FutureBrand's Annual Gulf Real Estate Study

Futurebrand’s annual
GulF real estate
study

GULF REAL ESTATE STUDY 1

This year’s Gulf Real Estate Study (GRES) is a reaction to the challenging landscape of the
real estate market we face today, and a shift in the way we both question and celebrate the
events spurred by the industry in the past twelve months.

Having focused and built many of the leading brands in this region and category for over ten
years, we are continually looking to assess achievements and failures as well as to measure
the performance of the brands that remain and those that we hope will capitalize. As our
name suggests, we seek insights and trends that will inform the brands’ future.

Where hyperbole once ruled, today the focus is on moderation. Developers are turning their
attention to previously neglected segments of the market with a broader variety of develop-
ments that cater not only to the luxury customer but also to the more affordable end of the
market. Countries in the Gulf Cooperation Council (GCC) are starting to create strong national
brands and forge themselves into cultural and leisure destinations that are not defined by
iconic real estate offerings but are complemented by them.

Given these changes, developer brands are going to have to proactively connect with and
listen to their end customers — both prospective clients and current residents. Those
who will best manage their reputations and build real trust in this period of difficulty will
ultimately succeed and endure.

We hope you enjoy reading this report. We’d love to have your thoughts and comments on our
findings and insights!
Cover image courtesy of Katarina Premfors
katarinapremfors.com


COntents ShaRE yoUR commEnTS:
futurebrand.com/gres or Twitter: #gRES

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


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


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


neWs & nOteWOrtHy State of the Market
A survey in March 2009 found that investors in the GCC see Abu Dhabi as the region’s
strongest-performing real estate market in the Middle East North Africa (MENA) region during
2009–2010. Abu Dhabi (at 26%) is closely followed by Saudi Arabia (25%) and Qatar
(19%).4
State of the Market
It is estimated that more than 15,000 apartments in Qatar are vacant.5
Despite growing demand in the housing sector, sale prices
in the Saudi real estate sector are typically 58% below the In Dubai’s central business district (between the World Trade Center and Interchange 1),
MENA average.2 office rents in September 2009 averaged between AED 225–275/square foot, as compared to
AED 375–400/square foot in November 2008. In Abu Dhabi, office rents averaged AED 230/
square foot in September 2009, a fall from AED 280/square foot in November 2009.6

Developers claim that Bahrain will need 80,000 housing units targeting the middle and
lower-income market segments to meet demand by 2020. The Bahraini government has
State of the Market announced plans to build 50,000 low-cost housing units by 2014.7

By the end of 2008, Dubai’s hospitality sector was reporting Analysts forecast that the Kingdom of Saudi Arabia will have to build 1.5 million new homes
an average occupancy level of 79%, the lowest in five by 2015 to meet its housing demand. Projections estimate that at current levels of supply,
years.3 the KSA market will see a shortage of 150,000–800,000 housing units by 2012.8

Projects in Bahrain currently hold a cumulative worth of over $36 billion. Since the start of
the economic crisis, 54 projects have been cancelled or put on hold, while construction and
planning continue on 148 projects.9


neWs & nOteWOrtHy State of the Market
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai and Vice-President
of the UAE, was quoted as saying that the worst of the crisis had passed and the emirate was
well poised to recover, as real estate does not constitute the mainstay of Dubai’s economy.11

State of the Market Dubai World, which owns the property unit Nakheel, has asked creditors to allow the firm to
delay debt payment until May 2010 at the earliest. The Dubai government announced that
One in four homes and a quarter of all office space in Dubai it had borrowed $5 billion — half of the $10 billion it initially planned to raise by the end of
is currently unoccupied. Oversupply has created a glut 2009 — from Abu Dhabi’s government-controlled banks.12
in the market, and an additional supply coming onto the
market is expected to further depress prices.10 The Dubai government announced that it would not guarantee Dubai World’s debt of $59
billion and that lenders must bear part of the responsibility.13

As part of an initiative to protect property investors, the Dubai Land Department is working
on drafting a new law that would further regulate the relationship between developers
and investors.14

Due to a new supply of hotel rooms, the average occupancy rate has dropped below 70% from
peaks of over 87% experienced between January and June 2008.15


neWs & nOteWOrtHy Market CorreCtion
Property prices for undeveloped land in Kuwait have fallen by 40%–50%, and built properties
have seen devaluations of up to 30%.18

By the end of 2008, Dubai’s commercial sector reported a 16% vacancy rate, up 7% from six
months earlier.19
MARKET CORRECTION
A 400-square-meter villa in Qatar was for sale at $549,390 in September 2009, down from
In January 2009, 500 developers were officially registered
$824,085 in September 2008.20
with RERA, down from 800 in November 2008.16

Qatar’s current projects have a cumulative worth of over $42 billion. Since the start of the
economic crisis, seven projects have been cancelled or put on hold, while construction and
planning continues on 124 projects.21

Market CorreCtion
Delays
By the end of 2009, the
$220 billion worth of projects have been put on hold or cancelled in the GCC since the start
number of developers had
of the global economic slowdown, with 91% of the cancellations announced in Dubai. Besides
been reduced to 473.
17

the announced postponements and cancellations, 54% of all announced projects in the GCC,
totalling $1.05 trillion in projected costs, are under threat of being put on hold or cancelled.22


neWs & nOteWOrtHy SALES & MARKETING
Saudi Arabia has banned off-plan sales and promotions without prior approval from a
commission that has yet to be established.26
INFRASTRUCTURE
MERGERS & CoNSoLIdATIoNS
Qatar will spend $17 billion over the next five years to boost
The government of Qatar ordered Barwa Real Estate and Qatar Real Estate (Alaqaria) to
its tourism infrastructure.23
merge operations in early 2009. The two companies are in the final stages of merging their
non-competing portfolios, which will result in a real estate giant with a market capital-
INFRASTRUCTURE ization estimated at $3 billion.27

Infrastructure projects worth $28.5 billion are currently Amlak and Tamweel declared in November 2008 that they would initiate a merger between
under construction in the UAE, with another $76.9 billion themselves and two other government-owned banks, which was to have been completed by
worth of projects planned for the coming decades.24 Q1 2009. The global real estate crisis and deepening recession have negatively affected both
lending institutions, and the nationwide steering committee responsible for seeing through
the merger is still reviewing the plans.28

In March 2009, Qatar’s Ezdan Real Estate Company — the country’s largest property firm, with
market capital of $2.6 billion — revealed that it was looking into the possibility of merging
INFRASTRUCTURE with the Group of International Housing Co. to help both companies weather the economic
slowdown.29
Though $62 billion worth of public works projects were put
on hold or cancelled between October 2008 and April 2009
After months of talks about combining Deyaar and Union Properties into a single company,
in Saudi Arabia, the government awarded $137 billion in
the merger was scrapped because the new entity would not be able to secure financing in the
new public-sector contracts over the same period.25
tough real estate climate.30


neWs & nOteWOrtHy CommerCial
In the Jeddah office market, rents continue to decrease and vacancy levels continue to rise
with the arrival on the market of new, better-equipped office spaces.32

commERciaL
Average Dubai office prices were down 58% and office rents fell 44% in Q3 2009 as
Abu Dhabi’s prime office sector saw compared with the same period in 2008.33
a year-on-year drop of 40% in office rents.

Office rents in Dubai’s free zones have fallen by as much as 63%. While Dubai International
Finance Centre (DIFC) continues to command the highest rates in Dubai (AED 280–325/
square foot), Jumeirah Lale Towers (JLT) has seen a significant drop in asking prices, down
In Q3 2008, prime from AED 240–280/square foot in Q3 2008 to AED 70–120/square foot in Q3 2009.34
rental rates stood at
AED 5,000/square reTail
meter. Retail rents in Dubai have fallen by 18% in the past year due to an oversupply of stock and
lack of demand.35

Since then prices
have dropped to
AED 2,900/square
meter.31


neWs & nOteWOrtHy Mortgages and Financing
In recent months, banks in the region have introduced stringent rules for lending. It is
estimated that 70% of banks in MENA have restricted mortgage loans to individuals
earning more than $5,450 per month. Of those surveyed, 77% of lenders are still financing
residential properties; and 40% of these limit financing to one property per applicant.37

UAE Central Bank figures show that mortgages provided by the nation’s 52 national and
foreign banks rose by AED12 billion from January to June in 2009, as compared to AED44
billion for the same period in 2008.38
Layoffs
LayoFFs
In December 2008 Dubai Properties laid off an
estimated 600 staff members, while Damac let 200 In December 2008, Nakheel made 500 staff members, or 15% of its work force, redundant,
workers go at around the same time.36 while its sister company Istithmar World cut almost 10% of its work force. Facing continuing
cancellations and project delays, Nakheel cut another 400 staff members in July 2009.39

Deyaar laid off 20% of its work force in October 2009, days after posting a 74% drop in Q3
profits as compared to the same period in 2008.40


2009 nOtables
TRanSpoRTaTion nETwoRkS
Dubai Metro began operations in 2009. The project will serve as a litmus test for other GCC
governments interested in developing domestic and regional transportation infrastructure.
Despite the economic downturn, Nakheel launched its Palm Jumeirah Monorail this year, and
others in the region (such as Masdar) appear committed to providing internal transportation
networks that link to the greater public transportation grid.

REgULaToRy aUThoRiTiES
Following the launch of RERA (Real Estate Regulatory Authority) in 2008, ARERE (Ajman
Real Estate Regulatory Establishment) was launched in January 2009. Various regional
governments, including Saudi Arabia, have announced plans for establishing similar entities
to provide greater transparency and stability.

pRojEcT cancELLaTionS anD DELayS
The increase in the number of project delays and cancellations has further dented investor
confidence. Conflicts between investors and developers, master developers and third-party
developers, and tenants and landlords are becoming increasingly common as a result.

changES To ThE UaE FREEhoLD pRopERTy ownERShip LawS
The UAE government issued a federal law to clarify the issuance of visas to foreign nationals
owning freehold property in the UAE. The multiple-entry, six-month visa for those whose
properties are worth over AED 1 million and who have a monthly income of no less than AED
10,000 has had a lukewarm reception. It continues the trend of new regulations affecting
investors’ assessment of the market.


2009 trends
aFFoRDaBLE hoUSing
Perhaps in reaction to the oversaturation of luxury products, developers are starting to cater
to the middle to lower-income brackets. Governments (Bahrain, Saudi Arabia) as well as
developers and financial institutions (Aldar, Saudi Binladin, Kinan, Islamic Development
Bank) have all announced products to serve a previously neglected market segment.

FLExiBLE LEaSing agREEmEnTS anD BUying opTionS
Indicative of the shift in the dynamics of supply and demand, landlords are now offering
and accepting multiple cheques for annual leasing agreements, in contrast to the previous
practice of taking single cheques. Additionally, alternative payment options such as “rent
to own” programs have become more commonplace as developers try to spur the market.

TRaDing Up
Falling prices have empowered various segments of the rental market to move into bigger or
better properties at the same or lower cost as their previous tenancy. This has led to some
noticeable shifts in the demographics and concentration of different neighborhoods. This
trend is also affecting the commercial real estate market, albeit at a slower pace.

FaiLURE oF aUcTionS
Once an attractive way to achieve record-high prices, two property auctions held in Dubai
during 2009 have been largely considered failures, with many of the available plots failing to
meet the reserve prices.


reGIOn at a GlanCe


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


saudI arabIa UpDATES & MiLESTonES

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


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


Qatar UpDATES & MiLESTonES

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


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


baHraIn UpDATES & MiLESTonES

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


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


uae UpDATES & MiLESTonES

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


uae UpDATES & MiLESTonES

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


uae 2009 UpDATES & MiLESTonES

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


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


ImpaCt OF tHe dOWnturn
Based on the research, the principal impact of the economic downturn can be seen in the People are almost 70% more likely to see value in investing right now than they are to feel
lack of trust homebuyers have for developers. Heightened awareness of risk, the potential for less likely to buy or invest in the region ever again. A significant majority—approximately
monetary loss, loopholes and corruption all speak to a weakening of homebuyer confidence. two-thirds of homebuyers—see value in the Gulf real estate market and intend to purchase in
Perhaps most interesting is that this new wariness does not seem to affect homebuyer the future.
attitudes towards purchase.

Changes in Consumer Attitudes toward the Gulf Real Estate Industry Belief that Property Prices in the Future Likelihood of Investing in
Region Today Offer Good Value for the Region
I am more aware of risk now 56.4% the Money
I am less likely to buy or invest in the Believe Likely
region again 22.6%
I see great value and opportunities to buy a
home here right now 38.0%
I am disappointed with the way the region 69% 63%
responded to the downturn 24.6%
I now have more fear/concern of losing
money
45.7%

I feel less urgency in finding a home
to buy here
28.1%
15% 16% 22% 15%
I now have less trust in the developers to
deliver what they promise
38.6%

I am more aware of loopholes and Unsure Don’t Believe Unsure Unlikely
corruption
49.9%

I believe prices will decline further 52.9%
0% 15.000% 30.000% 45.000% 60.000%


deVelOper reCOGnItIOn deVelOper reputatIOn
Emaar remains the most recognized developer brand, although its lead over Nakheel has Emaar, again, remains the most highly esteemed developer brand, but the dramatic rise of
decreased. Beyond the jumps made by Barwa, Aldar and United Development Company Aldar, Dar Al Arkan, Barwa, Dubai Properties and UDC has closed the gap significantly.
(UDC), the big story is the decline of Damac. In 2008, Damac had risen to share the
#2 position in recognizability with Nakheel. Today, Damac is almost 70% less familiar
than Nakheel.

Top 2 Box* Familiarity Across the
Top 2 Box* Familiarity Across the ∆ Vs. 2008 2008
∆ Vs. ExcellentExcellent Overall Rating (Top Box)*
Overall Rating (Top Box)* ∆ Vs. 2008Vs. 2008
∆
UAE, Saudi Arabia and Qatar Qatar
UAE, Saudi Arabia and

Emaar 69%
Emaar 69% 0.31 0.31
-8% -8% Emaar Emaar 56% 56% 0.44 -14%
0.44 -14%

Nakheel 41%
Nakheel 41% 0.59 0.59
+9% +9% Aldar Aldar 41% 41% 0.59 0.59
+28% +28%

Barwa 18%
Barwa 18% 0.82 0.82
+8% +8% Dar Al Arkan Al Arkan
Dar 37% 37% 0.63 0.63
+33% +33%

Aldar 17%
Aldar 17% 0.83 0.83
+3% +3% Barwa Barwa 32% 32% 0.68 0.68
+25% +25%

UDC 15%
UDC 15% 0.85 +7%
0.85 +7% Dubai Properties Properties
Dubai 31% 31% 0.69 0.69
+29% +29%

Damac 13%
Damac 13% 0.87 -19%
0.87 -19% UDC UDC 26% 26% 0.74 +19%
0.74 +19%

13%
Dubai Properties Properties
Dubai 13% 0.87 No0.87 No Change
Change Nakheel 20%
Nakheel 20% 0.8 -5% 0.8 -5%

Dar Al Arkan Al10%
Dar Arkan 10% 0.9 +1%0.9 +1% Sorouh 18%
Sorouh 18% 0.82 N/A0.82 N/A

Sorouh 5%
Sorouh 5% 0.95 0.95
N/A N/A Damac 14%
Damac 14% 0.86 -12%
0.86 -12%

0% 0%25% 25% 50% 50% 75% 75%100% 100% 0% 0% 38% 38% 75% 75% 113% 113% 150%
*Top 2 Box*Top 2 Box the percentagepercentage of respondents the rated the
*Top 2 Box identifies the of respondents who rated who rated the
identifies identifies the respondents who
developer as the one as the one with whom they are most oror second-most familiar.
developer with whom they are most or second-most familiar. familiar.
developer as the one with whom they are most second-most *Top Box is *Toppercentagepercentage of therated the developer Excellent.
*Top Box is the percentage who developer Excellent. Excellent.
the Box is the of who rated who rated the developer


deVelOper preFerenCe deVelOper OutlOOk
Similar to reputation, Emaar’s once unassailable lead in the GCC has greatly diminished. In terms of how developers are expected to do in the current economic climate, Emaar is still
Aldar, Dar Al Arkan and Barwa are now preferred at levels that are beginning to rival Emaar. the dominant developer brand in the region.

In the Current Economic Situation, Which Developer Will...

Most Want to Buy Ato Buy A Home
Most Want Home ∆ Vs. 2008 2008
∆ Vs.
From (Top Box)* Box)*
From (Top In 50% Current Economic Situation, Which Developer Will...
the
50%

38%
Fare The Best
Emaar Emaar 52% 52% 0.48 0.48
-3% -3% 50%
50%
25%
38%
Fare The Best
Aldar Aldar 40% 40% 0.6 0.6
+27% +27% 13% 10% 7% 6% 6% 5% 4% 7%
4% 1%
25%
Dar Al Arkan Al Arkan
Dar 34% 34% 0.66 +29%
0.66 +29% 0%
10%

Emaar Emaar

Aldar Aldar

Nakheel Nakheel

Barwa Barwa

Dubai Properties

Dar Al Arkan Arkan

Damac Damac

UDCUDC UDC

Sorouh Sorouh

ofNone of These
13%

Dar Al Arkan Arkan
7% 6% 6% 7%

Properties
5% 4% 4%

Nakheel
Barwa Barwa 30% 30% 0.7 0.7

None ofNone of
+27% +27% 1%

Sorouh Sorouh
Damac Damac
Emaar Emaar

Barwa Barwa

Dubai Dubai

NoneThese These
Aldar Aldar

UDC
0%

Dar Al
Dar Al
Nakheel

Dubai Properties

These
Dubai Properties Properties
Dubai 28% 28% 0.72 +21%
0.72 +21%

Properties
%0
UDC UDC 24% 24% 0.76 +17%
0.76 +17%
%31 3% 3% 4% 4% 4% 1%
Nakheel 19%
Nakheel 19% 0.81 0.81
+1% +1% 10% 12%
%0
%52 14%
3% 3% 4% 4% 4% 1%
Sorouh 16%
Sorouh 16% 0.84 N/A
0.84 N/A %31
%83 10% 12%
%52 14%
Damac 11%
Damac 11% 0.89 0.89
-8% -8% %05 44%
%83 Fare The Worst
0% 0% 38% 38% 75% 75% 113% 113% 150% 150%
*Top Box is the percentage of respondents who agree completely with the %05 44%
statement, “This is the developer I would most want to buy a home from.” Fare The Worst


deVelOper ImaGe
If “room to improve” and “parity at the top” were the two key takeaways in the 2008 Innovative
Innovative
examination of developer brand image, in 2009 the themes would touch on “weakening” AverageAverage B-
Grade: Grade: B-
and “decentralization.” Perhaps not surprisingly, given the downturn-fueled events of 2009,
Emaar Emaar 4.4 4.4
ratings of developers across measures have declined, typically by between 5% and 10%.
This is compared with the 2008 performance figures that had room to improve. Overall, the
average grade fell from a B to a C+/B-. The other big story of 2009 is the continued decline Aldar Aldar 4.1 4.1
of the Nakheel brand, the dramatic fall of Damac and the rise of non-Dubai-based developer
brands including Abu Dhabi’s Aldar, Saudi Arabia’s Dar Al Arkan and Qatar’s Barwa. Nakheel Nakheel 4.1 4.1

Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior), Damac Damac 3.9 3.9
among home buyers familiar with the developer.
Dar 3.8 3.8

3.6 3.8
3.6 43.8 4.24 4.4
4.2 4.4
High-Quality Construction
High-Quality Construction Builds Great Places to Live to Live
Builds Great Places
Average Grade: Grade: B-
Average B- AverageAverage B-
Grade: Grade: B-
Emaar Emaar 4.4 4.4 Emaar Emaar 4.3 4.3

Aldar Aldar 4.2 4.2 Aldar Aldar 4.1 4.1

Dar 4.2 4.2 Dar Al Arkan Al Arkan
Dar 4.0 4.0

Nakheel Nakheel 4.0 4.0 Nakheel Nakheel 4.0 4.0

Dubai Properties3.9
Dubai Properties 3.9 Damac Damac 3.9 3.9

3.8 3.95 4.1 4.25 4.4
3.8 3.95 4.1 4.25 4.4 3.8 3.925 4.05 4.175 4.3
3.8 3.925 4.05 4.175 4.3


Scores represent the average rating on a 5-point scale, from 1 (Unacceptable) to 5 (Superior),

Easy to Work With With
Easy to Work Good Value for the Money Money
Good Value for the
Average Grade:Grade: B-
Average B- AverageAverage C+
Grade: Grade: C+


Dar Al Arkan Arkan 3.9
Dar Al 3.9 Dar Al Arkan Al Arkan
Dar 4.0 4.0

Dubai Properties 3.9
Dubai Properties 3.9 Nakheel Nakheel 3.8 3.8

Nakheel 3.9
Nakheel 3.9 Damac Damac 3.8 3.8

3.8 3.925 4.05 4.175 4.175 4.3
3.8 3.925 4.05 4.3 3.6 3.725 3.85 3.975 4.1
3.6 3.725 3.85 3.975 4.1
Experienced in Real EstateEstate Development
Experienced in Real Development Provides Homes Homes that Are a Good Investment
Provides that Are a Good Investment
Average Grade:Grade: B-
Grade: Grade: C+


Dubai Properties 3.9 Dar Al Arkan Al Arkan
Dar 3.9 3.9

Nakheel 3.9
Nakheel 3.9 Nakheel Nakheel 3.9 3.9

Damac Damac 3.9 3.9 Dubai Properties
Dubai Properties 3.8 3.8

3.8 3.95
3.8 4.1 4.25
3.95 4.1 4.4
4.25 4.4 3.6 3.75 3.9 4.05 4.2
3.6 3.75 3.9 4.05 4.2



Luxurious Homes Homes
Luxurious Reasonably Priced Priced
Reasonably
Average B- AverageAverage C
Grade: Grade: C

Aldar Aldar 4.1 4.1 Dubai Properties

Dar 4.1 4.1 Dar Al Arkan Al Arkan 3.7
Dar 3.7

Nakheel Nakheel 4.1 4.1 Barwa Barwa 3.7 3.7

Damac Damac 3.9 3.9 Nakheel Nakheel 3.7 3.7

3.8 3.925 4.05 4.175 4.3
3.8 3.925 4.05 4.175 4.3 3.6 3.7 3.8 3.9
3.6 3.7 3.8 43.9 4
Environmentally Oriented
Environmentally Oriented Financially Sound Sound
Financially
Grade: Grade: B-


Dar 4.0 4.0

Dubai Properties
Dubai Properties 3.9 3.9 Nakheel Nakheel 3.9 3.9

Barwa 3.7
Barwa 3.7 Damac Damac 3.9 3.9

3.6 3.775 3.95 4.125 4.3
3.6 3.775 3.95 4.125 4.3 3.8 3.925 4.05 4.175 4.3
3.8 3.925 4.05 4.175 4.3



Premium Amenities
Premium Amenities Responsive Customer ServiceService
Responsive Customer
Grade: Grade: C+
Emaar Emaar 4.3 4.3 Aldar Aldar 4.2 4.2

Aldar Aldar 4.1 4.1 Emaar Emaar 4.2 4.2

Dar 3.8 3.8

Nakheel Nakheel 4.0 4.0 Nakheel Nakheel 3.8 3.8

Dubai Properties
Dubai Properties 3.8 3.8 Damac Damac3.7 3.7

3.6 3.775 3.95 4.125 4.3
3.6 3.775 3.95 4.125 4.3 3.6 3.75 3.9 4.05 4.2
3.6 3.75 3.9 4.05 4.2
Well-Planned Units Units
Well-Planned Government Affiliated
Government Affiliated
Average B- AverageAverage C
Grade: Grade: C

Dar 4.2 4.2 Dubai Properties

Aldar Aldar 4.2 4.2 Aldar Aldar3.7 3.7

Damac Damac 4.0 4.0 Barwa Barwa3.7 3.7

Nakheel Nakheel 3.9 3.9 Nakheel Nakheel3.7 3.7

3.8 3.925 4.05 4.175 4.3
3.8 3.925 4.05 4.175 4.3 3.6 3.75 3.9 4.05 4.2
3.6 3.75 3.9 4.05 4.2



Trustworthy
Trustworthy Communicates Progress
Communicates Progress
Average Grade: Grade: C+
Average C+ AverageAverage C+
Grade: Grade: C+


Dar 3.9 3.9 Nakheel Nakheel 3.9 3.9

Nakheel Nakheel 3.9 3.9 Damac Damac 3.9 3.9

Damac Damac 3.8 3.8 Dubai Properties3.7

3.6 3.75 3.9 4.05 4.2
3.6 3.75 3.9 4.05 4.2 3.6 3.75 3.9 4.05 4.2
3.6 3.75 3.9 4.05 4.2
Desirable Locations
Desirable Locations Delivers on Time Time
Delivers on
Grade: Grade: B-

Aldar Aldar 4.1 4.1 Dar Al Arkan Al Arkan
Dar 4.1 4.1

Nakheel Nakheel 4.0 4.0 Aldar Aldar 4.1 4.1

Dar Al Arkan Al Arkan 3.9
Dar 3.9 Damac Damac 3.9 3.9

Damac Damac 3.9 3.9 Nakheel Nakheel 3.8 3.8

3.8 3.925 4.05 4.175 4.3
3.8 3.925 4.05 4.175 4.3 3.6 3.8
3.6 43.8 4.24 4.4
4.2 4.4

FutureBrand's Annual Gulf Real Estate Study

FutureBrand's Annual Gulf Real Estate Study

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