Abu Dhabi Real Estate

Issue 13 2013

06 Trends in Abu Dhabi’s real estate market

20How Saadiyat Island will boost tourism

10 Building a sustainable future

Abu Dhabi Real EstateConsolidation, new projects and a market upswing are changing the emirate’s cityscape.

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Welcome | 01Welcome | 01

The property market in Abu Dhabi is experiencing increasing investor interest driven by the market and economic growth. Since the end of 2012, Abu Dhabi’s real estate has shown a positive trend across the

residential, retail and hospitality sectors. Figures released by Statistics Centre – Abu Dhabi (SCAD) in June show that real estate grew 1 per cent in the fi rst half of this year.

This trend is set to continue as investor confi dence is being buoyed by a number of large-scale announcements. The major one was Abu Dhabi’s Executive Council announcing an AED330 billion investment in the economy over the next fi ve years. Among the major projects that received the green light were the airport expansion, Etihad Rail and the Cultural District on Saadiyat Island. The latter consists of The Louvre Abu Dhabi – set to open in 2015 – followed by Zayed National Museum in 2016 and Guggenheim Abu Dhabi in 2017.

These museums are integral to the development of Abu Dhabi as a regional centre for culture and raising its international profi le. However, these major projects will also raise investor interest and increase the value of real estate developments located in close proximity to these attractions.

The recent merger of Sorouh Real Estate into Aldar Properties has been a positive development for Abu Dhabi’s real estate market. This giant developer, with a land bank of 77 million square metres, is uniquely placed to focus on market demands and the measured development of the emirate’s real estate sector.

A growing economy, record tourism numbers and the high level of government support indicate the medium- to long-term prospects for Abu Dhabi’s real estate sector remain very strong. With on going developments across the emirate, from Sir Bani Yas to Saadiyat Island, and from the Western Region to Al Ain, Abu Dhabi’s cityscape is heading for an exciting future. ◆

A Rising Cityscape

Fahad Saeed Al RaqbaniDirector general of the Abu Dhabi Council for Economic Development

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Welcome.indd 1 10/17/13 4:12 PM

02 | Contents

The merger of Aldar Properties and Surouh Real Estate has created a well-capitalised developer with a

77-million-square-metres land bank that is well positioned to serve every

aspect of Abu Dhabi’s real estate market. His Excellency Abubaker

Seddiq Al Khouri, the chairman of the capital’s largest developer, explains how Aldar Properties is helping to

build Abu Dhabi’s future.

Abu Dhabi’s real estate market has seen a modest recovery this year, with particularly strong growth

in the prime sectors. This is set to continue in the medium term thanks to positive investor sentiment, which

is underpinned by Abu Dhabi’s government investing AED330

billion in the economy over the next five years. uch strong government

support and steady economic growth will also support the real estate sector

in the long term.

The UAE has one of the world’s largest carbon footprints, with 80

per cent of all electricity consumed in buildings. That is changing as

numerous government initiatives are pushing sustainable development.

Estidama, a green building initiative launched by the Abu Dhabi Urban Planning Council, is already being implemented across the emirate.

04Building the future

The

Issue 13 2013

06Real estate shows

positive trends

10A greener approach

02-03 Contents.indd 2 10/10/13 5:14 PM

The Economic Review | 03

Cities such as Bilbao, Las Vegas and Macau have proven that investment in tourist infrastructure can provide

steady returns. Abu Dhabi has targeted tourism as an important part of its future economic growth, and this year’s record visitor numbers are

showing the validity of this approach. Abu Dhabi aims to become the

regional centre for culture, which is highlighted by the the Cultural District on Saadiyat island that will open with Louvre Abu Dhabi in 2015, followed by Zayed National Museum in 2016

and Guggenheim Abu Dhabi in 2017.

The merger of Aldar Properties and Sorouh Real Estate Company has

had a transformational impact on the developer. It has improved Aldar’s credit profile, as well as making it

financially stronger and operationally more diversified. With strong cash reserves and available liquidity as of mid-2013, the company is in an

excellent position to access the market and select projects that add value.

Direct investment by the government, with help from the

private sector and the quasi-government interests in between, has lead to a broadening of Abu Dhabi’s economic base. Evidence of this can

be found across the real estate supply chain, from the manufacturing of raw materials, through to the delivery of

master-planned communities.

20Creating tourist

attractions

12On solid foundations

16The big vision

02-03 Contents.indd 3 10/10/13 5:14 PM

04 | In Conversation HE Abubaker Seddiq Al Khouri

The Abu Dhabi property market, like the rest of the world, was hit by the

recent global economic crisis. What positive impact does the merger of

Aldar Properties and Sorouh Real Estate into Aldar Properties have on the

company and the emirate’s real estate market?

The merger took place at a turning point in the real estate market in Abu Dhabi, and we have seen greater stability as market fundamentals have been improving. A flight to quality is already unfolding and demand for high- quality housing, commercial and retail space is rising.

As for Aldar, the merger has had a transformational impact on the company, improving the credit profile, as well as making it financially stronger and operationally more diversified. Total assets have grown by a third to AED43. billion from AED32 billion, and we en oy a strong liquidity position, with AED .4 billion of cash and available liquidity as of mid-2013.

Our business strategy is focused on growing stable and predictable cash flows, and we are now in an excellent position to assess the market, and select projects that really add value.

Customers also benefit from Aldar as it offers a broader product suite across Abu Dhabi, and we are in a stronger position to focus on serving our customers, innovating and delivering high-quality services.

The Abu Dhabi government is committed to building the infrastructure

to help realise Abu Dhabi Economic Vision 2030. Can you outline how

the relationship between the government and Aldar Properties will work

towards reaching the goals of Vision 2030?

As the market leader in real estate, Aldar has an important role to play towards reaching the emirate’s strategy for economic development and diversification as outlined in Vision 2030. Aldar’s growing and diversified portfolio caters to different markets segments and supports the government’s policy agenda for economic development. In partnership with Abu Dhabi’s government, Aldar is helping to meet demand in the housing, commercial and retail property, education, and hospitality and leisure segments. This is being achieved through our extensive portfolio of assets, the significant delivery pipeline and land bank along with helping support social and human resource development through Aldar Academies. This strong partnership will continue to grow as Abu Dhabi moves ahead with its comprehensive plan for the development of the emirate.

Another key aspect of the Economic Vision 2030 is sustainability. How will

Aldar Properties help reach the goal of building more sustainable buildings,

especially in context of the Pearl Building Rating System?

We take sustainability very seriously, and are a key partner of the Urban

Building the futureThe chairman of Abu Dhabi’s largest developer, explains how Aldar Properties is helping to shape Abu Dhabi’s future.

His Excellency Abubaker Seddiq Al KhouriChairman of Aldar Properties

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04-05 Interview-Aldar.indd 4 10/10/13 5:06 PM


Planning Council (UPC). Aldar projects strictly follow the UPC’s Estidama Pearl Building Rating System and, when delivered, will show improved performance in terms of water and energy consumption and offer a better quality of life for users and visitors. Our latest national housing developments, Sila’a and Ghuraibah, were designed and constructed to conform to these Estidama guidelines, set by the Abu Dhabi Urban Planning Council and the Plan Al Gharbia 2030, earning a Two Pearl rating for their sustainable credentials.

Another economic target for Abu Dhabi is to boost tourist numbers. How is

Aldar Properties working to put Abu Dhabi on the tourism map?

Approximately 2.3 million hotel guests stayed in Abu Dhabi in 2012, representing a seven per cent increase over 2011, and we expect this number to continue to increase.

Yas Island is a truly unique entertainment destination and an important contributor to the leisure and tourism industry in Abu Dhabi and the wider UAE.

Our hospitality and leisure portfolio on Yas Island includes the iconic five-star Yas Viceroy hotel, which was built across the F1 Yas Marina Circuit, six plaza hotels that are run by world renowned operators, and our award winning 18-hole golf course, Yas Links. The Ferrari World Theme Park and Yas Waterworld are key attractions for visitors, and the introduction of Yas Mall, the biggest mall in Abu Dhabi, to the island in 2014 will further drive visitor numbers. All these attractions are unique to Abu Dhabi. Plus you can find the beach only a few minutes away from the F1 circuit.

At Aldar, we have implemented both internal and external initiatives to help market Abu Dhabi as a leading tourism destination. We have set up a Destination Management function working closely with our Asset Management team that is responsible for marketing Yas Island as a leading tourism destination in the region. These teams liaise with stakeholders such as Abu Dhabi Tourism and Culture Authority, Etihad, Miral and many others in order to leverage capabilities across these institutions to ensure the success of Abu Dhabi as a leading leisure destination.

Furthermore, the government’s investments in infrastructure combined with an increase in air passenger numbers visiting the city will result in the continued growth of overall visitor numbers.

Aldar Properties now has a land bank of 77 million square metres. How will

this land be monetised?

With the largest domestic land bank among UAE’s publicly listed real estate companies – 90 per cent of which is in investment zones in Abu Dhabi – Aldar is coordinating closely with government agencies and other private sector companies to ensure the responsible and measured development of our communities of the future.

We currently have a team of master planners and developers working diligently on reviewing potential developments that are expected over the next five to seven years. We have a stringent selection criteria with focus on market demands and we will only launch at the appropriate time.

In the years to come and as we continue to witness growth in Abu Dhabi’s economy and industrial development, there will be a need for increasing housing requirements to accommodate the influx of new residents. This, in turn, will lead to more development launches and the monetisation of the land bank.

As a diversified property investment and development company, even though we operate a low-risk development model, we have already prioritised our future developments based on market demand. Our large land bank allows swift response to market dynamics and all new developments undergo a rigorous selection and monitoring process. ◆

As the market leader in real estate, Aldar has an important role to play towards reaching the emirate’s strategy for economic development and diversification as outlined in Vision 2030.

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06 | Feature Trends

The fi rst half of this year has seen a modest recovery in Abu Dhabi’s real estate market, while the medium- to long-term outlook is positive, reports Guido Duken.

Real estate shows positive trends

The 2008 global fi nancial crisis negatively impacted Abu Dhabi’s real estate market. As a result 200

to late 2012 was characterised by a period of decline. owever, since the end of 2012 there has been a modest recovery shown by growth in the residential, retail and hospitality sectors and further stabilisation of the prime offi ce market.

According to ones Lang La alle’s Abu Dhabi Real Estate Market Overview Q2 2013 prime residential rents remained unchanged during

2 after eight per cent growth in 1, while secondary residential rents continued to fall. The residential sales market witnessed fi ve per cent growth during 2 2013 for

prime product in investment areas , following eight per cent growth in 1. The signifi cant increase in transaction numbers in the fi rst half of the year was driven by regional investors from countries affected by the Arab pring who see the UAE as a safe haven. Also, long-term Abu Dhabi residents are choosing to buy rather than rent as the market begins to recover and ob security returns.

Prime sectors’ recoveryThe interesting fact looking at the above fi gures is that the recovery has largely been restricted to prime sectors of Abu Dhabi’s real estate market, while secondary subsectors continue to decline. A number of factors are behind this demand for quality real estate. Until the end of last year Abu Dhabi’s rents had fallen for 18 straight months, which made the city more affordable to live in. Property prices in the emirate have tumbled about 0 per cent since the global fi nancial crisis. This increase in affordability

Abu Dhabi: Estimated new real estate supply (per cent of exisiting stock)Source: IMF

OfficesResidentialRetailHotel

2001 2012 2013

Pe

rce

nta

ge

0510

1520

2530

06-09 Positive Trends 4pages.indd 6 10/10/13 5:16 PM


Real estate shows positive trends

further jobs in the private sector. A number of major projects received the green light such as the airport expansion, Etihad Rail, and the Saadyat Island museums. These new projects will fuel short-term demand for real estate.

The Abu Dhabi government has recognised the need to manage the real estate market better over the past few years, according to Plumb from Jones Lang LaSalle. This is made clear by a number of new initiatives and strategies such as the high level of infrastructure spending, efforts to increase employment generation and greater control on supply levels.

Sustainable growthBalancing supply and demand is challenging, as shown by the shortage of properties in the prime sectors and an oversupply in others. “When growing an economy and a city, finding a balance between supply and demand is an optimum position to wish for and is not something that can happen overnight,” says Neill from Cluttons. “In order for Abu Dhabi to grow it has to push development. There has no doubt been a supply issue in certain developments and areas. However, this is now improving and there has been clear growth in the economy and within certain parts of the real estate sector itself.”

Andrew Laver, a valuer at Asteco Real Estate, agrees with Neill. “I don’t think there is anywhere in the world where there is a perfect equilibrium between supply and demand, and I cannot see this equilibrium being achieved, although the total stock levels may come closer to satisfying the population numbers at some stage.”

Long-term market recovery and growth is largely dependent on Abu Dhabi government’s continued support of economic development initiatives to diversify the economy and generate sustainable demand growth. That this government support will continue is a given as

There is a definite trend to “trade up” or flight to quality”, which means demand for high-quality real estate is higher than that for poorer quality space.

is encouraging commuters from Dubai to relocate to the capital. Furthermore, the announcement that government employees or those working for affiliated companies must live in Abu Dhabi or risk losing their housing allowances has further driven residential demand.

“Historically the city had a lack of high-quality residential developments, so schemes that have been recently built are popular,” says William Neill, Head of Cluttons Abu Dhabi. “People moving to the city from abroad and Dubai demand and expect a high-quality product, and as the economy continues to grow and more people relocate to Abu Dhabi, this trend is set to continue.”

Jones Lang LaSalle’s report confirms there is a shortage of high-quality stock in terms of design and construction quality, property management and suitability to end-user requirements.

Craig Plumb, Head of Research MENA at Jones Lang LaSalle, says there is a definite trend to trade up or flight to quality , which means demand for high-quality real estate is higher than that for poorer quality space. This means that many older buildings are seeing an increase in vacancies and this is set to continue.

“There has been a shortage of high-quality new space over the past few years but this trend is now changing with significant levels of new space being completed in 2012 and 2013,” says Plumb.

Positive outlookIn the short to medium term the outlook for the sector is positive, with confidence being buoyed by a number of large-scale announcements in the UAE’s capital since October 2012. The biggest one was Abu Dhabi’s Executive Council announcing that it is planning to invest AED330 billion in the economy over the next five years. This investment is expected to create 5,000 jobs for Emiratis and


08 | Feature Trends

key policy aspects are outlined in The Abu Dhabi Economic Vision 2030. Initiatives to diversify and grow the economy through areas such as tourism and finance all impact the demand for real estate.

In this regard the major developments underway on Yas Island – Yas Waterworld, Yas Mall and the redevelopment of Yas Marina – are all aimed at enhancing Abu Dhabi’s reputation as a major regional tourism hub.

A more medium-term initiative is the cultural district on Saadiyat Island that will be delivered by 2017. Abu Dhabi’s Executive Council has approved capital budgets for the district that will include the Louvre Abu Dhabi Museum, Sheikh Zayed National Museum and Guggenheim Abu Dhabi Museum.

“These major projects will enhance Abu Dhabi’s position and image globally, thereby attracting more visitors and potentially raising investor interest in the capital,” says Laver from Asteco Properties. “Furthermore, real estate developments located in close proximity to these attractions are likely to see increasing values as these projects are delivered.”

In May, the Abu Dhabi government issued a new federal law to create a financial free zone under the name “Global Marketplace Abu Dhabi” at Al Maryah Island. This free zone is aimed at strengthening Abu Dhabi’s position as a global financial hub.

“The biggest development this year is not a new project, but the change in status of an existing

project, this being the announcement to create a new financial free one on Al Marayah Island,” says Jones Lang LaSalle’s Plumb.

“The decision to make Sowwah quare a financial free one will

have a big impact,” says Cluttons’ Neill. “It should hopefully help attract various large financial institutions and businesses to locate or expand within the city. The lack of a free zone at present is likely to have impacted the decision for many companies to locate or expand within the market and, hopefully, will help put Abu Dhabi on the map as an international financial centre.

Sustainable recovery in the real estate market is also dependent on the government implementing supply controls: a key trend during the first half of 2013 has been developers re-looking at schemes that had been placed on hold following the market downturn.

“We expect that the market will continue maturing over time, with an increasing gap between property types and location,” predicts Laver. “Abu Dhabi Island, especially the more central parts, is likely to see increased vacancy levels and eventually buildings becoming obsolete and less economically viable, leading landlords to demolish and rebuild to improve their offering.

“At the same time, investment area locations are expected to become more attractive as additional facilities and amenities, as well as improved infrastructure (schools, parks, hospitals, retail,) are provided. Overall, the city

Sale price* of residential units (Q4 2009- Q2 2013)Source: Jones Lang LaSalle, Q2 2013 *Asking prices Note: Sales prices pertain to investment areas only

Prim

e Sa

les (

‘000

AED

/sq.

m) 17,222

15,070

13,455

11,840

11,840

11,840

11,840

11,000

11,000

10,900

10,500

10,200

10,200 11,000 11,500

Q4 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013

Q2 2010

Q2 2011

Q2 2012

Q2 2013

Q3 2010

Q3 2011

Q3 2012

Q4 2010

Q4 2011

Q4 2012Abu Dhabi has

an attractive coastline and a

large increase in high-quality residential and

commercial schemes is set

to appear in the city as increased

demand leads to an improved

market sentiment.



is expected to become a more desirable residential location.”

Challenges for the marketThe real estate market does face some challenges. The key factors lie in the fact that it is still maturing, and essential elements such as laws regulating real estate ownership are still unclear. This is making it tough to attract demand from international investors as well as resident expatriates.

The main geography of Abu Dhabi is also both a challenge and an opportunity for its real estate market.

The main part of the capital is located on an island space, which means land comes at a higher price and is more sought after. In time there will be a lack of land for development and new projects on the island will have to come from the redevelopment of older existing sites. However, not all landowners are in a position to redevelop older buildings. As more new stock gets built on the island, older buildings become more obsolete with high vacancy rates resulting in a lack of income for redevelopment. The city will have a challenge on its hands to regenerate parts of the island and there will be a visible difference in the level of quality between buildings.

On the positive side Abu Dhabi has lots of space for expansion both on the mainland and on the network of islands adjoining it. It has an attractive coastline and a large increase in high-quality

residential and commercial schemes is set to appear in the city as increased demand leads to an improved market sentiment. This will likely drive developers to build more projects to keep in line with market trends. Given the limited amounts of good quality supply in the capital, there are opportunities for developers to generate better returns, provided they conduct reasonable market research prior to reaching the design and build stage.

Medium- to long-term prospects“The medium- to long-term prospects for Abu Dhabi remain very strong – given the high level of government support and their intention to expand and broaden the economic base of the emirate – which will be very positive for the real estate sector,” says Plumb.

Neill echoes this sentiment. “The medium- to long-term outlook is positive. Demand and confidence seem to be slowly returning and we are seeing various stalled projects beginning to progress again. The government is expected to invest heavily in infrastructure and real estate and the economy is in a healthy position. As more people and businesses locate to the city, demand within both the residential and retail sectors will increase and improve. The government is working towards cementing Abu Dhabi’s status as an international hub and the next five to 10 years are going to be interesting for the city.” ◆

Abu Dhabi: Residential stock (2012-2015) Source: Jones Lang LaSalle, Q2 2013

Abu Dhabi: Office stock (2012-2015) Source: Jones Lang LaSalle, Q2 2013

Num

ber o

f uni

ts (0

00s)

(000

s)

20122012

Completed

Completed

Future Supply

Future Supply

20132013 20142014 20152015

211

10

206

19

221

14

240

The biggest development this year is not a new project, but the change in status of an existing project, this being the announcement to create a new financial free zone on Al Marayah Island.

2,877 2,952

1743,126

4743,600

315

Sale price* of residential units (Q4 2009- Q2 2013)Source: Jones Lang LaSalle, Q2 2013 *Asking prices Note: Sales prices pertain to investment areas only


10 | Feature Sustainable Development

Sustainability lies at the heart of Abu Dhabi’s infrastructure development plans, says Mary Sophia.

A greener approach

Sustainable practices and resource conservation have always been essential to survival in the harsh and

unforgiving desert. Abu Dhabi, with its desert heritage, clearly understands this. Although the emirate has eight per cent of proven global crude oil reserves it is taking a leading role in renewable energy and sustainable technologies.

This is evidenced in Abu Dhabi’s real estate sector, which has been at the forefront of sustainable development through various urban planning initiatives. The most ambitious project is Masdar City, which has been designed as a commercially viable development while maintaining the lowest possible ecological footprint. This is achieved through cutting-edge clean technology research and development, pilot projects, technology testing, and construction of some of the world’s most sustainable buildings. Cities today are responsible for over 70 per cent of global CO2 emissions, which makes Masdar City’s innovations of vital importance.

According to the World Bank, a UAE resident consumes 8,271 kilograms of oil equivalent energy (kgoe) per annum compared to the United Kingdom’s 3,254 kgoe. It is estimated that approximately 80

Abu Dhabi Airports Company’s Midfield Terminal

Building (MTB) project

per cent of electricity consumption occurs in buildings, which contributes to the UAE’s sizeable carbon footprint. By 2020, Abu Dhabi plans to generate seven per cent of its electricity from renewable sources. For example, currently the GCC’s largest operating solar-panel-based power-generation facility is Masdar City’s 10-megawatt plant.

Although it is innovative projects like Masdar City that grab public attention, there are other important measures under way.

The Abu Dhabi Urban Planning Council (UPC) launched a green building scheme that became mandatory two years ago. Estidama, which means ‘sustainability’ in Arabic, comprises of the Estidama Pearl Building Rating System (PBRS).

Through a system of required credits and extra points, PBRS promotes projects that are energy efficient, use less water and create a healthier living environment. Designs are assigned grades from a 1 Pearl Design Rating to a maximum of 5. The rating is given based on the credit points the building achieves through certain specified eco-friendly measures. Sixty credit points win a 1 Pearl Design Rating.

New villas, buildings and communities need at least a 1 Pearl Design Rating, while new government buildings must

According to official data, out of more than 10,000

Estidama-rated villas within the emirate, 7,500 of

them have a 2 Pearl or 3 Pearl

Design Rating.

10-11 Building Future.indd 10 10/10/13 5:20 PM


Pearl rating system requirements we not only create healthier, resource-efficient, comfortable and environmentally friendly communities, but villa owners may see a better return on their investment,” said Mohamed Al Khadar, the executive director for development review and Estidama at UPC.

The largest building to have received a Pearl rating so far is Abu Dhabi Airports Company’s Midfield Terminal Building (MTB) project. Besides the project size it also stands out by receiving a 3 Pearl Design Rating. It is this commitment by government agencies and developers that is building a greener future in Abu Dhabi. ◆

Masdar city’s Personal Rapid Transit (PRT)

achieve at least 2. The PBRS has different standards for villas, buildings and community centres. There are currently 406 projects being built under UPC initiatives, which include 50 schools and 15 universities in the emirate.

According to official data, out of more than 10,000 Estidama-rated villas within the emirate, 7,500 of them have a 2 Pearl- or 3 Pearl Design Rating. Estidama has also rated 23 mosques and now forms an integral part of the new Abu Dhabi Mosque Development Regulations.

According to Fahad Al etbi, the chief operations officer of Aldar Properties the first developer in Abu Dhabi with 2 Pearl-rated communities and villas – these sustainable communities are achieving around 20 per cent less energy consumption.

“This is achieved through the use of a better insulated building envelope (walls, windows and roofs), more efficient AC systems, the use of LED lighting and solar water heating systems. The implementation of these measures not only contributes to the rationalisation of energy consumption but also helps to create better and healthier communities,” he said.

The 1,022-villa Al Ain hareba scheme, being built by UPC and Aldar, is part of the first Emirati housing project designed to comply with the government’s Estidama standards.

All the homes in this development are being built to the 2 Pearl Design Rating. Besides the 20 per cent lower energy consumption, water usage will be 30 per cent lower than average.

Moreover, the developers say all the insulation materials are free from ozone depleting materials, 20 per cent of construction materials are procured regionally and 50 per cent of construction waste will be sent for recycling.

y building sustainable homes that comply with the Estidama

PEARLRATINGSYSTEM

Precious water

Resourceful energy

Stewarding materials

Innovating practice

Integrated development

process

Naturalsystems

Livable Villa/Building/

Community

10-11 Building Future.indd 11 10/10/13 5:20 PM

12 | Feature Aldar

The merger of Aldar Properties and Sorouh Real Estate Company has created a powerful partnership to build Abu Dhabi’s future, reports Dania Saadi.

On solid foundations

Consolidation and rationalisation has been the order of the day in the aftermath

of the global financial crisis that saw Abu Dhabi’s real estate prices down by about 0 per cent from their 2008 peak. Aldar Properties, the emirate’s biggest state-linked developer, received two separate government bailouts worth nearly $10 billion in an 18-month period at the height of the crisis.

The fallout from the global financial crisis affected the business mood in Abu Dhabi negatively and several capital-intensive pro ects were put on hold as the government reassessed its development plans. With an oversupply of villas, flats and office space, the Abu Dhabi government refocused its strategy on pro ects with socio-economic benefits such as housing for Emiratis, schools, hospitals, roads, cultural attractions and other infrastructure.

This is in line with other government initiatives to help develop the emirate and diversify the economy away from oil income.

y 2030 the aim is to increase the non-oil sector’s contribution to the gross domestic product from 43.

per cent in 2012 to 4 per cent. It is against this background that the Abu Dhabi government made two

significant announcements in anuary. The first was that Aldar

Properties and orouh eal Estate Company were to merge with government backing. econdly, the Executive Council of Abu Dhabi announced plans to spend 0 billion on infrastructure between 2013 and 2017.

According to analysts, the primary ob ective of the Aldar

orouh merger was to cut down on overlapping costs as the companies act as the primary development vehicle for the government. It would also reduce borrowing costs and increase coordination.

“The Aldar-Sorouh merger intended to create a larger and stronger real estate developer that is primarily focused on Abu Dhabi, with a more diversified product offering and a larger land bank,” said Mohammed Al-Shukairy, a

12-15 Aldar.indd 12 10/10/13 5:21 PM


than doubled year-to-date on the back of the Sorouh merger and the company also has a land bank of 77 million square metres – 90 per cent of which is in investment zones.

The combined company also has a more balanced mix of revenues coming from residential, commercial, hospitality and retail developments at a time when the UAE capital’s property market is still shaky, said Mohammad Kamal, an analyst at Arqaam Capital. Office rents are expected to stagnate or decline this year as supply increases and vacancy rates are at about 37 per cent, according to a report by Jones Lang LaSalle, a property consultancy. The residential market is doing better, but increases in rents are concentrated largely at the more luxurious end of the market.

“The merged entity is better poised to weather the current weakness in Abu Dhabi’s property market, primarily via consolidating rental and hotel assets into a significant recurring income portfolio,” Kamal said.

The merger has also allowed Aldar Properties to renegotiate some of its loans. The company has debt of about $3.81 billion, of which $1.2 billion comes due by the end of next year, according to Aldar Properties’ Chief Financial Officer, reg Fewer.

The primary objective of the Aldar/Sorouh merger was to cut down on overlapping costs as the companies act as the primary development vehicle for the government.

partner at law firm Clifford Chance and the leader of the firm’s team that advised on the merger.

“A more capable company, and one that is better placed to achieve economies of scale, could also be expected to strengthen ties with the government as it continues to assist in the delivery of a number of projects, including national housing,” explained Al-Shukairy.

The Aldar/Sorouh merger came into effect on June 27 and the deal was completed on June 30, creating a developer with $13 billion in assets. Moody’s Investors Service immediately put Aldar on review for a possible upgrade after the merger, signalling to the debt markets that it considered the deal a significant positive development. Aldar Properties’ corporate family rating was raised to B1 from B2.

Commenting on these events, H.E. Abubaker Seddiq Al Khouri, the new Chairman of Aldar Properties, said: “It gives me great pleasure to announce that today marks the first day of business as a combined company. Operating under the name Aldar Properties, the business is one of the biggest real estate developers in the region. The company benefits from a strong balance sheet, a large asset base, a prime land bank for development and an experienced management team.

“These strengths, combined with our continued close partnership with the Abu Dhabi overnment, will allow us to flourish commercially in an economy that is sustainable. I believe that all these strong and exciting fundamentals will deliver significant value to all our stakeholders for years to come.”

The significance of the AldarSorouh merger can be broken down into a number of key areas.

The newly created Aldar Properties is one of the largest listed real estate companies in the Middle East and North Africa region with a market capitalisation of around $5.7 billion and combined total assets of $12 billion. Aldar’s shares have more

RevenueProfit Margin (%)

Net Income (M/AED)

Income statement for Aldar Source: Bloomberg

Sept 2011 Dec 2012 Mar 2013 Jun 2013

1,50

0

50%

1,00

0 100%

500

150%

12-15 Aldar.indd 13 10/10/13 5:21 PM

14 | Feature Aldar

According to him, Aldar is currently in talks to refinance the 1.2 billion bond that matures in May 2014.

Aldar already has successfully negotiated an amendment to the terms and conditions of a 2010 loan facility between orouh and a syndicate of banks, which currently has an outstanding balance of AED 2.1 billion. The interest margin on this loan has been reduced from 4. per cent to 2.4 per cent, representing a significant and immediate interest cost reduction that clearly demonstrates the synergy benefits of merging the two companies.

The merger of the two companies is already delivering significant benefits. This includes a strengthened financial position, as shareholder equity has almost doubled, gearing has more than halved and the business has a more balanced and diversified portfolio, said Aldar Chairman Al

houri while announcing the 2013 half-year results. ood progress is being made with the integration of the merger and we have already commenced the realisation of financial synergies by reducing the company’s cost of borrowing.

The merger has also brought an enhanced ability to prioritise and

select value-adding pro ects, as well as to monetise the company’s land bank and recycle capital into growth opportunities.

With the Abu Dhabi government owning a stake of around 3 per cent in the merged venture, it will remain a key customer for Aldar as the company has a strong track record of delivering large-scale pro ects. The company plans to deliver about ,400 housing units by the end of 2014 at developments including ate Towers and Al

ayanna, which will boost the company balance sheet.

Details about Aldar’s delivery pipeline beyond 201 will be made public in the near future.

In the coming months we’re going to be announcing a series of pro ects and developments that will fill the second half of 201 and 201 , said CFO Fewer. We have a team of masterplanners and developers working diligently on some fantastic ideas. We have a number of very interesting opportunities, which we are fast-tracking and we will be bringing forward pro ects based around market demand.

The performance of Aldar Properties is an important litmus test for the future mergers of large

Aldar Properties’ Q2 Operations Update» trong delivery pipeline

with over ,400 units to be delivered in the next 12 months.

» The construction of Yas Mall, Aldar’s 233,000 square metre flagship retail development on Yas Island, is progressing well and is 80 per cent complete.

» At World Trade Center Abu Dhabi, managed by Aldar, final preparations are being made for the opening of The Mall by the end of this year.

» Aldar’s office portfolio has expanded following the merger with orouh and now consists of 2 3,000 square metres of high-grade commercial premises.

eadquarters’ building is now 82 per cent let or under heads of terms.

» Occupancy levels in the hotel portfolio continued to rise in 2, with occupancy up to 8 per cent versus 8

per cent in 2 2012.

Oct Nov Dec Jan 2013 Feb Mar

Stock chart for Aldar (1-year)Source: Bloomberg

12-15 Aldar.indd 14 10/10/13 5:21 PM


companies in the United Arab Emirates and other parts of the Gulf, where partially government-owned entities often duplicate each other’s functions and harbour debt that they accumulated in the run-up to the financial crisis.

“From a technical perspective, the statutory all-share merger is ground-breaking in the UAE,” says Mohammed Al Shukairy, partner at Clifford Chance in Dubai. This transaction paves the way for a more effective – and now a tried and tested – method of merging UAE-listed companies.

The completion of the AldarSorouh merger came amid a wave of company consolidations in the UAE. Dubai and Abu Dhabi announced in June the merge of their aluminium smelters to create a combined UAE company valued at 1 billion, including net debt.

There is also speculation surrounding a merger of the Abu Dhabi stock exchange and the Dubai Financial Market, which would help to increase liquidity throughout the UAE instead of dividing it between the emirates.

The most important key factor that will determine Aldar Properties’ future is its relationship with the Abu Dhabi government. ut as Aldar

Properties is 37 per cent owned by the Abu Dhabi government through its investment vehicles and banks, it should remain the emirate’s key vehicle for delivering major infrastructure pro ects.

Overall, this means that Aldar Properties stands to benefit from Abu Dhabi’s plan of transforming itself into a business and cultural hub. The Abu Dhabi government forecasts economic growth to accelerate to . per cent a year through 2016 as it diversifies its economy.

Moody’s Investors Services has noted: “Abu Dhabi Government’s willingness to provide systemic support in order to stabilise and consolidate the local real estate market.

That is ratings parlance for the fact that the Abu Dhabi Government was behind the merger every step of the way, and will continue to support Aldar Properties, which is viewed as a key instrument of economic and social policy in the emirate.

In other words, the creation of a strong, risk-resilient property company in the Aldar orouh merger will hasten Abu Dhabi’s real estate recovery. And that is a win-win situation for all concerned. ◆

“Aldar Properties stands to benefit from Abu Dhabi’s plan of transforming itself into a business and cultural hub.

May Jun Jul Aug Sept1.00

2.00

2.68

12-15 Aldar.indd 15 10/10/13 5:21 PM

16 | Feature Changing Cityscape

Abu Dhabi has carefully constructed a network of diverse business interests that is helping to shape its cityscape for the future, reports Marlow McGuinness.

A big vision

Abu Dhabi is built on anticipation. The government has made a point of looking to

the future and publishing visions and plans that reach out to 2030, bringing with them the promise of development projects.

Each plan has its own waypoints, but there is one that has not received the attention it deserves. In the midst of the Abu Dhabi Economic Vision 2030 is a target for the emirate’s real gross domestic product (GDP). The projections suggest that in 2016 non-oil GDP will be 51 per cent, exceeding that of oil for the fi rst time and marking a watershed moment in economic diversifi cation.

Figures released in June, by the Statistics Centre – Abu Dhabi (SCAD), show that progress toward this goal was steady in 2012. While the numbers can be read in different

ways, they are seen most favourably as constant-price fi gures. These estimate non-oil GDP at 48 per cent for 2012, having achieved 7.7 per cent growth over the past year.

“There has been an upward trend in non-oil activities over the course of the past few years, with the non-oil GDP at constant prices growing from AED 200.209 billion in 2005 to AED 325.433 billion in 2012,” SCAD said in a statement.

While these fi gures are preliminary – keen observers will have to wait until Q4 for SCAD’s more accurate assessment – they are positive. More importantly, for those in the business of building Abu Dhabi, they show a notable achievement. Real estate and education were the two SCAD-defi ned economic activities showing the most growth; each achieved a 15 per cent improvement in 2012 fi gures. Interestingly, manufacturing hit what SCAD described as a record growth rate, clocking in at 11.2 per cent.

Education

Real Estate

Aldar

Construction

Emirates Steel

Shipment

Steelmakers

Senaat General Holding CorporationDucab

Arkan Building Materials

MubadalaDevelopment

Company

Masdar

Eco-focus

EMAL

AerospaceInfrastructure

Al Maryah Island

Sowwah Square

Cleveland Clinic Abu DhabiGalleria

Mubadala Healthcare

TDIC

Al Raha

Saadiyat Island

New York University

Rosewood Abu Dhabi

Paris -Sorbonne University

UAE University

ZayedUniversity

Yas Marina Formula 1 Circuit

Ferrari World

Yas Waterworld Gate

Towers

Al Reem Island

Yas Mall

Gate Towers

GuggenheimLouvre

Abu Dhabi Mid-field Terminal ComplexEtihad Rail

KIZAD

Khalifa Port

16-19 Cityscape.indd 16 10/10/13 5:23 PM

The Economic Review | 17The Economic Review | The Economic Review | The Economic Review | The Economic Review |

Other companies in Senaat’s portfolio include successful cable manufacturer Ducab, a joint venture with the government of Dubai, which has managed sustained growth and product range expansion. Senaat also holds a majority stake in publicly-listed Arkan Building Materials, which was restructured and privatised in 2006.

If Senaat is Abu Dhabi’s face of industrial diversifi cation, then Mubadala Development Company has the rest of the bases covered. Established by the government in 2002, it describes itself as “a principal agent in the diversifi cation of Abu Dhabi’s economy”. Its interests are a model of that diversity, stretching from the eco-focused Masdar, to the growing aluminium giant EMAL, aerospace activity, technology investment and, of course, real estate.

Among its specifi c business units is Mubadala Real Estate and Infrastructure. It describes itself as operating as an equity partner and asset manager with a focus on social infrastructure projects and real estate investments. Its portfolio is a long list of high-profi le pro ects and collaborations, including the development of the Paris-Sorbonne University and Zayed University in Abu Dhabi and the UAE University in Al Ain.

Perhaps its most prominent development project is Al Maryah Island. Formerly known as Sowwah Island, it is planned as a 114 hectare mixed-use development, notable for a two-tier road network and pitched as Abu Dhabi’s new central business district.

Snapshot views of industry and business show how a co-ordinated government programme has been put in place.

These fi gures point to a tale of diverse investment providing a steady return. This investment has been unmistakably directed by the hand of the government, with help from the private sector and the quasi-government interests in between. In Abu Dhabi, the evidence of this can be found across the supply chain, from the manufacturing of raw materials, through to the delivery of master-planned communities.

Snapshot views of industry and business show how a co-ordinated government programme has been put in place.

Take the work of Emirates Steel. In September the company announced that its fi rst ever export shipment – around 13,000 tonnes of steel – to the Americas had landed in port, carrying with it the UAE’s fi rst batch of structural steel.

“We want to extend beyond our traditional markets to leverage our experience and secure further growth,” said Saeed G Al Romaithi, Emirates Steel’s CEO, in the statement. “We are moving into the international markets, and are competing globally with the international steelmakers in high-value niche markets.”

The relatively small amount of steel adds up to a big deal. As a key construction commodity, it was sub ect to signifi cant price fl uctuations during the last construction boom, and may be so again. The UAE now has a home-made supply, with enough current capacity to support exports.

Emirates Steel is one of seven industrial enterprises run by Senaat General Holding Corporation, which is backed by the Abu Dhabi government. Two executives from the Abu Dhabi Council for Economic Development (ADCED) sit on Senaat’s board: HE Mohamed Rasehed Al Hameli, the senior economic advisor and ADCED’s director general HE Fahad Saeed Al Raqbani.Al Raqbani.

Building completion by regionSource: www.scad.ae

No.

of b

uild

ings

ABU DHABI AL AIN AL GHARBIA

Second Quarter 2012

Second Quarter 2013

1,023

138

355

1,501

635

30


18 | Feature Changing Cityscape

The island is also home to some of the biggest and most talked-about projects of the post-crash era, including Sowwah Square, an office, hotel and retail development, the Rosewood Abu Dhabi hotel and Abu Dhabi’s own iteration of the Cleveland Clinic Abu Dhabi Hospital, a 364-bed facility being developed for Mubadala Healthcare by publicly-listed Aldar Properties, and now due for completion around April next year.

Mubadala’s far-reaching influence doesn’t end there. Through Mubadala Capital it has invested in a si eable chunk – 30.51 per cent – of Aldar; the single biggest holding by some margin. The next largest is Al Joud Investment, with ust five per cent.

Aldar made its name with a distinctive headquarters, plus the development of the Yas Marina Formula 1 circuit and its neighbouring Ferrari World theme park. In une this year it officially merged with Sorouh Real Estate, a successful Abu Dhabi-based developer that had been punching above its weight with developments such as the genuinely spectacular Gate Towers on Al Reem Island.

andover on this pro ect is expected to begin in Q4 this year.

In August the post-merger Aldar announced a half-year net profit of AED 1.41 billion, up 57 per cent on the same period in 2012. It noted a strong delivery pipeline, with ,400 units expected to be delivered over the next 12 months. It also offered an update on the construction of Yas Mall, a 233,000 m2 retail development on Yas Island, which it

says is 80 per cent complete.The work of these organisations

is having a discernible impact in the market, according to local real estate experts.

“The merger of Aldar and Sorouh has influenced the Abu Dhabi property market in a big way, some may say in a negative way due to the lack of competition,” said Mario Volpi, managing director of Prestige Dubai. “From a government perspective they are a more streamlined entity and one that perhaps will have Abu Dhabi’s interests at heart, before profit.

The decree that Abu Dhabi public sector employees should live in homes within the emirate of Abu Dhabi by end of September, if they wish to collect their housing allowance, is also having an impact on the residential property market. This is seen as a short-term influence, but according to Volpi, average rental values are up over 13 per cent for properties in the first six months of this year.

While asking people to live in the emirate that provides their income has boosted the market, a more long-lasting effect is likely to be felt as construction projects’ pace picks up again.

“The release of many of the mothballed construction projects across the emirate has brought a lot more people to the city to work on these revitalised pro ects and has led to more economic activity in general, said Mark Wellman- iggs, general manager at Crompton Partners Estate Agents.

The government’s in ection of capital into infrastructure projects in the capital has boosted the rentals market and will have a significant impact on the economy as a whole,” said Wellman-Riggs. “Abu Dhabi is a city largely dependent on governmental and quasi-governmental institutions as a source of revenue. The recent real estate landscape has most significantly been influenced by the Aldar developments at Al aha

The government’s

injection of capital into

infrastructure projects in the

capital has boosted the

rentals market and will have

a significant impact on the economy as a

whole.”

Abu Dhabi: Building completion by type of useSource: www.scad.ae

No. of buildings

Residential

Residential/commercial

Industrial

Public Facility

Commercial

Other Second Quarter 2012

Second Quarter 2013

921

18

44

27

12

1

1,368

12

41

40

40

0



and the Tourism Development & Investment Company (TDIC) developments on Saadiyat Island.

“The latter is probably the most interesting of the master planned communities offering apartments and villas in what is predicted to become, after the construction of New York University, the Guggenheim and the Louvre, the cultural centre of the city.”

Indeed, Saadiyat Island contract awards from the government-owned TDIC have been some of the most anticipated of 2013. Arabtec led the consortium of companies, including Constructora San Jose and Oger Abu Dhabi, that, in January, nabbed the long-awaited AED 2.4 billion award to build the Jean Nouvel-designed museum. As recently as September, the consortium in turn awarded the project’s AED 415 million worth of MEP works to frequent collaborator Drake & Scull International, who will work on the contract with Habtoor Leighton Specon.

The Tourism & Culture Authority, which owns TDIC, is not the only government entity contributing to the project pool.

The Abu Dhabi Airport Authority is responsible for the development of the Abu Dhabi Midfield Terminal Complex. The AED 10.8 billion contract for the associated building works went to another Arabtec

consortium, this time with Tav Construction and Consolidated Contractors International, in June of last year. The 700,000m2 terminal building is scheduled to open in 2017 and promises the release of smaller contract packages along the way.

The massive airport project is part of a major push to improve transport infrastructure in the emirate. Other notable projects include the development of Etihad Rail’s freight network, plus AED 7 billion of urban rail plans, which saw expressions of interest submitted in June this year.

Alongside these land transport projects, the largest infrastructure mega-project in the emirate, Khalifa Port and Kizad industrial zone, celebrated its first year of operation in September. Construction is expected to continue on site until 2030, during which time the port will be built in five planned phases. i ad’s anchor tenant, EMAL, is already in place.

State-backed projects such as these are designed to improve the emirate’s connectivity with its markets. Building these connections makes it easier to attract more people and more business to Abu Dhabi, where a combination of developers are making it more attractive for them to stay.

It adds up to an equation for continuing economic diversity, while leaving people anticipating more. ◆

Through phased development Khalifa Port is designed to grow to a capacity of 15 million TEU’s container traffic and 35 million tons of general cargo by 2030.

About the author: Marlow McGuinness is a writer with an interest in design, construction and industry. He produces creative content for business, via his own content agency, and has been based in the Middle East for seven years.


20 | Feature Tourism

Culture and heritage take centre stage as Abu Dhabi diversifies its tourist offerings, writes Alicia Buller.

Creating tourist attractions

Tourism is a cornerstone of Abu Dhabi’s diversification drive with clear strategies and

targets in place. The aim is to attract three million visitors per year by 2015 and 7.5 million by 2030. Abu Dhabi is proud of its culture and heritage, which explains why these aspects are central to its strategy of showcasing itself as a high-end yet affordable tourist destination where visitors can engage in world-class business and relax.

Focusing on tourism provides a number of advantages for Abu Dhabi’s economy.

Many of the companies that operate in the tourism sector fall within the category of small and medium business enterprises (SME), which supports Abu Dhabi’s stated goal of diversifying its enterprise base and creating more jobs. Tourism is also seen as a way to boost foreign currency earnings and improve the international profile of the emirate.

This strategy appears to be working as Abu Dhabi’s tourism sector has had a record year so far, with August being the best month

since the emirate started keeping records. From January to August, visitor numbers grew 13 per cent year-on-year to 1.75 million. Revenue increased 17 per cent to AED3.31 billion and occupancy levels rose eight per cent to 68 per cent.

“These results make encouraging reading when viewed against the fact that hotel inventory in the emirate has grown from 137 properties and 23,613 rooms in 2012 to 146 offering 25,300 rooms this year,” said Mubarak Al Muhairi, the Abu Dhabi Tourism & Culture Authority’s (TCA) Director General.

Al Muhairi was also optimistic for the rest of the year.

With a final quarter ahead of us that is packed with major events, including the Abu Dhabi Grand Prix, Abu Dhabi Art, the Seatrade Middle East Forum and the Al Ain Aerobatic Show, we could see the best results of the year yet,” he said.

Looking ahead, Abu Dhabi’s tourism numbers should keep rising as ma or pro ects are finished. In one way, it could be argued that Abu Dhabi is attempting to emulate the Bilbao effect where the Guggenheim

Illus

trat

ions

by

Tara

k Pa

rekh

20-24 Tourism.indd 20 10/10/13 5:24 PM


contribute to its economic growth.”Has this ‘build it and the visitors

will come’ approach proven successful in other destinations beside Bilbao? Keez Hartzuiker, CEO of Roya International, said “While the ‘build it and they will come’ approach seems a riskier one to take given the costs associated, there is no doubt that this model has proven successful in numerous cities before. Some examples would include Las Vegas and Macau. Both cities were largely manmade and, in spite of a lack of natural geographical or historical elements, have become references in tourism and been successful in maintaining year-round activity.”

This approach has also worked in creating new tourism segments, according to Tea Ros, Managing Director of Strategic Hotel Consulting. She cites the growth of medical tourism in Thailand, which was driven by building new, high-end hospitals. The government’s investment into developing the Cleveland Clinic Abu Dhabi on Al Maryah Island indicates a clear interest in the medical tourism sector.

A unique aspect of Abu Dhabi’s tourism push is the high degree of government involvement and backing in creating the necessary tourist infrastructure. The TCA, which is 100 per government-run, has many responsibilities, which include managing the emirate’s tourism sector, marketing Abu Dhabi internationally, attracting investment, and developing museums such as the Louvre Abu Dhabi. TCA is the sole

While the ‘build it and they will come’ approach seems a riskier one to take given the costs associated, there is no doubt that this model has proven successful in numerous cities before.

Museum became the catalyst that put the Spanish city on the world map. But that would be wrong on many levels as Abu Dhabi is already well known internationally, it has a flourishing economy, and it is definitely not relying on ust one pro ect to boost tourism numbers.

A prime example is Saadiyat, a natural island 10 minutes drive from downtown Abu Dhabi. In its essence, Saadiyat is a multi-faceted island destination offering a great variety of attractions to different people. A business hub for international commerce; a relaxed waterfront home for residents; a cultural magnet for arts aficionados the home of dazzling architectural icons; and a pristine beachfront tourism destination.

The centrepiece of Saadiyat is the Cultural District, which will open with Louvre Abu Dhabi in 2015, followed by Zayed National Museum in 2016 and Guggenheim Abu Dhabi in 2017.

Ahmed Al Fahim, Executive Director of Marketing, Communications, Sales and Leasing at the Tourism Development & Investment Company (TDIC), said: “The development of the Cultural District will contribute hugely to the development of Abu Dhabi as regional centre for culture, and it is aimed at transforming the emirate into a hub of world cultural exchange. The museums will breathe life into the art and cultural scene and attract visitors, exhibitors, collectors and performers from around the world. This new aspect of Abu Dhabi will, without doubt,

20-24 Tourism.indd 21 10/10/13 5:24 PM


shareholder of the TDIC, the master developer of major tourism destinations such as Saadiyat Island. By creating investment partnerships and joint ventures, TDIC’s developments are helping Abu Dhabi realise the emirate’s considerable tourism potential.

In most countries the government is overshadowed by the private sector, which plays a more active role in tourism development and investments, according to Ros. “The high degree of government involvement may be an advantage, provided that there is a well-defi ned strategy, marked direction and clear communication and distribution of responsibilities between various parties,” she says.

“Working closely together and allowing for government involvement will help pace the growth of infrastructure, strengthen the city’s branding as well as

balance supply and demand,” Hartzuiker says.

The scale on which the TCA and TDIC function is made clear by Saadiyat Island, which will eventually be home to an estimated 145,000 residents with a full complement of leisure and tourism facilities, as well as civic and cultural institutions. The 27 square kilometre island will have seven districts and a developed area of 2,600 hectares when work is completed.

Saadiyat Beach is one such district with its nine kilometres of unspoilt coastline, which will be home to nine fi ve-star hotels and luxury residential properties. The Saadiyat Beach Golf Club was inaugurated in 2010, while last year St Regis Saadiyat Island Resort, Park Hyatt Abu Dhabi Hotel and Villas, and Monte-Carlo Beach Club opened. New hotel and spa projects from hotel groups such as Shangri-La, Rotana and UAE-based developer Bin Otaiba Investment Group are in the pipeline.

Sustainability, maintaining the beauty of the emirate and marketing this beauty are an important part of the TCA and TDIC’s remit. The TDIC works closely with Environment Authority Abu Dhabi (EAD) and ensures that all contractors working on its projects have an environmental management plan before commencing work on site.

Abu Dhabi:Hotel Establishment StatisticsJanuary to August 2013 FiguresSource: TCA Abu Dhabi

increase in guests to 1,755,730 13%

increase in guest nights to 5,480,74225%

increase in average length of stay to 3.12 days

10% 1 2 3 0.12

increase in revenue to AED 3.31 billion 17%

increase in occupancy level to 68% 08%

20-24 Tourism.indd 22 10/10/13 5:24 PM


In the Western Region, Sir Bani Yas Island is being developed as a leading nature-based tourism destination. This nature and wildlife reserve is currently home to the five-star Desert Island esort & Spa by Anantara, as well as Anantara Al Yamm Villa Resort with its 30 luxurious beachfront villas. In the near future, the island will also host Anantara Al Sahel Villa Resort, which will afford guests a rare view of grazing sand gazelles, as well as Arabia’s elusive mountain gazelle and oryx.

In addition, Qasr Al Sarab Desert esort by Anantara in the Liwa desert has been designed with a clear focus on Arabian culture and heritage. This destination reflects the history and traditions of the region while offering tours through the archaeological sites, as well as traditional desert activities throughout the spectacular Empty Quarter.

“Our portfolio of projects embraces all aspects of Abu Dhabi’s heritage and culture while preserving its natural beauty and resources. The projects on Saadiyat and Sir Bani Yas aim to enrich people’s lives whilst meeting the needs of a rapidly growing tourism

and real estate industry,” says the TDIC’s Al Fahim.

“In recent years, we’ve noticed that international travellers who come to Abu Dhabi and the region are first and foremost looking for a cultural experience. These tourists want to walk away with a unique experience, enjoy an adventurous trip and have an interesting story to tell by the time they’re ready to leave,” he says.

The further development of Abu Dhabi’s cultural offering is sensible given the wealth of history and heritage in the emirate, according to Ros. However, she believes that this should not come at the expense of other areas of tourism.

Abu Dhabi also has excellent opportunities to diversify its tourism offering to appeal to families, adventure travellers and tourists interested in nature and an unspoiled environment. The diversification efforts should not be mutually exclusive but rather promoted hand-in-hand,” says Ros.

The Bilbao EffectThe ilbao effect’ also known as the ‘Guggenheim effect’) refers to the cause and effect relationship that occurred when a single world-class project became the catalyst for reviving an economically distressed, post-industrial city in pain’s asque country. It was the opening of architect Frank eary’s masterful Guggenheim Museum in 1997 that catapulted Bilbao onto the world stage.

When it was decided in the 1990s to spend $228.3 million on a modern art museum, critics ob ected to squandering so much public money on something so irrelevant and exclusive. But Bilbao did not construct the museum simply for the sake of having an iconic building it was one answer in a quest to address a number of serious problems such as high unemployment, the demise of traditional industries, poor public transport and urban deterioration.

The city tackled these problems through

a holistic plan. It created a new subway line and an airport. New residential, leisure and business complexes were built in town while the riverfront was renovated. The icing on the cake was the construction of the uggenheim Museum Bilbao and additional cultural investments as a means of diversifying the economy and reducing unemployment.

The Guggenheim Bilbao began drawing international visitors almost immediately after its opening. In its first three years, almost four million tourists visited the museum, helping to generate about €500 million in economic activity. While the Guggenheim Museum Bilbao was a costly venture, its return on investment (not including the value of the permanent art collection) was complete as early as seven years after opening. Figures show that since the museum’s opening, the city has received an average of 779,028 new yearly overnight stays.

The projects on Saadiyat and Sir Bani Yas aim to enrich people’s lives whilst meeting the needs of a rapidly growing tourism and real estate industry.

20-24 Tourism.indd 23 10/10/13 5:24 PM


Positioning itself as the primary cultural destination in the Middle East is a shrewd move by Abu Dhabi, says Hartzuiker but, “further diversification may be essential to ensure the emirate individuates itself from developing destinations in its direct proximity”.

The recent upswing in Abu Dhabi’s real estate market has had a positive effect on tourism pro ects. ising investor confidence, availability of liquidity and attractive financing options have opened the door for more projects.

“Our projects and developments offered for sale and leasing have been in high demand from potential tenants and homeowners, as well as investors,” says Al Fahim. “We expect this demand to increase in the next couple of years – especially when new projects come to life on Saadiyat. They will not only add more value to the destination and attract interest from potential investors and residents, but will also increase the footfall of visitors and tourists to the island.”

“The tourism fundamentals in Abu Dhabi are currently strong,” says Ros. “The emirate’s tourism offering and infrastructure is constantly improving and a number of new hotels have opened, many of

them landmark developments with the ability to draw in further tourists.

“Provided that the air lift – primarily driven by the growth of Etihad Airways – can support the growing number of tourists, there is strong potential for the continued growth of tourism arrivals.”

However, it is not just the growth of tourism numbers that is important, but also how long they stay.

“As Abu Dhabi segues from being a secondary destination to becoming a leisure destination in its own right, longer stays, often associated with leisure guests, can be foreseen for the city’s future,” says Hartzuiker.

One issue could be the likelihood of oversupply in the upscale and luxury segment of the hotel market in the short-to-medium term. However, both Ros and Hartzuker agree that this will stabilise over time provided tourism arrivals continue to grow.

The current focus on the top segment means that there is a strong opportunity to develop mid-market and budget hotels, as well as boutique and lifestyle concepts.

“To successfully compete as a world-class destination, the emirate has to be able to provide a wide range of hotel offering,” says Ros. ◆

Abu Dhabi Establishments Rooms

5 Star 33 9,7794 Star 24 5,3533 Star 24 3,6992 Star 4 3611 Star 6 437Total Hotels 91 19,629Deluxe 17 2,536Superior 18 1,859Standard 20 1,276Total Hotel Apartments 55 5,671 Total 146 25,300

Abu Dhabi: Hotel Establishment Inventory As of August 2013 Source: TCA Abu Dhabi

The current focus on the top segment means that there is a strong opportunity to develop mid-market and budget hotels, as well as boutique and lifestyle concepts.

20-24 Tourism.indd 24 10/10/13 5:24 PM

Welcome | 25

Cover by Tarak Parekh

The Economic Review is a quarterly publication issued by the Abu Dhabi Council for Economic Development.

Chief Editor and translator Dr. Hadi Al Taie

Production Dima Al Bawardi

Coordination Noura Al Obaidli

Abu Dhabi Council for Economic Development is a statutory body, established in May 2006, to facilitate economic diversification and growth through creating greater understanding, cooperation and engagement between the public and private sectors of the Emirate of Abu Dhabi.

Abu Dhabi Council for Economic DevelopmentPO Box 44484, Abu Dhabi, UAET: +971 2 418 9999, F: +971 2 418 9988, E: [email protected]: www.adced.ae @ADCED_TER

Published byMotivate Connect – A Division of Motivate Publishing

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© Copyright Abu Dhabi Council for Economic Development

Reproduction, copying or extraction by any means of the whole or part of this publication must not be undertaken without the written permission of the Abu Dhabi Council for Economic Development.

The views expressed in this publication are not necessarily those of the Abu Dhabi Council for Economic Development.

Special thanks to:

His Excellency Abubaker Seddiq Al Khouri, Chairman of Aldar Properties; Fahad Al Ketbi, COO Aldar Properties; Ahmed Al Fahim, Executive Director of Marketing, Communications, Sales and Leasing Tourism Development & Investment Company; Keez Hartzuiker, CEO Roya International; Tea Ros, Managing Director Strategic Hotel Consulting; William Neill, Head of Cluttons Abu Dhabi; Craig Plumb, Head of Research MENA Jones Lang LaSalle; Andrew Laver, Valuer Asteco Real Estate; Mario Volpi, Managing Director Prestige Dubai; Mark Wellman-Riggs, General Manager Crompton Partners Estate Agents; Mohammad Kamal, Arqaam Capital

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Abu Dhabi Real Estate

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