Forum and the Globe Summit seek to
reposition Riyadh and consolidate its role
as a major business and financial hub as
well as a major events tourist destination.
Riyadh’s 5-star and 4-star room supply
are concentrated in primary CBD’s and
adjoining roads with a concentration in
the Central Area constituting 57% of total
supply, 32% are located in northern areas
while the remaining are dispersed on other
major roads.
Corporate demand continues to drive the
city’s hospitality sector. Occupancy levels
fell by 4.5% in 2009 compared to previous
year due to cancellation or postponement
of major events planned in the previous
year and decline of corporate visitors due
to global economic downturn reaching
an average occupancy rate of 79% in
the hotel segment. Serviced apartments
continue as reasonable substitutes for long-
riyadh hospitality FIRST Quarter 2010
2011 2012 2013
term visitors; however, occupancy levels
also declined by 2% in 2009 compared to
previous year. Rise in corporate activities and
Government events resulted to a
In a clear sign of corporate cost cutting
5% increase in occupancy levels
a number of international and regional in Q1 2010 compared to the
companies have limited or shortened same quarter in the previous year
visits, resulting in a decline of 1.5 days in reaching an average occupancy rate
length of stay from an average of 2 days in of 79% in the hotel segment.
2009 compared to the previous year’s 3.5 Average occupancy rate for
days. Meanwhile VFR (visiting family and serviced apartments registered
relatives) visitors have an average length a YOY decrease by 2%.
of stay at 5.5 days-the same as the previous average occupancy rate
year.
100%
90%
The average room rate remained stable at
80%
US$195 per night while RevPAR increased 70%
60%
by two percent reaching US$ 144 per 50%
available room. F&B and MICE segments 40%
30%
contribution to the hotel’s accrued revenue 20%
which also increased representing an
10%
0%
average of 35% of the hospitality sectors 5-Star Hotels 4-Star Hotels Serviced Apartments
total revenue in the past year. market PERFORMANCE (Y/E 2009)
The city’s room supply is expected to grow MARKET OCCUPANCY: 74%
by 870 in 2010 and a further 1,034 rooms 5-star OCCUPANCY: 79%
are expected to enter the market by the ARR: US$ 195
REVPAR: US$ 144
end of 2011. About 10% of the future
hotel supply is in the 5-star category and The city’s room supply is expected to
30% in the 4-star category, in addition grow by 870 in 2010 and a further
1,034 rooms are expected to enter
there are currently 6 serviced apartments
the market by end of 2011
under construction in the city.
average room rate
We anticipate a slight drop in occupancy
rates once forthcoming supply is delivered; 500
450
however, Riyadh’s hospitality sector is not 400
350
widely vulnerable to seasonality unlike 300
US$
markets in Eastern Province, Makkah and 250
200
Madinah. We therefore expect demand for 150
100
hotel rooms to increase and for occupancy 50
levels to stabilise in the medium term. 0
5-Star 5-Star 4-Star 4-Star Serviced
Suite Suite Apartment
Colliers International 21
 jeddah office FIRST Quarter 2010

jeddah cumulative office supply

900,000

800,000

700,000

600,000

m2 GLA
500,000

400,000

300,000

200,000

100,000

0
2008 2009 2010 2011 2012 2013 2014

Jeddah’s office space grew substantially by Rentals declined by 3% in other parts of the
Jeddah’s office space grew by over 119,200 m2 between Q1 2009 to Q1 city while North, South and Central Jeddah
over 119,200 m2 between 2010. However, with a commercial market witnessed rental increase by an average of
Q1 2009 to Q1 2010 marked by limited supply and increasing 4% YOY. Average office rents currently
Vacancy levels fell by 2% currently demand, vacancy levels fell by 1% while stand at US$ 110 per m2 per annum for
at an average of 5.5% market-wide modest increase in rents was observed. Grade B offices and US$ 336 per m2 per
annum for Grade A space.
Unlike Riyadh, delivery of office space in
PERFORMANCE indicators
Jeddah has been scattered with no defined Before end of 2010, over 115,400 m2 of
Average Net Rent: US$ 278 per m² pa primary CBD. Existing supply is dominated office net leasable area is expected to enter
Premium Net Rent: US$ 395 per m² pa by Grade B comprising approximately 72% the market-in various parts of the City-
Average Sales Price: US$ 2,650 per m²
of total net stock. Office space demand stems 60% of which is of Grade A quality. A
average yield: 10.5%
from the trade, tourism, finance, real estate number of office developments that are
Vacancy Rate: 5.5%
and other business services especially those currently under construction such as The
facilitating imports and exports. Over the Headquarters, Zahran Building, Lamar
Net stock absorption grew
modestly by 1% in Q1 2010 proceeding twelve months there has been
Towers and Jeddah Gate will be offered on
a slight increase in the number of domestic
free-hold. These developments will test the
and regional companies seeking to establish
AVERAGE REnTAls Q1 2010 market’s appetite on strata ownership, the
their presence in Jeddah translating to an
demand of which is currently challenging to
400
increased demand especially for Grade
350 gauge. Meanwhile, office space is set to grow
A accommodation. Overall the quality
300
by 17% by 2013. With a growing business
of office premises within Jeddah is below
US$ per m2

250
industry, it is expected that forthcoming
200 that of Riyadh’s, leaving a shortfall in
150
international standard or regional standard supply especially those of Grade A offices
100
Grade A accommodation. will be easily absorbed by the market.
50
0
King Abdulla Street Al Madina Street Al Tahlia Street
Unlike Riyadh, forthcoming supply in A majority of forthcoming supply and those
Jeddah is scattered in various locations in the pipeline are standalone commercial
within the City, Most of new supply is developments while forthcoming supply
Existing Supply m2 NLA
owner-occupied with Grade A multi-tenant located on the Corniche Area are generally
Al Murjan Tower 9,400
space generally found within mixed-use part of mixed-use developments.
Gulf Plaza 17,900
Saudi Business Centre 28,700 developments.
As the market recovers, demand for office
Gulf Centre 33,600
Jeddah Tower 38,900 Vacancy levels fell by 2% YOY and are space is set to increase in Jeddah; however,
Ibn Hamran Centre 64,800 currently at an average of 5.5% market- gap in market-wide supply is minimal.
wide. Tahlia district recorded the lowest Opportunity lies in readdressing the
By end of 2010, over 115,400
vacancy rate at 4% while vacancies in other imbalance of supply by developing Grade
m2 of office net leasable area is
expected to enter the market areas reached 7%. Movement of rentals has A offices that can accommodate multi-sized
been varied in different parts of the City. tenants.

22 Colliers International
 jeddah reSidential FIRST Quarter 2010

jeddah forthcoming residential supply

4,500

4,000

3,500
Number of Units

3,000

2,500

2,000

1,500

1,000

500

0
Royal Escan Jeddah Gate Lamar Towers Burj Al Masarat

Sustained population growth combined a market-wide increase of 16% reaching

with delayed supply delivery has created
an increased demand and supply gap in
Jeddah’s residential market. This was
further exacerbated by the flash flood that
covered some parts of the city in November
2009 which resulted in the destruction of
sizeable number of homes.
an average of US$ 780 per m2 in Q1 2010
compared to previous year. The rental
market observed a YOY increase of 7%
and reaching 15% in some parts of the city
increased due to the Jeddah floods.
Bandar and Shata’a Al Thahabi in South
Ubhour District are currently the most
Bandar and Shata’a Al Thahabi Districts
are currently witnessing the most active
residential construction activities, of
which the majority of units are mid-end
average sales price q1 2010
900

Newly delivered residential supply is active in residential construction with the 850

generally larger and has better finishing majority of units of mid-range constructed US$ per m2
800

quality compared to houses in other cities by mid-scale developers. With limited 750

of the Kingdom. Apartments recently available financing schemes and a median 700

delivered are larger in size compared to older monthly household income of US$ 1,614, 650

stock. This indicates the growing number
of Saudis that are relocating to residential
apartments as they are currently priced out
of a majority of villa supply. Demand for
apartments has been sustained whereby a
sizeable number of units are of 2-bedroom
and 3-bedroom types. Average size of
apartment units of one-bedroom structure
stands at 86 m2 while four-bedroom units
can span at an average of 270 m2.
Drop in plot size and BUA of villa units is
indicative of declining household size and
developers’ attempts to address affordability.
However, high-end residential villas
especially those located in the Corniche
Areas are bigger in sizes reaching an average
of 800 m2 BUA.
affordability remains a major constraint in
supply absorption.
According to a strategic plan by the Jeddah
Municipality, the city needs more than
570,000 housing units over the next 20
years. Jeddah municipality’s plan is based on
present shortages and future requirements.
Currently there is a shortage of 283,000
housing units, including 80,000 in the
low-income group with the Government
actively calling for the development of
151,600 residential units to accommodate
residents in underdeveloped areas especially
those affected by the flood, and a further
51,500 units to meet rising demand.
600
VIllas Apartments
Due to the Jeddah flood, rents in some
parts of the city increased by almost 15%
With an average household
income of US$ 1,614, the major
challenge lies in affordability
PERFORMANCE indicators
Average Rent: US$ 81 per m² pa
Premium Rent: US$ 89 per m² pa
Average Sales Price: US$ 850 per m²
average Yield: 9.5%
average rentals q1 2010
90
80

Overall the trend reflects that new 70

60
construction activities in the city are of mid
US$ per m2 pa

50
to high-end and more spacious apartment 40
units. Price growth in Q1 2010 compared 30
to previous year is driven by increase in 20
land prices. The freehold market witnessed 10
0
VIllas Apartments

Colliers International 23
 jeddah retail FIRST Quarter 2010

jeddah cumulative shopping mall supply

1,200,000

1,000,000

800,000

m2 GLA
600,000

400,000

200,000

0
2008 2009 2010 2011 2012 2013 2014

Jeddah’s retail sector has been performing With a minor overall decline in retail
robustly in recent years, despite voids rentals have remained relatively
considerable increases in available retail stable. We attribute the decline n overall
Shopping mall supply grew gross lettable area. However, the volume occupancy levels to be relatively short
by 16% in 2009. of lettable space to be delivered into the term as the worlds markets recover and
market, even when combined with the Jeddah’s previous large influx of new retail
under construction and planning total, floor space is absorbed.
Existing Supply m² GLA
is notably smaller than that which has
Big Box tenants in Jeddah with an average
Herra Mall 61,600 been delivered and absorbed by the market
area size of 18,000 m2 GLA currently
Al Andalus Mall 79,900 in the last three years - indicating that
lease at an average of US$ 147 per m2 per
Serafi Mega Mall 90,278 Jeddahs retail supply has reached a plateau.
annum, line shops with an average unit
Jeddah’s shopping mall gross lettable area
Aziz Mall 99,100 size of 140 m2 are currently achieving an
grew by 16% over the past year compared
Red Sea Mall 133,200 average of US$ 667 per m2 per annum.
to a 51% growth in 2008.
Mall of Arabia 139,800
Jeddah’s shopping mall stock is expected
*This table does not constitute an exhaustive list of current supply The city’s current four leading malls are
to grow by 351,000 m2 GLA by 2014. A
Mall of Arabia, Red Sea Mall, Al Andalus
sizeable portion of forthcoming malls
Mall and Serafi Mega Mall all with an
are part of mixed-use and masterplanned
average daily footfall of 34,250. These
Average retail occupancy in Q1 developments. Retail remains one of
2010 stands at 86% while net lettable malls lead the market in terms of gross
the few available recreational activities
stock absorption declined by 3%. lettable area, tenant mix and available
in Jeddah where a whole family can go,
food and entertainment centres (FEC).
Jeddah’s shopping mall suggesting that the market may support a
Jeddah’s malls are the most developed in
stock is expected to grow by higher GLA per capita and higher average
the Kingdoms in terms of entertainment
351,000 m2 by 2014. spend requirement than might otherwise
activities available. It is usual to find two
be the case.
entertainment centres inside a mall that
appeal to different age ranges. As Jeddah is gears itself as a prime business
tourism destination in the Middle East with
AVERAGE rentals q1 2010 Market-wide footfall grew by 3% in Q1
the help of the General Commission of
2010 compared to the previous year due to
800 Tourism and Antiquities, more competition
700 a longer summer vacation which coincided
in Jeddah’s retail sector is set to accelerate
600 with Ramadan and Jeddah witnessing the
as investors will try to attract consumers
US$ per m2 pa

500
benefits of increased domestic tourism.
400
300 Hard voids-units that are empty but
200
available for occupation, grew by 4% with
100
0
the entry of Danube Mall and other retail
Anchor Store Department Store Line Shop supply in early 2010, while soft voids-those
available but currently trading, declined
by 2%. Average retail occupancy in Q1
2010 stood at 86% while net lettable stock
absorption in Q1 2010 registered a 3%
decline compared to previous year.
with high-end retail shops coupled with
international brands that appeal to the
general public. This competition will
result in the construction of improved
quality retail offering with added features
that will attract various types of consumers.
Older malls are expected to lose footfall
and tenant base to newer malls which will
necessitate revamps in facilities in order to
remain competitive.

24 Colliers International

jeddah cumulative HOTEL room SUPPLY
12,000
10,000
Number of Rooms
8,000
6,000
4,000
2,000
0
2008 2009
Jeddah’s hospitality sector has been marked
by an undersupply especially in the 5-star
segment. As of 2009, the 5-star market
comprised a total of 2,996 rooms, spread
over 14 hotels. Only 3 hotels of the city’s
current stock are of international 5-star
quality whilst others, although classified
as 5-star and 4-star hotels are generally
old and have reached their prime income
generating tenure.
The Government has recently taken steps
to spur growth by issuing a study which
calls for reclassification of the Kingdom’s
hotels in lieu of international classification
standards to boost hotel occupancy. The
study also recommends measures such as
easing regulations in obtaining building
permits to encourage investors, extension
of lease periods for tourism developments
and the provision of training to Saudis
to stimulate participation in the hotel
industry. The study also aims to streamline
hotel developments in Saudi Arabia into
proper star classification.
Jeddah’s hospitality sector is not vulnerable
to seasonality as other hotel markets in
Saudi Arabia and enjoys sustained robust
occupancy rates for most part of the year.
However, occupancy levels declined by
1.5% during the past year due to drop in
corporate tourism.
Serviced apartments continue to dominate
the domestic tourist catchment market.
Jeddah’s numerous festivals have attracted
an increasing number of domestic tourists
over the recent past with a notable increase
in tourism visitation during the past year
jeddah hospitality FIRST Quarter 2010
2010 2011 2012 2013
due to the extended summer holidays
that coincided with Ramadan. Although
the quality of existing stock is poor both Occupancy levels declined by
by national and regional standards, 1.5% during the past year due to
occupancy levels increased by 5% in Q1 a drop in corporate tourism
2010 compared to previous year. This is a
dual effect of increased domestic tourism market PERFORMANCE (Y/E 2009)
and the aftermath of the Jeddah floods that MARKET OCCUPANCY: 71%
occurred in November 2009. 5-STAR OCCUPANCY: 75%
ARR: US$ 195
Another factor in the success of the
REVPAR: US$ 139
serviced apartment market is the minimal
difference between the city’s 4-star room
ARR and the average rate of a serviced AVERAGE ROOM RATE
apartment when considering the general 600
poor quality of 4-star hotels. Average room 500
400
rate stands at US$ 32 per night during
US$
300
shoulder season, US$ 21 per night for non- 200
season while quality two-bedroom serviced 100
0
apartment rates reache US$ 172 per night 5-Star 5-Star Suite 4-Star 4-Star Suite Service
Apartments
during high season.
As the region’s business sector recovers, Average room rate remained
growth of occupancy levels is expected to stable as hoteliers expect decline in
be sustained. Average RevPAR (revenue occupancy only in the short term
per available room) in the 5-star market The city’s existing room stock is
increased from US$ 178 in Q1 2008 to expected to increase by over 800
rooms in the coming two years
US$ 186 in Q1 2010.
The city’s existing room stock is to
increase by over 800 rooms in the coming AVERAGE OCCUPANCY RATE
two years; however, the growing number of 90%
domestic and inbound visitors is expected
80%
70%
to buoy the hospitality sector in the short 60%
50%
term. The city’s hotel supply is expected 40%
to increase by another 5,000 rooms by 30%
20%
2014. This is expected to result to drop 10%
in occupancy once forthcoming supply is 0%
5-Star Hotels 4-Star Hotels Serviced
delivered. Apartments
Colliers International 25
 eastern province office FIRST Quarter 2010

eastern province cumulative office supply

1,400,000

1,200,000

1,000,000

m2 NLA
800.000

600,000

400,000

200,000

0
2008 2009 2010 2011 2012 2013

Eastern Province’s commercial market was heights of over forty-stories.

historically marked by slow growth with net
Construction activity increased in stock CAGR increase of 7.4% between 2003
and 2007. However, increased business activity
Dammam-Al Khobar Highway, comprising
and demand for office space in 2007 and 2008
approximately 57% of total forthcoming supply
has promoted the development of new office
space by developers.
PERFORMANCE indicators
Average Net Rent: US$ 120 per m² pa Construction activity increased in Dammam-Al
Premium Net Rent: US$ 216 per m² pa Khobar Highway and the Corniche areas which
comprise approximately 57% of total forthcoming
Average Sales Price: US$ 1,090 per m²
supply in Dammam and Al Khobar. Demand
Average yield: 11%
stems from Energy Sector related industries with
Vacancy Rate: 11.5%
ARAMCO expanding its operational activities
with alliances. Further growth in demand is
AVERAGE REnTAls Q1 2010 supported by general trading businesses and the
300 logistics sector with increased import and export
250 activities over the past year.
US$ per m2 pa
Net stock growth by over 166,300 m2 in 2009 on
the back of the economic crisis resulted in the
softening of rents and sluggish absorption of new
supply. Vacancies increased by 2.5% compared
to the previous quarter with a current market-
wide vacancy rate of 14%. Average occupancy
rate of old stock Grade A offices stood at 94.5%
in Q1 2010 while old stock Grade B offices
observed an average occupancy rate of 82.5%
during the same period. These occupancy levels
do not include recently completed properties.
Concurrently, net stock absorption of new supply
had become sluggish with an absorption rate of
new supply at 30%.
Rents also dropped by an average of 10% in Q1

200
150 A majority of available office space is of Grade 2010 compared to previous year. Current average
100 B quality consisting 78% of total supply and is rents of Grade A office space ranges from US$
50 predominantly owner occupied. Unlike other 200 to US$ 320 per m2 per annum while average
0
leading cities in the Kingdom, demand for Grade rents for Grade B office space ranges from US$
Mousa Ibn Al Naseer
Street
King Fahad Road
9th Street
King Saud Street
Prince Faisal Bin
Fahad Street
Mecca Street
King Abdullah Street
Prince Mohammed Ibn
Fahad Street
Al Ashrea’s Street
King Abdulaziz Road
Prince Sultan Street

B office space is more dominant than demand for
Grade A office space. We continue to foresee
this to remain the case in the short to medium
term due to the nature of the province’s business
and industry. However, demand for Grade A
A majority of available office space is of grade office is also increasing at a modest rate. The
B quality, amounting to 78% of total supply demand profile from occupants is, in the main,
for larger floor plates although there has been a
Al Khobar and Dammam’s office supply is
noticeable increase in the demand for smaller
expected to increase by over 184,800 m2
offices, predominately from the banking sector.
of NLA in 2010, followed by an additional
increase of 257,200 m2 in 2011 Al Hugayet Tower is currently the tallest iconic
tower in the province and the market leader
in terms of floorplate size and facilities offered.
Existing Supply m2 NLA
Meanwhile, Dammam Municipality recently
Al Subaiei Building 1,900
revised its building code permitting commercial
Adil Kashoggi Tower 10,490
developments with greater permissible heights.
Al Mohammadiah Tower 10,220
Novotel Business Park 30,000 This encouraged a number of high rise office
Al Rashid Tower 24,300 developments currently under construction
Al Hugayet Tower 38,400 particularly along the Dammam-Al Khobar
*This table does not constitute an exhaustive list of current supply Highway where some office buildings have
113 to US$ 147 per m2 per annum.
Al Khobar and Dammam’s office supply is
expected to increase by over 196,900 m2 of NLA
in 2010, followed by an additional increase
of 261,000 m2 in 2011. Whilst a majority of
the forthcoming supply will be standalone
developments one forthcoming development, Al
Turki Business Park set completion in Q2 2010
is a mixed-use development. Once completed,
it will offer over 12,400 m2 of NLA. Although
demand is increasing, supply will continue to
outstrip demand in the medium term. Rents
are expected to further soften when new supply
enters the market as landlords will be forced to
revisit their rents to attract tenants. Due to
the nature of the province’s business sector, we
expect demand for Grade B office space to still
dominate the market with minimal growth in
Grade A office space demand.

26 Colliers International

eastern province forthcoming residential supply
350
300
Number of Units
250
200
150
100
50
0
Al Fahad Saraya
Residential Al Waha
Towers
Eastern Province’s overall residential
unit demand has not been met on the
supply side whilst conversely mid-range
developers indicate that about 13% of
current supply is unoccupied. We attribute
this to the continued bias of developers
on developing mid-end and high-end
residential units while pent up demand for
affordable accommodation climbs. Delays
in residential unit delivery has further
aggravated rising demand.
Currently, there is a good supply of low-end
leasehold residential villas and apartments
in the province while existing freehold
supply are within the midto high-end
ranges. New units under construction tend
to be of higher quality than those seen in
other Saudi cities, although not on par
with those in Jeddah. Unit sizes of new
residential units in both Dammam and Al
Khobar are relatively bigger than those
in Riyadh with an average sizes of 175 m2
and 200 m2 for a two and threebedroom
apartments respectively. However, newer
units delivered to the market are slightly
smaller than previously delivered. To some
extent, this reflects declining household size
and the market requirement for affordable
property aimed at low to middle-income
occupiers.
We find that almost 62% of residential
units have a plot size between 300 m2 and
450 m2 with either three-bedroom or four-
bedroom units. To put into perspective,
Al Khobar’s and Dammam’s household size
stood at 6.0 and 6.2 respectively, according
to a Colliers commissioned consumer survey
conducted in 2009. Eastern Province’s
median monthly household income stood
at US$ 1,497 in 2009 according to a recent
Colliers commissioned consumer survey
eastern province reSidential FIRST Quarter 2010
Al Al Sweilam Al Ghadeer Meda 3 Abraj Al Muhandseen
Andalusiat Village Village Yasmeen
Project
which underscores that current price levels
have priced out a majority of the province’s
residents.
Overall Sales prices dropped by an average Affordability remains a challenge
of 13% YOY from Q3 2008 to Q3 2009, resulting to 13% vacancy rate
with rents softened by an average of 4% in despite increasing demand
the same period. However, rents and sales
prices in prime residential areas remained
PERFORMANCE indicators
stable due to high demand. Land prices in
prime areas increased by an average of 5% to Average Rent: US$ 68 per m² pa
Premium Rent: US$ 72 per m² pa
10% in Q3 2009 as compared to last year.
Average Sales Price: US$ 716 per m²
Sustained demand from the end of Q3 Average Yield: 9.5%
2009 has resulted in a nominal increase in
freehold prices at 2% on average in Q1 2010
average sales price q1 2010
reaching an average of US$ 870. Rents
900
reached an average of US$ 57 per m2 per 890
annum. We expect rental and sales prices 880
US$ per m2
to further increase as the economy recovers 870
860
and as pent up demand continues to grow. 850
840
Previous trends indicate that a majority
830
of residential units delivered were 820
concentrated in Khobar, which is the Eastern 810
VIllas Apartments
Province’s most developed area. Similarly,
most residential units presently under Average monthly household income
construction are also located in Khobar. stood at US$ 1,497 in 2009
However trends indicate that a majority of
Residential freehold market registered an
announced planned residential projects are
average increase of 2% in Q1 2010
located in Dammam and Dhahran.
The effects of the Mortgage Law are
expected not to be felt in Eastern Province’s
average rentals q1 2010
70
residential market in the medium term
60
new regulations are tested. However, as
50
US$ per m2 pa
population continues to increase demand 40
for residential units will also grow. The 30
20
challenge therefore lies in developing units 10
that will be financially within reach of the 0
Villas Apartments
province’s residents.
Colliers International 27
 eastern province retail FIRST Quarter 2010

eastern province cumulative shopping mall supply

1,800,000

1,600,000

1,400,000

1,200,000

m2 GLA
1,000,000

800,000

600,000

400,000

200,000

0
2008 2009 2010 2011 2012

Retail GLA supply grew by over
614,000 m2 in the past two years
Existing Supply m² GLA
Mall of Dhahran 150,600
Al Rashid Mall 150,000
Ibn Al Khaldoun Mall 20,520
Al Shatea Mall
Marina Mall
Fouad Centre
*This table does not constitute an exhaustive list of current supply
Market wide occupancy rate of
shopping malls in the province
stood at 94% in Q1 of 2010, a
2% decline over the previous year
Average rent of line shop tenants
stands at US$ 644 per m2 per
annum excluding service charges,
equating 7% YOY increase
AVERAGE rentals q1 2010
700
600
US$ per m2 pa
Limited shopping mall gross leasable area
(GLA) per capita in Dammam and Al Khobar
in the past have resulted to a historical robust
occupancy levels. However, with huge
additional stock of over 614,000 m2 entering
the market in the previous two years, tenants
have started abandoning older malls in
favour of new ones which prompted owners
to revamp their properties. One notable
addition in supply is the Mall of Dhahran
which was originally completed in 2005. The
mall since then had undergone expansion in
2009 increasing its gross lettable area to over
40,100 150,500 m2 and created increase in retail
44,200 hard voids. The mall had secured covenants
24,000 with strong tenants however, when one of its
major anchor tenants pulled out, occupancy
levels dipped while some of the additional
space has yet to be absorbed.
Al Rashid Mall and Mall of Dhahran
currently dominate the retail segment in
Al Khobar and Dammam. Although new
centres currently under construction are in
par in terms of size, their strong reputations
will help to ensure ongoing competitiveness.
Retail footfall declined by 1.3% with less
leisure visitors coming in from neighbouring
Bahrain while footfall of premier malls
increased by 3% in Q1 2010 compared to
last year. Market wide occupancy rate of
shopping malls in the province stood at 94%
but currently trading declined by 1%. Average
retail occupancy in Q1 2010 stands at 89%.
Net lettable stock absorption in Q1 2010 has
experienced a 1% decline compared to previous
year.
Meanwhile, big box tenants have an average
area size of 16,500 m2 and an average lease
rate of US$ 121 per m2 per annum. Average
rent of line shop tenants stands at US$ 644
per m2 per annum excluding service charge.
Mall operators have attempted to diversify
their malls by including bigger spaces for
food courts and entertainment centres.
These facilities have proven to increase
footfall and dwell time at malls. One
notable forthcoming supply that follows this
scheme is Al Othaim Mall Dammam. Once
delivered, it will be the first Al Othaim mall
to operate in Dammam and will have the
biggest indoor entertainment centre in the
area at 12,500 m2.
Although recently delivered supply have
more entertainment facilities, the number
of centres offering destination retail
opportunities, with shopping, entertainment
and family food and beverage outlets under
the same roof remains a relatively untapped
territory.
The general trend towards larger retail
properties, as witnessed elsewhere in the
GCC, is expected to continue in Dammam

500 in Q1 of 2010, a 2% decline over the previous

and Al Khobar as further new properties are
400 year. This is due to a number of international
300 completed. The largest of these properties
line shop brands that stopped operation in under construction, Al Shubaily Grand
200
100
Saudi Arabia in lieu of international market Mall, will deliver an additional 191,000
0 conditions and newly added supply entering m2 of leasable area to the market. When
Anchor Store Department Store Line Shop
the market. complete, Al Shubaily Grand Mall will be
Hard voids - units that are empty but available the largest single mall in the area. However,
for occupation, grew by 2.5% with the entry of construction completion of the mall has been
Dhahran Mall extension and other retail supply delayed due to financing issues. The mall is
in early 2010, while soft voids - those available expected to open before end of 2010.

28 Colliers International

eastern province cumulative HOTEL room SUPPLY
6,000
5,000
Number of Rooms
4,000
3,000
2,000
1,000
0
2008 2009 2010
Hospitality demand continues to largely
stem from corporate tourism and domestic
visitation in Eastern Province. Previously
characterised by limited supply, the growth
of room stock in Dammam and Al Khobar
has been significant especially in serviced
apartments over the previous two years.
Hotel room supply grew by 7% while growth
of the serviced apartment is estimated at
20%. Delivery of additional stock resulted
to drop in occupancy levels and a softening
of observed average daily rates.
A majority of Dammam and Al Khobar’s
5-star and 4-star stock is located along
major roads while the rest are located in
the Corniche areas. The number of 5-
star hotels in Dammam and Al Khobar is
limited while quality is not on par with
those found in Riyadh. However, this is
largely a reflection of demand which is
highly business-oriented. Luxury hotels
therefore are not feasible in the province as
it is in the Kingdom’s other leading cities.
Average occupancy of the 5-star segment
in 2009 stood at 68% with a 5% decline
on average compared to previous year.
Drop in occupancy rates is attributable
to decline in the number of corporate
tourism in addition to the large number
of 4-star hotel room supply that entered
the market this year reaching 301 rooms.
Nonetheless, the 5-star segment continues
to be driven by corporate tourism with
corporate guests representing 79% of the
total number of 5-star hotel guests in the
province. This does not take into account
Le Meridien Hotel’s observed occupancy
which stood at around 80%. The hotel
continues to lead the 5-star segment while
Park Inn Al Khobar is the market leader in
terms of occupancy and observed average
eastern province hospitality FIRST Quarter 2010
2011 2012 2013
daily rate in the 4-star segment. As the
first value hotel in Eastern Province, Park
Inn enjoyed a robust occupancy in Q1 Hotel room supply grew by 7%
2010 at an average of 60% compared to while growth of the serviced
apartment is estimated at 20%
its soft opening occupancy of 40% last
over the past two years
year. Observed ARR of the hotel segment
declined by an average of 8% while market PERFORMANCE (Y/E 2009)
average room rates of serviced apartments MARKET OCCUPANCY: 65%
remained stable. 5-STAR OCCUPANCY: 68%
ARR: US$ 150
Average occupancy of the 4-star segment
REVPAR: US$ 98
declined by 9% reaching 62% compared
to previous year. Although a large average occupancy rate
proportion of 4-star hotel guests belong 76
74
to the corporate segment which currently
72
represents 66% of total number of guests,
percentage
70
68
a number of 4-star hotels in the province 66
64
have started offering suites and duplex 62
units to capture the domestic tourism 60
5-Star 4-Star Serviced Apartments
market. Currently, the 5-star and 4-star
Average occupancy of the 5-star
hotel segments cater to 5% of the domestic segment in Q4 of 2009 stood
tourism market share. at 67% with a 5% decline on
average compared to the same
There are a total of 1,086 hotel rooms
quarter in the previous year
currently in the pipeline with the delivery
Existing Supply Rooms
of Novotel and Sofitel delayed to end of
Al Khobar Intercontinental Hotel 120
2010. Delivery of these rooms in tandem Al Nimran Hotel 123
with a sizeable number of rooms that Carlton Al Moaibed Hotel 123
Coral International Hotel Al Khobar 131
entered the market this year is expected Moevenpick Hotels & Resorts Al Khobar 143
to create a market dilution in the short to Sheraton Dammam Hotels & Towers 274
Le Meridien Al Khobar 330
medium term. However, as the economy *This table does not constitute an exhaustive list of current supply
picks up, inbound and domestic tourism
in the province is expected to sustain
average room rate
the market. The key is to define where 400
350
opportunity lies. With corporate tourism 300
250
and domestic tourism clearly playing major
US$
200
roles in the performance of the hospitality 150
100
sector, potential remains to hotels which 50
0
are affordable and business-friendly. 5-Star 5-Star 4-Star 4-Star Serviced
Suite Suite Apartment
Colliers International 29
 amman OFFICE FIRST Quarter 2010

amman forthcoming OFFICE SUPPLy

300,000

250,000

200,000

m2 NLA
150,000

100,000

50,000

0
Jordan Gate Living Wall Commerce One Abdali

Absorption rates for newly completed Colliers International expect over

office buildings in Amman are reported
to be slowing down. Owners of completed
dedicated office buildings located in areas
Despite an undersupplied office such as Tlaa Al Ali indicated to Colliers
sector and an increase occupancy International research staff that they have
rate of 95%, uptake of new office
been fully leased within three months of
space post Q1 2009 is slow.
completion; although this was prior to the
AVERAGE rentals q1 2010 financial crisis. Market levels at the time,
200 for dedicated office buildings, reported
180 average occupancy rates of 95%. In Q4
160
140 2009 Colliers International research staff
US$ per m pa
376,000m² NLA of primary grade office
space to enter the market between Q1 2008
and the end of 2011, 250,000m² NLA of
which will be provided by developments
within the Abdali master-plan scheme.
This figure however, does not include
proposed office space within Sector 7 of
Phase I. There are also numerous individual
office developments underway on the Wadi
Saqqra and Airport Road corridors, and
these will be primarily owner-occupied and

120 witnessed several office buildings in Amman targeted towards secondary grade markets
2

100
80 to be partially vacant, an indication that respectively.
60 occupancy rates are closer to 90% and will
40 Due to weak economic indicators of market
20 continue to drop in the first quarter of 2010
conditions it is difficult to quantify the
0 as new supply is released onto the market.
Abdoun

7th Circle

Umm Uthaina
Sweifiyah

Jabal Amman

Shmeisani

Rabiyah

supply demand balance in Amman’s office

The majority of primary grade office space
that currently exists in the market is owner-
An increase by 19% in average occupied, meaning that the rental and
asking rental rates between
Q2 2009 and Q1 2010
sale values of office space analysed in this
section do not necessarily reflect potential
AVERAGE sales price Q1 2010
capitalisation rates for leaseable, primary
2500 grade office space delivered to the market
US$ per m2 pa
sector. Reported absorption rates of new
dedicated office buildings pre Q1 2009 was
high. However, current occupancy rates
within newly completed, dedicated office
buildings is low. Rents have decreased
since their peak in Q4 2008 therefore it
is reasonable to suggest that the city is

2000
1500 in future. slightly over supplied with formal, grade
1000 A dedicated office accommodation for the
500 Over the last two quarters there has been
0 short to medium term. As and when new
decrease in asking sales prices due the economic
Jabal Al Hussain

Shmeisani

Sweiflyah

supply enters the market and rents stabilize,

Tlaa Al Ali

Wadi Saqra

Mecca Road

and financial crisis resulting in a slowdown in

occupiers of outdated office space will be
real estate investments, particularly in the
enticed to move into Grade A dedicated
office sector. This has ultimately led to a
PERFORMANCE indicators
office space thus alleviating the low
slowdown in the construction sector resulting
occupancy rates plaguing the prime office
Average Rent: US$ 150 per m² pa in completion delays, thus pushing back
sector.
Premium Rent: US$ 190 per m² pa forthcoming supply. However, the market
Average Sales Price: US$ 1,508 per m²
is experiencing an increase in rental rates Therefore Collier’s long term outlook
Average yield: 10%
confirming that the office market as a whole for office space, supported by demand
Vacancy Rate: 9.9%
(Grade A, B, and C) is undersupplied and will assumptions made by the GAM, looks
A decrease by 5% in average continue to be undersupplied for the short to positive especially for developers/investors
asking rental rates between medium term. planning for future office provision.
Q2 2009 and Q1 2010

30 Colliers International

amman cumulative RESIDENTiAL SUPPLY
580,000
560,000
Number of Units
540,000
520,000
500,000
480,000
460,000
440,000
2004 2005 2006
Current demand for housing units stands
at approximately 490,000 units and the
Greater Amman Municipality estimates
that around 30,000 additional housing
units are required annually in order to meet
the city’s demand growth.
Residential villas account for around 26%
of overall residential stock in Amman.
The villa segment has traditionally been a
relatively safe investment, and yields across
this part of the residential market are low.
It should be noted that the rental market
for residential villas is dominated by smaller
unit sizes, with the vast majority of five
and six bedrooms being owner-occupied.
Residential apartments constitute the
majority of residential units in Amman,
predominantly within 7 storey apartment
buildings or less.
High end apartment units are currently
dispersed around the core commercial hubs
of Shmeisani and Sweifiyah. Villa units
targeting the high income segment are
located primarily in Abdoun, around the
1st Circle, and around Dabuq to the north-
west of the city – a high growth location
that is emerging as a core retail and leisure
hub targeting high-income and visitors
segments. Key attractions in close proximity
include the King Hussein Mosque, the
Children and Aviation museums and the
City Mall.
With the exception of one bedroom
apartments in Abdoun, apartments in
Amman attract lower prices per unit area
than villas. One bedroom apartments carry
the highest prices per unit area across
apartment sizes. Rental and sales prices for
two bedroom properties per m² are markedly
lower than prices for one bedroom properties,
with the notable exceptions of properties in
amman reSidential FIRST Quarter 2010
2007 2008 2009 2010
Umm Uthaina and Sweifiyah. The rental
and sales prices of three bedroom apartments
in Amman broadly follow those of the two
bedroom segment. Yields are therefore
largely similar to those found in the two
bedroom segment as well. Purchase prices Organic demand growth aimed
per unit area of four bedroom apartments at low to middle income housing.
are slightly more expensive than those of Total current housing supply stands
two and three bedroom properties, although at around 560,000 units
rents are broadly similar. Hence, yields are
lower in this sub-section of the residential
PERFORMANCE indicators
apartment segment. In part this reflects
the lower availability of these properties. Average Rent: US$ 55 per m² pa
It is also due in part to the relative price Average Sales Price: US$ 585 per m²
increase of villa properties, which have Average Yield: 9.4%
driven some occupiers away from villas and Vacancy Rate: 17%
into the large apartment market.
The residential sector in Amman
Three bedroom villas constitute the
is oversupplied evidenced by the
largest sub-section of the overall villa
60% decrease in average rental rate
market by number of units. Rental rates
and sales price since Q4 2008.
and sales prices of both three and four
bedroom properties are among the highest
in the city. Rental properties in the five average rentals q1 2010
bedroom segment are scarce in a number 30000
of the city’s areas. To some extent this 25000
is due to the smaller overall number of
US$ per m2 pa
20000
units available in this segment, but it also 15000
reflects a greater tendency towards owner 10000
occupation in these areas than elsewhere. 5000
Colliers International research suggests 0
that six bedroom villas available for rent Q4 2008 Q1 2020
are extremely rare and therefore calculating
yields for these properties is not possible.
average Sales price Q1 2010
With 560,000 units currently in Amman 1400
and with a population of approximately 2.46 1200
million people with an average household 1000
US$ per m2
size of 5 persons per household (pph) the 800
average occupancy rate is around 88%. 600
However, we believe the bulk of the vacancy 400
is due to units being owned by expatriate 200
Jordanians who do not permanently reside 0
in Amman. Q4 2008 Q1 2020
Colliers International 31
 amman retail FIRST Quarter 2010

amman cumulative retail supply

180,000

160,000

140,000

m2 GLA
120,000

100,000

80,000

60,000

40,000

20,000

0
Mihrath Project Abdoun Abdali Beitna Jordan Gate
Mega Mall Boulevard Mega Mall

The retail sector in Amman has traditionally These brands range from major big box
been dominated by independent, street anchor stores such as Carrefour through to
facing retail units. The retail landscape has well known international consumer brands
Existing supply amounts to gradually shifted towards shopping malls such as Calvin Klein.
216,500m² GLA of retail mall space since the beginning of this decade, driven
According to a national income survey
Current average rental rate is primarily by a liberalised trade regime
recently carried out by Ipsos, 47.4% of
approximately US$ 418 per and the emergence of regional retail
Jordanian households earn US$285 – $560
m2 which is a decrease of 5% groups expanding beyond home markets
per month, with only 1.6% earning more
over the previous year. in the GCC. Shopping mall supply is
than US$2,800. According to Colliers
concentrated primarily in Amman’s high-
GDP Per Capita estimates, household
AVERAGE rentals q1 2010 income districts of Abdoun, Sweifiyah and
incomes in Amman increase to an
Tlaa Al Aall (comprising the City Mall and
average of US$966 per month against a
Mecca Mall), located in West Amman.
800 national average of US$440. The focus of
700 Nevertheless, street facing retail units forthcoming retail supply is therefore on
600
remain an important and popular segment the capital city, given higher disposable
US$ per m2 pa

500
of the city’s overall retail provision, incomes and the opportunity to capture
400
300
given a favourable climate and weaker tourism markets. In contrast to the tourism
200
spending power when compared to GCC marketing drive of regional destinations
100 markets. The concept of a shopping mall such as Dubai, however, Jordan is not
0 as an entertainment destination in itself is positioned as a shopping hub given that
therefore yet to be established in Amman, the country is visited primarily by Arab,
Mecca Mall

City Mall

Abdoun Mall

Zara Centre

and forthcoming shopping mall supply will
also compete with retail supply integrated
within mixed-use developments. An
Mall Total Units m2 GLA Footfall(per day)
Example of this is the Abdali Boulevard
MECCA MALL 350 110,000 80,000 – a 180 unit shopping arcade targeting
ABDOUN MALL 70 12,000 7,500 high-income markets and incorporating
CITY MALL 60 55,000 43,000
both shopping mall and high street
AMMAN MALL 50 12,000 3,000
characteristics.
ZARA CENTRE 45 11,500 1,000
BARAKA MALL 90 17,000 3,250
With the recent opening of the Baraka Mall
in Sweifiyah, total supply of shopping mall
space in the city has reached approximately
216,500m². Although the weather in
Jordan doesn’t render climate controlled
shopping environments essential in
the way that they are in other regional
markets, the concept has been welcomed
by consumers. This is in part due to the
arrival of major international brands that
have provided an impetus to the sector.
Jordanian expatriate and European tourists
whose shopping needs are amply serviced
by their home countries. The core demand
base of Jordan’s retail sector therefore
remains internal.
There is a considerable amount of retail
mall space under construction in Amman,
and even more under planning. Although
the GLA volume is still low on a per capita
basis, there are signs that the market may
be reaching saturation. City Mall has only
recently achieved full occupancy after a
year of operation. Baraka Mall’s leasing
programme has taken longer than expected
and remains incomplete. Problems are
being experienced by Beitna Mega Mall
in finding tenants, compounded by the
mall’s location in the low-income east of
Amman.

32 Colliers International

amman forthcoming HOTEL room SUPPLY
700
600
Number of Rooms
500
400
300
200
100
0
Amman Rotana
A significant number of hotels are reported to
be at the planning stages in Amman. In general
terms, the Abdali project is expected to offer
between four and eight hotels additional to the
Rotana that is already under construction. Abdali
Boulevard, developed by Abdali Investment
Company, will offer several serviced apartments.
Kurdi Group have also indicated that Mecca Mall
Phase III will include a hotel that will begin the
process of converting the mall into a mixed use
centre. The Royal Village Project also reportedly
includes provision for a hotel, although details
remain limited. The Grand Amman Financial
Complex is planned to include a 5-star hotel. A
450 room hotel is also planned for the Mihrath
Project. Nevertheless, these proposed hotels all
remain in the early stages of planning, and there
is no confirmation that these will be developed
as proposed.
Occupancy rates only recovered in 2007 and
this resurgence led to an average occupancy of
61% in 2008, which was expected to continue
assuming that the impact of external shocks was
constrained and corporate and leisure tourism
continued to grow. However, with the economic
crisis in late 2008 caused occupancy rates to drop
to around 54% in 2009.
Although the amount of tourist arrivals is
increasing, the occupancy rate for 5-star hotels is
around less than what it was for 2008, and with
the forthcoming supply, predominantly in the
5-star category, it is expected that occupancy
levels will decline over the next three years, to
47%, indicating an oversupply in the market.
Amman derives its hospitality sector demand from
a number of sources. As is the case in the city’s
other real estate sectors, demand related to the
security situation in Iraq has bolstered the market.
In the hospitality sector additional demand related
to Iraq has mainly been the result of Amman’s
position as a primary access point to the country.
Non Governmental Organisations, contractors
and journalists commonly pass through Jordan
as a result. The US military maintains a rolling
amman hospitality FIRST Quarter 2010
Hilton W-Hotel
contract with the Marriott Amman, for example,
to provide rooms for transiting service personnel
and ancillary staff.
A second major source of demand for hotel
accommodation in Amman is Jordan’s popularity
as a Meetings Incentives Conferences and PERFORMANCE INDICATORs (Y/E 2009)
Exhibitions (MICE) destination. Whilst the
MARKET OCCUPANCY: 65%
bulk of conferences and exhibition facilities are
5-STAR OCCUPANCY: 54%
located on the Dead Sea and near to Petra, hotels
in the city report that the majority of delegates 5-STAR ARR: US$ 207
will spend at least one night in a hotel in Amman REVPAR: US$ 135
during their visit. These guests complement the
number of business travellers visiting Amman as
their primary destination. An increase by 25% in number
The third primary source of demand for hotel of hotel rooms was registered
rooms in Amman is leisure tourists. In a similar between 2008 and 2009
manner to MICE visitors, a significant number
of these visitors pass through Amman’s hotels
for between one and three nights as one of the
destinations on their tour of Jordan. While it trend in occupancy rate
remains highly unlikely that leisure tourists will
ever have long durations of stay in the capital, 80%
they do provide a valuable additional source of 70%
60%
demand to the city’s hospitality sector. 50%
40%
The fourth, and largest, source of demand for
30%
Amman’s hotels is business travellers. The bulk
20%
of the city’s premium hospitality stock is business 10%
oriented, and this remains unlikely to change for 0%
2004 2005 2006 2007 2008 2009
the foreseeable future.
Although of lesser impact than the above factors,
Jordan also attracts a considerable number of
Hotels in Amman witnessed
airport transit visitors. A significant proportion of
a 13% decrease in occupancy
these transit visitors are of relatively low net worth.
The Queen Alia International Airport Hotel rates from the previous year
currently attracts a considerable proportion of its
demand from this visitor segment. This is largely
due to the favourable agreement that it enjoys
with Jordanian Immigration allowing transit
passengers to leave the airport itself and visit the
hotel without officially entering Jordan. Although
this generates a sizeable volume of demand for the
hotel, the low spending of these visitors means that
they do not provide a compelling revenue source
for sustainable future growth.
Colliers International 33
 cario OFFICE FIRST Quarter 2010

cairo CUMULATIVE OFFICE SUPPLy

4,000,000

3.500,000

3,000,000

2,500,000

m2 NLA
2,000,000

1,500,000

1,000,000

500,000

0
2010 2011 2012 2013

Despite a decline in growth rate in GDP
from an estimated 6-8% per annum to 4.7%
in 2009 over 2008 and a decrease in FDI
inflows from US$ 13.2bn in 2007/2008
to US$ 9.5bn in 2009, the entry of new
Continuously increasing office multinational organisations and the
demand remains unsatisfied
expansion of local business has continued
new establishments and enterprises to increase, leading to an increased demand
9,000
for office space, particularly primary grade
8,000 office space.
Number of Companies
the conversion of ground floor residential
units into office space as a short-term
measure which has led to a fragmentation of
the office market. The market is expected to
fragment further as private sector developers
rush to meet unsatisfied demand for office
space. Given land availability constraints in
central Cairo and the focus of development
activity in the new communities, New
Cairo and 6th October will house the vast

7,000
majority of forthcoming office space.
6,000 The volume of foreign direct investments
5,000
4,000
registered by the creation of new Whilst other office sectors in the Middle
3,000 establishments and expansions of businesses East have witnessed large decreases
2,000 peaked in 2007/2008. The growth in in average rental rates between 2008
1,000
0
the number of new establishments and and 2009, Cairo office sector registered
expansions in 2007/2008 had exceeded
2003 / 2004

2004 / 2005

2005 / 2006

2006 / 2007

2007 / 2008

2008 / 2009

continuous increases over the same period.

earlier forecasts, which had been projected
to grow at a lower rate. In 2008/2009
Average rental rate increased by the number of new establishments and
8% between 2008 and 2009, expansions decreased by 21% over
followed by 1% decrease in 2010
2007/2008. The continuous growth in
Average rentals q1 2010 new companies has intensified the chronic
900
shortage of suitable office space.
800
700 Private and public investments have
increased at a CAGR of 20% between 2002
US$ per m2 pa
Whilst apartment and villa rents between
decreased 2008 and 2009 followed by an
increase between 2009 and Q1 2010, office
rental rates increased by 8% in 2008/2009
followed by 2% decrease between 2009/Q1
2010. Although a majority of primary grade
office buildings registered an increase in
rental rates, the global economic downturn
led to a diminishing growth rate. Average

600
500 rental rates are currently US$ 260 per m²,
and 2009 and the expansion by companies
400 with premium rental rates reaching US$
300 has continued to increase. Private
750 per m².
200 investment as a share of of GDP grew to
100
0 15% in 2008 followed by a decline in 2009 Due to the insufficient supply and
to 8.8% of GDP. Despite the decrease, continuously increasing demand, the gap
Star Capital

Nile City
Towers
Liberty
Tower

165 Tower

JAC Office
Tower
Al Oubour
Gardens
DHL Commercial
Tower

private and public investments remain an between demand and supply is expected
important source of income to the country. to widen. Colliers International therefore
2008 2009 Q12010

Cairo office market is significantly remains bullish on the market’s prospects

PERFORMANCE indicators
undersupplied in terms of primary grade due to extensive pent-up demand for high
Average Rent: US$ 260 per m² pa
office buildings as well as dedicated office quality space, intensified by new demand
Premium Rent: US$ 750 per m² pa
buildings. Existing supply consists of created out of strong economic growth.
Average Sales Price: US$ 2,960 per m²
residential units that are converted into Demand is expected to continue to outstrip
Average yield: 8.8%
offices due to very limited number of supply over the next three years, provided
Vacancy Rate: 1%
dedicated office buildings in the Capital. no new major projects are announced. The
Provided scheduled completion dates likelihood of development delays is expected
are met, cumulative primary grade Occupancy rates of almost 100% in Cairo’s to reinforce our anticipated demand-supply
office supply is expected to increase to limited Class A office stock have prompted dynamic.
approximately 3.7 million m2 by 2013

34 Colliers International
 cairo reSidential FIRST Quarter 2010

cairo cumulative RESIDENTiAL SUPPLY

400,000

350,000
Number of Units

300,000

250,000

200,000

150,000

100,000

50,000

0
2009 2010 2011 2012 2013 2014 2015

Whilst USAID is forecasting a total demand
of 2.1 million housing units, the Ministry of
Planning is forecasting demand for housing units
at 5.3 million units between 2007 and 2017,
which denotes 152% difference. Although both
sources indicate the same ranking in demand,
in terms of low income witnessing highest
demand followed by middle income, USAID is
forecasting approximately 51,000 housing units
in demand in the higher income category while
Ministry of Planning is forecasting 128,800 units
in the same income category.
The problem is therefore not one of supply
but rather the affordability constraints
on real estate performance, property prices in
Zamalek continued to increase throughout
the economic downturn. Nasr City and
Dominant demand for housing units
Heliopolis witnessed a continuous decrease in in the lower income segment
prices between 2008 and 2009, but the largest Average apartment sales price has registered
decrease was recorded in New Cairo, which 29% increase between 2009 and Q1
amounted to 78% between 2008 and 2009. 2010, while average villa sales price has
decreased by 8% over the same time period
Aggregated sales price for apartment units is
Average apartment sales price
currently US$ 926 per m², which equates to a
9.4% investment yield. 2,000
1,800
Research conducted by Colliers International 1,600
shows that approximately 72,000 high end
1,400
1,200
US$ per m2

residential units will be delivered to the 1,000

(low income levels and a poorly developed 800
mortgage market) that prevent a large segment market between 2009 and 2015, provided 600

of the population from purchasing or renting scheduled completion dates are met. Current 400
200
new homes. The problem is compounded by supply of approximately 281,000 units is set to 0
a reluctance on the part of landlords to enter increase by 27% over the next six years.
Zamalek

Heliopolis

Moandseen

Nasr City

Maadi

Doqqi

New Cairo

6th October
into tenancy agreements with low-income
tenants because of historic difficulties in Economic growth, increased capital inflows,
evicting tenants. occupancy saturation in central Cairo and 2008 2009 Q1 2010

population growth trends all point to demand PERFORMANCE indicators

Current supply amounts to 281,070 villa and
apartment units. Four out of five major villa
areas registered an aggregate increase of 31%
in rental rates between 2009 and Q1 2010. The
largest increase was registered in New Cairo,
at 48.5%, followed by 48% in Zamalek.
Whilst average rental rates declined by 14%
across the capital between 2008 and 2009, the
outstripping supply over the next three years. Average Rent: US$ 100 per m² pa
Colliers estimates existing pent-up demand premium Rent: US$ 140 per m² pa
Average Sales Price: US$ 1420 per m²
within the high-income demographic at
Average Yield: 7%
approximately 35,000 units, based on this Vacancy Rate: 5%
segment’s 5.2% share of overall demand.
Average rentals q1 2010
Considering additional demand estimated
160
at 12,800 units per year between now and 140

apartment rental market witnessed a recovery 2015, Colliers expect moderate levels of price
US$ per m2 pa

120
100
of 44% between 2009 and Q1 2010. Average appreciation in the new communities over the 80
rental rates for apartment and villa units in next six years. Colliers also anticipate owner- 60
these areas are currently US$ 87 per m² and occupier demand within the high income
40
20
US$ 119 per m² respectively. segment to increase as the new communities 0
Zamalek

Maadi

Heliopolis

Mohandseen

Nasr City

Doqqi

New Cairo

6th October

The change in average apartment sales
price followed the same trend as rental rates,
witnessing a 29% decrease between 2008
and 2009, followed by 29% increase between
2009 and Q1 2010. Despite the economic
downturn and the negative effects thereof
become more developed. This is demonstrated
by the current premium enjoyed by Kattameya
Heights and Palm Hills in New Cairo and 6th 2008 2009 Q12010
October respectively. 25% increase in supply between
2010 and 2013, provided scheduled
completion dates are met

Colliers International 35
 cairo retail FIRST Quarter 2010

cairo cumulative shopping mall supply

1,400,000

1,200,000

1,000,000

m2 GLA
800,000

600,000

400,000

200,000

0
2009 2010 2011 2012 2013

The entry of the City Stars mall in the
Cairo retail sector has successfully attracted
Retailers have witnessed a international brands to the city, meeting
decrease in sales volume despite demand from wealthy Egyptians, and offering
an increasing footfallt a shopping experience closer to international
retailing standards with anchor tenants, a
AVERAGE rentals q1 2010
professionally compiled tenant mix, food
courts, and entertainment facilities.
1200
City Stars is the largest existing mall in terms
1000
of number of units and size. Although Hyper
US$ per m2 pa
consist of 644,742 m² GLA and by 2013,
provided scheduled completion dates are
met, approximately 1.18 million m² GLA,
an increase by 83% over three years and a
CAGR of 22%. Mall of Arabia is currently the
largest planned mall in Cairo, amounting to
approximately 176,000 m² GLA, followed by
Cairo Festival City at 154,000 m² GLA. Sun
City Mall with its 275 retail units, located
in Heliopolis, is scheduled for completion

800

600 One is the second smallest mall in terms in late 2010 and has successfully pre leased
400 of m² GLA, it has the largest average unit 50% of the retail units. The majority of
200 size at 741 m² per unit, followed by 419 m² forthcoming shopping malls are developed in
0 per unit in Maadi City Centre. City Stars large residential communities and as part of
master plan developments, mainly located in
City Stars

Nile City
Towers Mall

Dandy Mega
Mall

Hyper One

Rehab Mall 2

has the smallest average unit size at 224 m²,

which explains its high average rental rate of New Cairo and 6th October. The exception
US$ 900 per m². is Emaar Misr’s Uptown Cairo Mall, which
2009 Q1 2010 will be located in Moqattam. The capital
Rent for high-end retail malls averages Average rental rate has registered 12% decrease has also seen an increasing retail supply in
US$630 per m² pa, a decrease by 12% between 2009 and Q1 2010 from US$ 720 per office buildings where the ground floor and
between Q1 2009 and Q1 2010 m² to US$ 630 per m² per annum. Nile City mezzanine floor is dedicated to retail, such
Towers Mall recorded the largest decrease at as in Katameya Downtown, developed by
Current average sales price 34% from US$ 1,000 per m² to US$ 662 per m².
at US$ 4,830 per m² Katameya for Real Estate Investments.
Despite an average rental decrease across retail
sector, shopping malls such as Hyper One and Despite reported increases in foot traffic in
prominent forthcoming retail supply
Rehab Mall 2 witnessed increases by 3% and shopping malls, retailers are suggesting that
200,000
29% respectively. Current average sales price turnovers are declining. The increase in
180,000
160,000 ranges between US$ 4,140-5,520 per m², leading retail space supply should therefore lead to
140,000 to an average investment yield of 17%. increased competition in the retail sector and
120,000 create difficulties for many retailers to remain
m2 GLA

100,000 Although the effect of the global economic profitable. Rental rates and services charges
80,000 downturn in Egypt was not severe, compared will have a crucial role in the development
60,000
to other countries in the Middle East, many and outcome of the retail sector in Cairo. As
40,000
20,000
retailers have registered a decrease in sales mentioned earlier, street facing retail units
0 volumes despite an increase in footfalls. are performing better than shopping malls
Mall of Arabia

Cairo
Festival City

Uptown Cairo

Sun City Mall

Despite a registered success of shopping

malls, street facing retail units still remain
more popular and more profitable due to
the lower rental rates and absence of service
Cumulative shopping mall supply
charges which lead to higher margins.
is expected to reach approximately
1.2 million m2 by 2013 By end of 2010, Cairo retail supply will
and with increases in supply of both retail
space categories, forthcoming shopping
malls will need to increase the incentives
for retailers to select them over street facing
retail units. Colliers International remains
bullish in the short to medium term.

36 Colliers International

cairo cumulative hotel room supply
17,000
16,500
Number of Rooms
16,000
15,500
15,000
14,500
14,000
13,500
2008 2009
Tourist inflows into Egypt in 2009 totalled
12.5 million visitors, representing a decrease of
2% over 2008. Despite the decrease between
2008 and 2009, the CAGR for tourist arrivals
between 2000 to 2009 remains strong at 10%.
This translated into a room night demand of
over 126 million room nights in Cairo last
year, with an average stay of 10.6 nights.
Daily tourists spend reached a peak in 2001at
US$ 132 with a total annual tourist spend
of US$ 4 billion. Whilst average spend levels
have declined by 36% to US$ 85 since the
peak in 2001, growth in tourist numbers have
increased total tourist spend to US$ 10.8
billion in 2009.
The entry of luxury hotel brands such as the
Four Seasons and Fairmont over the past
few years, prompting a recovery in high-
income cultural tourism markets, following
perceived downturn in the quality offering
of the Egyptian tourism market. This is
being reinforced by the renovation and
refurbishment of existing hotels which had
previously claimed 5-star status due to a
lack of alternatives rather than quality of
product. Several operating contracts are
running out in the near future, prompting
the entry of new operators into the market.
The improved level of service set by new
operators may prompt surviving incumbents
to renovate their hotels, providing a much
needed boost to overall service quality.
Average room rates increased by 3%
between 2007 and 2008, followed by 6%
decrease between 2008 and 2009. Average
occupancy rate continued a downward trend
post 2007, amounting to a total decrease of
21% between 2007 and 2009, consequently
leading to a decrease in revPAR by 22%
cairo hospitality FIRST Quarter 2010
2010 2011
over the same period. The decrease in
average room rate between 2008 and 2009
and the decrease in occupancy rate by 8% Cairo has currently a total of 175
over the same period led to a decrease in hotels, combining 14,600 hotel rooms
RevPAR by 12%.
average tourist daily spending
Looking forward, the focus of new hotel supply
in central Cairo l be on the redevelopment of 140
existing sites, the regeneration of urbanised 120
areas (such as Islamic Cairo or Giza) and the 100
m2 GLA
transfer of existing hotels to new operators, 80
60
as happened the case of the Ramses Hilton’s
40
transfer to the Ritz-Carlton group. The 20
concentration of future hotel development 0
will otherwise be in the new communities of 2000 01 02 03 04 05 06 07 08 2009
6th October and New Cairo, together with Market occupancy rate has
selected locations in Moqattam and possibly decreased from an average of 83%
New Maadi, mainly integrated within major YTD 2007 to 75% YTD 2008,
master plan developments. Existing supply is followed by 62% YTD 2009
expected to increase by 2,270 rooms.
PERFORMANCE INDICATORs (Y/E 2009)
At the micro-level, high quality hotels
MARKET OCCUPANCY: 62%
located on the Nile are expected to maintain
5-STAR OCCUPANCY: 65%
a market premium despite the delivery
5-STAR ARR: US$ 118
of new supply, with marginal impact on
REVPAR: US$ 75
performance expected. The real question
concerning the development of hotels in 6% decrease in ARR and 21%
the new communities will be the tourism decrease in occupancy rate between
market they intend to attract. Whilst the 2008 and 2009 led to 22% decrease
Smart Village hotel can benefit from the in RevPAR over the same period
immediate catchment area of large Egyptian
occupancy rate
and multinational companies within the
Business Park, and Cairo Festival City will 90%
80%
seek to establish itself as a retail-driven leisure 70%
destination in its own right, traditional 60%
50%
corporate and leisure tourism markets are 40%
more likely to prefer hotels located in central 30%
20%
Cairo. The diversification of Egypt’s tourism 10%
offering will be central to achieving this. 0%
2007 2008 2009
Colliers International 37
 TRIPOLI
Given the current economic and
political climate, it is likely that this
demand growth for primary grade
accommodation will continue throughout
the short and medium term.
average rentals q1 2010
1,000
900
800
700
US$ per m pa
600
2
500
400
300
200
100
0
Carinthia Business
Centre
Buliela Towers
Average asking rental rate has decreased
by 20% - 25% compared to over 2009.
PERFORMANCE indicators
Average Rent: US$ 365 per m² pa
Premium Rent: US$ 835 per m² pa
Vacancy Rate: 5%
Expected forthcoming supply
to enter the market by 2012
amount to 45,490 m2 of NLA
Approximately 55% of developments
initially scheduled for completion
are currently put on hold
38 Colliers International
OFFICE FIRST Quarter 2010
tripoli forthcoming office supply
90,000
80,000
70,000
60,000
50,000
m2 NLA
40,000
30,000
20,000
10,000
0
Beroco Office Tripoli
Building Centre
The Tripoli office market is highly
diversified. It varies from state owned multi-
storey towers to privately owned low-rise
office buildings and villas and apartments
converted into offices. The lease terms and
conditions, the amenities and the tenant
mix also vary considerably. The demand
for high quality office accommodation
is derived primarily from oil companies,
airlines, government departments and
embassies.
There are several projects that will deliver
primary grade office space to the Tripoli
market over the coming three to five years.
Demand for such space is high, and a large
proportion of the tenants of existing office
facilities could possibly relocate should
Al Fateh Tower
Dhat Al Emad
this higher quality space become available.
Furthermore, growing foreign investment
into Libya is expected to drive demand in the
sector, indicating that market performance
of high grade properties is likely to remain
strong for the foreseeable future.
The formal supply of what passes for grade
A office space in Tripoli is dominated by
two office complexes, namely the Burj Al
Fateh and the Dhat Al Emad. Both these
complexes are state owned and the rentals
are determined by the state. The Burj Al
Fateh offers furnished accommodation of
moderate quality. The Dhat Al Emad, on the
other hand, leases space only on a fitted office
space. Tenants may lease accommodation in
units of half or full floors.
The only genuinely considered international
standard office space available in the
market is the Corinthia Business Centre,
which is an office wing attached to the
Al Waha Tripolis Al Gaddafi
COmplex Tower Complex Tower
Corinthia Hotel. Apart from these three
office complexes, there are around five to
six storey office buildings in the Dhahra
and Downtown Areas. These are of similar
or lower quality to the Burj al Fateh office
tower.
The market for converted villas is
expanding as a result of limited supply of
formal office space. A considerable number
of government offices and embassies have
been forced to use this alternative. For
example, the property formerly used as the
prince’s palace is being refurbished for use
as the American Embassy. The rental rates
and lease terms for commercial villas are
similar to those of residential villas.
It was expected the delivery of 249,400 m2
NLA of grade A stock by 2013, based on
coverage of forthcoming supply. However,
53% of the development is currently
on-hold. Although these forthcoming
properties will deliver a significant
amount of stock given the city’s current
supply, there appears to be little risk of an
oversupply. Even if the existing tenants of
the Burj Al Fateh and the Dhat Al Emad
relocate to higher grade accommodation
en masse when new stock is delivered,
there is a long waiting list of prospective
tenants willing to move in. Oil companies
and embassies are in serious need of Primary
Grade office accommodation with security
and controlled access, sufficient parking
provision, broadband internet connections
and regular maintenance. In addition,
economic growth and increased openness
is bringing new international investors,
and hence, office occupiers, to the Tripoli
market.

tripoli forthcoming residential supply
7,000
6,000
Number of Units
5,000
4,000
3,000
2,000
1,000
0
2010
The provision of adequate housing for Libya’s
population is a necessity for the government.
The previous regime gave commitments
to build 100,000 units in order to meet the
housing shortage, but following cost and
implementation problems the programme was
abandoned in 1969. At that time, a major
housing survey found that 150,000 families
lacked a domicile of acceptable quality, and
placed the overall housing shortfall at over
180,000 units (including allowances for over-
occupancy of existing units). By the 1970’s
both the public and private sectors were
involved in housing construction. Towards
the end of the decade, the housing blocks
surrounding Benghazi and Tripoli had begun
to give way to more modern apartment
blocks with electricity and running water. Up
until 1986, the government invested around
US$2.2 million (LD2.8 million) in housing,
which resulted in the construction of 277,500
housing units.
Soon after, budget allocations for housing fell
short. This shortfall in new construction raised
the prospect of overcrowding and the creation
of slums as the country’s population expanded.
There have been ongoing government-
sponsored building projects since 1954, but the
housing deficit remains. Low-income families
were allowed to buy houses from the state at
10% of cost or to build their own homes with
interest-free loans. As of 2003, the last period
for which housing information is published,
total housing units numbered 829,723 with
6.8 people per dwelling. Real estate was the
main area of private investment until 1978.
However, investment was stifled by the
introduction of new property ownership laws
in the same year which limited each family’s
property ownership rights to a single dwelling.
Free market trade of property was limited to
TRIPOLI reSidential FIRST Quarter 2010
2012 2013
the sale of residential properties only. It was
illegal for individuals to lease residential
property and collect rent on the grounds that
it would be exploitative.
In the mid 1990s, when the country started
PERFORMANCE indicators
to experience the effects of the UN sanctions,
Average Rent: US$ 95 per m² pa
these rules were gradually relaxed. The
premium Rent: US$ 125 per m² pa
government needed to satisfy a growing
Average Sales Price: US$ 830 per m²
housing shortage while also providing Average Yield: 11%
accommodation for a growing population Vacancy Rate: 7.5%
of expatriate workers from countries such as
Egypt and Sudan. However, this relaxation
of regulations has not yet stimulated large average rentals q1 2010
scale private investment in residential
118
apartments. Currently existing high rise
116
apartment buildings in the city are under
US$ per m2 pa
114
state ownership. The various projects under 112
110
planning or construction will largely target 108
a high-income bracket, primarily expatriate 106
104
population. 2 BR 3 BR 4 BR
At present villa owners continue to prefer
to rent to commercial tenants on long Average rental rates increased by 4%
term leases, even though the rental prices between Q4 2009 and Q1 2010
commanded are relatively similar to those Average sales rates increased by 27%
of primary grade residential use rentals. In between Q4 2009 and Q1 2010
the case of units let for residential purposes,
the lease period is generally 1-2 years. While
villas are more expensive than apartments average sales prices q1 2010
on an absolute basis, evidence supplied to
Colliers staff by local brokers suggests that, 1,120
1,100
with a small number of exceptions, rental
US$ per m2
1,080
prices are similar on a unit area basis to those 1,060
of apartments. Comparing rentals across the 1,040
1,020
city, we’ve witness a decline of up to 36% in 2 BR 3 BR 4 BR
certain areas since last year. This is due to the
gradual flow of residential supply entering the
market.
Colliers International 39
 TRIPOLI retail FIRST Quarter 2010

tripoli forthcoming shopping mall supply

120,000

100,000

80,000

m2 GLA
60,000

40,000

20,000

0
Bab Tripoli Andalus Al Waha
Centre Mall Complex Mall

In the past, retail in Tripoli has been
dominated by street facing retail units in
Retail sector characterized by areas such as Gargaresh Road, Rashid Street
high occupancy rates derived and Bin Ashour Street. The city had only a
by into high demand. few small shopping centres, such as Zarqa Al
Existing supply of shopping Yamama.
malls as of Q1 2010 is in
The retail market has undergone considerable
excess of 200,000 m2 GLA
growth in the last few years with the opening
of high end malls, albeit small, like the Oasis
average rentals q1 2010 Centre and the Al Mahary Supermarket.
Government owned retail units have also
800
been taken over by private individuals/firms.
700
Since then, few international brands had
600
entered the market – Benetton, Damas and
US$ per m2 pa
have an expandable income; currently
Libya has a per capita income of $ 13,450.
This limits the potential constituency for
expanded retail provision. Nevertheless, the
recent substantial salary increments in the
public sector are expected to increase overall
purchasing power. Foreign brands are already
popular within higher income groups. In
principal, they are likely to be successful
when they enter the broader market.
The demand for retail comes not only
from Libyan nationals, but also from the
increasing expatriate population associated

500
with oil companies. There are also a smaller
400 Armani being among them.
number of Tunisians and Algerians who
300
Following the revolution in 1969, the travel approximately160-200 kilometres over
200
government forced the closure of all private the weekends to shop in Tripoli.
100
retail operations. State run department
0
stores were opened across the city, and until There is a strong demand for good quality
Oases Complex
Souk Al Thulatha’s
Complex
Al Mahary
Supermarket
Al Fateh Tower

Palm City Retail

Al Andalus
Gate Centre

the late 1980s these were the only retail
facilities available. In an effort to create
jobs and stimulate the economy, private
retailing was again permitted in 1988.
However, rebuilding of confidence in retail
Line store retail rents for established investment was slow, and it is only in recent
and successful shopping malls years that the industry has seen meaningful
are US$ 440 per m2 pa growth. Retailers in Tripoli have slowly
Street facing retail units are begun to adopt international retail industry
offered at US$ 795 per m² pa standards in terms of store design, layout,
merchandising, store lighting and other
presentation features.
A number of new shopping centres have
started operations in the last two years. The
demand for higher quality retail environments
and products is evident from the success that
the new shopping centres have achieved.
However, the majority of Libyans do not
retail space in Tripoli. This is demonstrated
by the high occupancy rates enjoyed by most
retail properties in the city, Oasis Centre
being an exception due to its positioning.
Retail market demand arises not only from
Libyans and expatriates working in Libya,
but also from residents of neighbouring
countries. There is a moderate volume of
additional stock being added to the market,
although total GLA per capita still remain
small by regional standards. In addition, it is
expected that when Majid Al Futtaim Group
deliver their retail property, the majority of
existing facilities will suffer a fall in footfalls
and rental rates. This is simply a reflection
of the group’s strength and track record in
delivering best in class facilities in cities
across the region.

40 Colliers International

tripoli cumulative hotel room supply
16500
Number of Rooms
16000
15500
15000
14500
14000
13500
2011
The Libyan hospitality market is currently
in relative infancy. There are approximately
13,638 existing hotel rooms in Libya across
market and star stage rating. The government
expects considerable expansion of Libya’s
tourist arrivals in the short to medium term.
As a result, the government has entered into
a programme of promoting hotel construction.
This programme includes granting permission for
resort projects to be developed by international
companies, construction of tourism hotels near
local attractions such as the Leptis Magna, and
the renovation of government owned hotels in
Tripoli. Demand is expected to increase mostly
in the 4 and 5-star segments.
The current supply of 4 and 5-star hotels (as
locally classified) in Tripoli is around 1,950
rooms. It is expected that a further 2,664
international standard 4 and 5-star rooms will
be delivered by the end of 2013 (with the bulk
of this supply being added during the course
of 2012). This delivery schedule is, as always,
subject to the possibility of construction delays
and project release timings. As new stock is
added, a de facto downwards reclassification
of properties currently listed as 4 or 5-star is
likely to occur, and the likelihood of moderate
customer movement away from the existing
3-star sector (currently supported by a lack of
supply at the upper quality levels), is likely to
support the absorption of new stock.
A number of international hotel chains such
as Intercontinental and the Marriott have
entered the Libyan market. The only previously
existing international hotel, the Corinthia,
is now operating at an average occupancy
of between 75% and 80%. The government
owned and Radisson operated property, Al
TRIPOLI hospitality FIRST Quarter 2010
2012 2013
Mahary Radisson Blue Hotel, is operating at
around 50% occupancy. Along with these
internationally operated hotels, there are a Existing hotel room supply in
large number of small, locally operated hotels Libya amount to 13,638.
which are enjoying healthy occupancy rates
because of more competitive room rates and the
market PERFORMANCE (Y/E 2009)
fact that many travellers are simply unable to
find any availability in one of the higher grade MARKET OCCUPANCY: 75%
properties. However, it is likely that much of 5-STAR OCCUPANCY: 65%
the forthcoming hospitality stock in the market 5-STAR ARR: US$ 455
will be absorbed before the internationally 5-STAR RevPAR: US$ 275
operated segment starts to experience a decline
in occupancy rates. Currently, newly renovated
After experience lack of existing
or recently constructed hotels such as the Al
supply and heavily unsatisfied
Waddan Hotel are experiencing occupancy
demand; now a number of
rates of around 60%.
international hotel chains have
There are significant numbers of 5-star hotel now entered the Libyan market
rooms under development in Tripoli, which
will end the functionally monopolistic position
enjoyed by the Corinthia at present. These average room rate
developments will satisfy the existing latent
500
demand for 5-star hotel accommodation 450
within the city, as well as causing a downwards 400
reclassification of nominally 5-star government 350
300
run hotels. As this occurs, it is likely that a
US$
250
proportion of the demand currently satisfied 200
by government run hotels will be relocated to 150
new hotels under development. However, it is 100
50
likely that this additional supply will result in a
0
moderate reduction in occupancy rates. 4-star 5-star
Supply of 4-star and 5-star
hotel rooms will increase from
905 in 2011 to around 2,664
rooms by the end of 2013
Colliers International 41
 damascus OFFICE FIRST Quarter 2010

average office sales price q1 2010

5,000
4,500
4,000
3,500
3,000

US$ per m2
2,500
2,000
1,500
1,000
500
0
Damascus Tower Al Faiha Tower Victoria Building Wahet Al Fardos Engineers Buinding Queen Centre
(Downtown) (Downtown) (Downtown) Tower (Salhiyeh) A (Salhiyeh) (Mezzeh)

Office supply in the traditional Central Salhiyeh, which comprises the majority of
Business District (CBD) of Damsascus is a the capital’s converted office space and the
microcosm of the country’s historic business free zone area in Baramkeh.
Average sales price has remained stable
environment: predominantly outdated
in the last 12 months at US$5,430 Average rental rates recorded a large
buildings developed in the late 1960s to
Average annual rental rates showedan increase of 28% between Q3 2007 and Q3
increase of 24% between Q3 2008 early 1980s to house state-owned enterprises
2008. Rates increased by a further 24%,
and Q3 2009 but remained level and professional clusters including lawyers,
between Q3 2009 and Q1 2010 between Q3 2008 and Q3 2009. Sales prices
engineers and doctors. The previously
followed the same upward trend between
fragmented office space and CBD in
average rentals q1 2010 Q3 2007 and Q3 2008, increasing by 4%,
Damascus has become more formalised with
700 followed by a larger increase between Q3
the establishment of privately-owned banks
600 2008 and Q3 2009 from US$ 2,550 per m2
and insurance companies in the wake of
US$ per m2 pa

500
400 and US$ 3,561 per m2, amounting to 40%.
the sector’s liberalisation. This process was
300 In Q1 2010, sales transactions slowed, down
200 driven further by the entry of multinational
100 causing prices and rental rates to level out.
0 companies and more recently, financial
brokerage firms into the city’s business Colliers expects the supply of dedicated
Damascus Tower
(Downtown)

Al Faiha Tower
(Downtown)

Victoria Building
(Downtown)

Wahet Al Fardos
Tower (Salhiyeh)

Engineers Buinding
A (Salhiyeh)

Queen Centre
(Mezzeh)

arena, which has also sustained demand for
office space.
Damascus office market is immature and Colliers International conducted a survey
fragmented, with high sales prices driven of designated office buildings in Damascus,
by demand regardless of quality of product
which comprised seven buildings with a
total Net Leasable Area (NLA) of 61,205
PERFORMANCE indicators
m². Office space within existing mixed-use
Average Rent: US$ 370 per m² pa
developments, most notably the Queen
Premium Rent: US$ 887 per m² pa
Average Sales Price: US$ 5,430 per m²
Centre in Mezzeh and the Damascus
Average yield: 6.8% Boulevard attached to the Four Seasons
Vacancy Rate: 10% Hotel, amounts to an additional NLA of
2,640m². Collective office space in the city
Colliers anticipates delivery of
86,000 m2 NLA to enter the market is still less than total NLA within the free
between 2010 and 2012 zone located in Baramkeh, estimated at
65,550m². Existing office supply is allocated
change in the average sales
in the following areas; the business area of
6,000
5,000 Downtown Damascus, the Mezzeh district,
which has emerged as a secondary business
US$ per m2
office space to increase by 66% between
2010 and 2012, concentrated mainly in
Yafour. The combination of rising demand
and inadequate supply, compounded by
the supply constraints and costs involved
in converting residential space into office
units, have led to a steady rise in office sales
prices. The potential increases in investment
yields has renewed investor interest in the
development of office space, though this
has yet to manifest itself into further supply.
Demand is expected to further increase
when the free trade agreement between
Syria and the EU is finalized during the
course of 2010. This agreement is expected
to remove all trade barriers, albeit gradually,
between Syria and the EU and it will allow
European companies to enter the Syrian

4,000 market. This should increase demand for

3,000
2,000 area with the development of two office office space as European companies seek
1,000 buildings, and the adjoining districts of to open new offices to start operations in
0
2009 2010 Kafr Soussa, Abu Roumana, Rawdah, and Damascus.

42 Colliers International
 damascus reSidential FIRST Quarter 2010

average residential sales price q1 2010

10,000

9,000

8,000

7,000

6,000
US$ per m2

5,000

4,000

3,000

2,000

1,000

0
Abu Malki West Maisat East East Kafr Dummar
Romana Malki Rukn Mezzeh Mezzeh Sousseh
(Villas) (Villas) (Towers)

Following high increases of 30%

Current trends in the residential market have
coincided with increased investment activity
at the macroeconomic level, and sectoral
developments in real estate and tourism.
This has improved investor confidence and
stimulated appetites for the acquisition of
residential real estate assets. Demand on
the part of owner-occupiers has also been
generated out of the liberalization of the
2009. During the period between Q3 2009
and Q1 2010 however rental rates remained
stable at US$ 210 per m² per annum. Sales
prices followed the same growth pattern
between 2007 and Q3 2009 and remained
unchanged in Q1 2010, stabilizing at US$
4,160 per m². Due to a larger increase in sales
price, the rental yield decreased from 6% in
Q3 2008 to 5% in Q3 2009. Rental yields
between 2008 and 2009, rental rates
and sales prices remained stable in
Q1 2010 compared to 2009
PERFORMANCE indicators
Average Rent: US$ 210 per m² pa
premium Rent: US$ 343 per m² pa
Average Sales Price: US$ 4,160 per m²
Average Yield: 5%
Vacancy Rate: 10%

banking sector, and the expected improvement
in the competitiveness of mortgage financing
offerings, the scope for which has been
boosted by the draft mortgage and financing
law. Demand generated by investor appetite
together with demand driven by the growth
showed little movement between Q3 2009 Rental yield decreased from 6% in
and Q1 2010 due to the levelling of both Q3 2008 to 5% in Q3 2009, due
to a larger increase in sales price
rental rates and sales prices.
average rentals q1 2010
Forthcoming supply, amounting to
approximately 3,000 residential units, will be 400
350
concentrated primarily in western Damascus,
US$ per m2 pa

300
in population are expected to give rise to an
and the western outskirts of the city, in line 250
undersupply in residential property. 200
with urban expansion trends, government 150
Current residential supply is estimated at planning and investor activity. A number 100
50
877,323 units. The Housing Authority itself of major developments are currently under 0
has only developed 40,000 units over the last construction in urban and rural Damascus,
Abu Romana

Malki

West Malki
Maisah Rukn
El Deen
East Mezzeh
(Villas)
East Mezzeh
(Towers)

Kafr Sousseh

Dummar

50 years, meeting only 20% of actual demand.
The housing shortage currently experienced
has been exacerbated by tenants vacating
long-term rented accommodation. Demand
for housing is mainly concentrated in middle
and lower-income segments, given that
salaries in the city centre average US$ 200 a
month. Demand for upper-middle and high
income housing, driven by the entry of more
foreign companies into the Syrian market will
further increase the supply shortage in this
segment of the market.
carried out by private, public and cooperative
developers.
Based on Colliers’ analysis, total demand in
2012 is forecasted to exceed supply by 10.5%.
Applying this to existing units and confirmed
forthcoming supply in 2012 (assuming that
the government succeeds in building 96,600
low cost housing units in rural Damascus),
results in a shortfall of approximately 106,339
units, indicating that the market will remain
undersupplied for the next five years.
US$ per m2
Colliers expects over 3,000 units to be
delivered to the market over the next three years
Based on estimated demand and
forthcoming supply, it is expected that
a shortfall of approximately 106,339
units will arise, likely to leave the market
undersupplied for the next five years
change in the average sales
4,500
4,000
3,500
3,000

Rental rates increased by 4% between Q3 2,500

2,000
2007 and Q3 2008, followed by a larger 1,500
increase of 36% between Q3 2008 and Q3 1,000
500
0
2009 2010

Colliers International 43
 damascus retail FIRST Quarter 2010

Damascus forthcoming shopping mall supply

180,000

160,000

140,000

120,000

100,000
m2 GLA
80,000

60,000

40,000

20,000

0
Sabboura Project Eight Gate Salaam Mall Syria Towers Mall

Whilst retail in Old Damascus is underpinned
Damascus is registering an increase by international tourists and low to middle
in consumer purchasing power income shoppers from all over the city and
driven by the entry of expatriates, the rural outskirts, international brands in
repatriated Syrians, and the Shalaan’s retail outlets started to attract
growth of the private sector the Syrian high-income segment, who
Average annual rent in shopping had previously done most of their clothes
malls is currently US$ 840 per m2 shopping whilst on holiday abroad. The
new clothing lines also attracted visitors
from Lebanon, Jordan and to a lesser extent
average rentals q1 2010
the GCC. This process saw the emergence
1,800
of single-brand outlets in the Shalaan area
1,600
1,400 and the establishment of retail outlets in
US$ per m2 pa
A young population, the successful adoption
of the mall concept both as a shopping and
leisure destination, increases in consumer
spending power, sustained and rising demand
on the part of expatriates living in Syria
and increases in tourism inflows represent
compelling fundamentals driving the
development of shopping malls both in the
city and in the emerging new Damascus.
The city has seen an increase in consumer
purchasing power driven by the entry of
expatriates, repatriated Syrians, and the
growth of the private sector in response to

1,200
the neighbouring high-income area of Abu
1,000 improvements in the business environment.
800 Roumana. Existing shopping mall supply
Shopping mall supply is expected to double
600 amounts to 86,600 m2 of GLA.
400 over the next five years, indicating investor
200 One of the major shifts in the Damascus retail confidence in the popularity of malls in
0
market was initiated with the introduction Syria. The volume of forthcoming supply,
City Mall

Town Center

Cham City
Center

Skiland

Damascus
Boulevard
Damasquino
Mall

of shopping malls, providing a new retail
experience for customers. Although the
first mall to be established in the capital
Reduction of import restrictions on was technically the City Mall, part of the
internationally branded clothing, mixed-use Rotana Queen Centre in Mezzeh,
supported by the GAFTA, Syria- the concept did not really take off until the
Turkey and tentative Syria-EU
Free Trade Agreements completion of the Town Center Mall in
2004, the first and largest standalone retail
Shopping mall supply is development in Syria. The mall concept
expected to increase by 256%
has been taken further with the completion
over the next five years
of the Cham City Center in Kafr Soussa
AVERAGE sales price in February 2007, the completion of the
Skiland shopping mall off the Airport Road
60,000
at the end of June 2007 and the opening
50,000
of the biggest mall in Syria, Damasquino,
40,000
US$ per m2
however, does raise concerns as to the
strength of demand required to absorb future
development. Based on Colliers International
analysis of existing shopping mall supply,
current GLA per capita in Metropolitan
Damascus is 0.02, compared to 1.3 in
Dubai or 0.53 in Doha. This is expected to
increase to more than 0.07 by 2013, based on
forthcoming supply and population growth
estimates. The introduction of new leisure
facilities and the encouragement of transport
facilities to and from the destination at
hotels, tourism centres, universities and
selected residential areas, are all optimal
means of reducing market oversupply risk.

located next to Cham City Centre in Kafr

30,000

20,000
Sousa area. The mall is targeting middle to
10,000
high income citizens and has attracted new
0
international brands to Syria such as Nike
and Lacoste.
Al Shaalan

Al Hamra
Street

Hamediya

Abu
Rumanah

Salhiya

44 Colliers International

damascus cumulative hotel room supply
7,000
6,000
Number of Rooms
5,000
4,000
3,000
2,000
1,000
0
2009 2010 2011
Increasing demand, generated by higher visitors
inflows, has urged the government to attract
greater tourism investments and develop the
required infrastructure and facilities. Demand
increased as a result of growth in corporate
tourism in line with economic development and
increased business opportunities. In addition to
a recovery in the number of Lebanese visitors
and international tourists. An expected
doubling of religious tourism by 2010, and an
expected surge in the number of Turkish tourist
will potentially increase demand.
Whilst rural areas of Damascus have
been designated as strategic areas for the
development of the capital’s tourism offering
in the longer term, the immediate focus is on
hotel provision within the city itself due to an
existing shortage of hotel rooms in proportion
to demand, causing high occupancy levels
and inflated average room rates on the basis
of supply shortfalls, rather than the quality of
rooms and services available. The shortage
is particularly acute in the four and five star
hotel segments in Damascus, which hosts the
majority of regional and international tourism
inflows.
Arab tourists represent the largest market for
hotels in both urban and rural Damascus. Arab
tourists staying in urban Damascus are more
likely to visit a 5-star rather than 4-star hotels.
Syrians represent the second largest market
for hotels in Damascus, however they tend to
stay in lower rating hotels, such as 4-star and
lower. International tourists staying in urban
Damascus are slightly more likely to visit a 5-
star rather than 4-star hotels.
damascus hospitality FIRST Quarter 2010
2012 2013 2014 2015
Hotel performance has followed an upward
trend, where average room rate increased
A recovery in the number of Lebanese
to US$110 in 2009 and market occupancy
visitors and international tourists, and
rate increased from 70% to 72% over the
a significant increase in the number of
same period. The increases in occupancy rate
Turkish tourists is expected in 2010
and average room rate led to an increase in
RevPAR, reaching US$79. The number of tourists visiting
Forthcoming supply of 4 and 5-star hotels, Syria has increased by 12%
scheduled for completion by 2013, is in 2009 over 2008.
estimated to increase existing supply by
31%. The development of the forthcoming market PERFORMANCE (Y/E 2009)
Intercontinental on a site adjoined to the
MARKET OCCUPANCY: 72%
Sheraton is representative of the future
5-STAR OCCUPANCY: 77%
challenge to incumbent hotels that have
ARR: US$ 110
enjoyed a monopoly over the 5-star market,
REVPAR: US$ 79
up until the completion of the Four Seasons
last year. The proposed operator transfer of
the older hotels will serve to reduce the risk An increase in occupancy levels have
of a decline in occupancy levels, providing supported an increase in RevPAR
them with a chance to upgrade their business, Average occupancy rate for 5-
leisure and F&B amenities to compete with
star hotels has decreased from
forthcoming supply.
89% in 2008 to 77% in 2009
To achieve demand supply equilibrium by 2015,
We expect the delivery of over 2,396
the supply of hotel rooms should increase by
hotel rooms between 2009 and 2013
90%. On the other hand, the confirmed hotel
forthcoming supply will only increase by 70%,
therefore the hotel market in Damascus will 5-star Average room rate
remain undersupplied in the short to medium
300
term, inflating room rates and occupancy levels
on the bases of supply shortage rather than 250
the quality, services and amenities offered by 200
the hotels. However, as more internationally
US$
150
branded hotels enter the market, such as the
Kempenski and Movenpick hotels, the quality 110
of hotel services and amenities in Damascus 50
will therefore improve, providing larger array
0
of selections to hotel guests. Dedeman Sheraton Cham Four
Hotel Palace Seasor
Colliers International 45
mena real estate overview FIRST Quarter 2010

over 260 offices

more than 60 countries
6 continents

EMEA 85
Americas 129
Asia Pacific 52

US$ 2bn in revenues

868 million ft2 under management
Over 11,000 Professionals

Available Market Studies:

Dubai, UAE

Abu Dhabi, UAE

Doha, Qatar

Riyadh, KSA

Jeddah, KSA

Eastern Province, KSA

This regional overview is extracted from a series of comprehensive real estate market studies which are
Mecca and Medina, KSA constantly updated and immediately available from Colliers International MENA for purchase

Muscat, Oman

Cairo, Egypt Colliers International is a global real estate consultancy company providing a comprehensive
Amman, Jordan range of property services to a broad range of clients on an international basis. Core services
include property and asset management; leasing; development consultancy & strategic
Damascus, Syria
advisory; property valuations and international property investment services.
Tripoli, Libya

Khartoum, Sudan

© Colliers International FZ LLC

Market Research Advisory Valuations Capital Investment Agency Property Management
Reproduction of the contents of this publication
is prohibited without gaining prior permission
from Colliers International.
The contents of this report is for information
only and should not be relied upon as a substitute
Office
for professional advice, which should be sought
from Colliers International prior to acting in
reliance upon any such information. The opinions, Retail
estimates and information provided herein are
made by Colliers International and affiliated
companies in its best judgment, in good faith Residential
and based as far as possible on sources deemed
reliable. Notwithstanding, Colliers International
and affiliated companies do not provide warranty Hospitality
to the accuracy of, and disclaim any liability for
errors and omissions made in respect of providing
such information. This report does not constitute
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46 Colliers International
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