OCCUPIER SENTIMENT SERIES

Transcription

1 OCCUPIER SENTIMENT SERIES June 2015

2 AN INITIAL WORD Welcome to our first report on occupier sentiment in, which provides insights into the current conditions and future expectations of corporates based in the region. As part of our efforts to continuously improve our understanding of our clients, whether they are international conglomerates or local businesses, we asked a number of occupiers across to identify some of the opportunities and challenges they face when setting their real estate agendas. These discussions are particularly relevant today, given the economic, social and political volatility of our region, which emerged as a main factor influencing real estate decisions. By sharing the results of these discussions, we hope that both corporate tenants and landlords will benefit from a better understanding of their peers, which will help create a more productive corporate environment and mature market. This report presents JLL s own view on these issues, and I look forward to hearing if you share or disagree with them. Best Regards We extend our thanks to those who shared their thoughts and perspectives through our one-onone discussions, and invite others to participate in future editions as we roll out a more formal Occupier Sentiment Survey in DANA WILLIAMSON Head of Agency,

3 1 GROWTH MARKETS The UAE s macro environment remains strong and conducive to corporate growth and investment. The political and social unrest that has swept across the region since 2011 has confirmed the UAE s position as a safe haven within a volatile region. Within the UAE, Dubai has cemented its place as the preferred business and financial centre within. It s success at diversifying its economy, supported by a strong private sector, has acted as a buffer against recent falls in oil prices, and allowed Dubai to achieve stronger economic growth than the rest of the UAE in 2014/2015. The emirate is expected to consolidate its position as the favoured location for corporate occupiers in the region over the next 3 years. DUBAI S STRATEGIC LOCATION JLL CITY MOMENTUM INDEX 2014 DUBAI IS THE PREFERRED MARKET IN Discussions with international corporates reveal they are currently forecasting a headcount growth of between 5 20% per annum in the UAE over the next 3 5 years. This is driven by: DOMESTIC GROWTH OF THE UAE REGIONAL & GLOBAL ROLE OF THE UAE GDP GROWTH (3% PA 2015/18) POPULATION GROWTH (2% PA 2015/18) LABOUR GROWTH (2% PA 2015/18) DIVERSIFIED ECONOMY EASE OF DOING BUSINESS WORLD BANK TRANSPARENT REAL ESTATE MARKET : JLL, LASALLE INVESTMENT GLOBAL CONNECTIVITY EMIRATES AIRLINES

4 2 CHOICE OF BUILDING The performance gap between projects offering high quality amenities, sufficient parking, good accessibility and international standards of property management, is likely to widen in terms of higher occupancy and rental levels. ACCESS, AMENITIES AND MANAGEMENT ARE KEY FACTORS Corporate real estate teams and decision makers are becoming more aware of the role their physical space plays in promoting productivity and efficiency. Office space within developments with a significant residential, leisure, and other components are becoming more popular. As office densities increase and flexible working becomes common; people may work from their desk, at home, or public spaces. International property management teams have proven to add value to tenants by undertaking lease renewal negotiations, ensuring tenant satisfaction, reducing operating costs through energy and sustainable management practices, and maintaining the overall security and maintenance of the office building. REPUTATION & PROFILE OF THE OWNER QUALITY OF MANAGEMENT FACILITIES / AMENITIES ACCESSIBILITY & PUBLIC TRANSPORT FLOOR PLATE EFFICIENCY / BUILDING SPECIFICATION EXTERNAL DESIGN ORDER OF IMPORTANCE (MOST TO LEAST) 3 QUANTUM OF SPACE As occupiers remain more focused on accommodating growth within existing real estate portfolios, we see limited increases in net absorption in most markets. This trend is likely to continue as corporates focus on cost containment strategies. LIMITED INCREASE IN THE QUANTUM OF SPACE DEMANDED While the level of enquiries continues to increase in most markets, the majority of corporates are currently focused on utilising their existing space more efficiently, rather than relocating to new premises. JLL data on net absorption reveals that while demand is still active in Dubai, the preferred growth market, activity has slowed down in Net absorption averaged 112,000 sq m over the past 4 years (Q Q1 2015), closely in line with the 109,000 sq m annual increase in supply. Corporates are trying to achieve short-term cost savings through real estate initiatives such as refurbishment, as opposed to relocation and expansion. As markets are expected to witness the delivery of further Grade A office space over the next couple of years, corporates should find it more attractive to expand their premises or relocate. DUBAI NET ABSORPTION OF CBD SPACE NET ABSORPTION ( 000 SQ M) 2012* 2013* * * 143 * YEAR TO Q1-1

5 USE OF SPACE 4 While government agencies and local companies still prefer traditional cellular offices, multinational corporates are looking to introduce more open, collaborative, and flexible designs within their offices as part of their workplace strategies to improve productivity. SIGNIFICANT CHANGE IN THE USE OF SPACE Workplace transformation is taking on a new significance at the global level, as corporates respond to changing economic conditions, with a continued emphasis on cost control and efficiency gains. Corporates are re-designing their workplaces to create more open, collaborative and flexible spaces and are increasing their use of alternative workplace strategies such as hot desking and remote working, as opposed to traditional enclosed offices. This is supported by technologies such as web conferencing, which have driven global connectivity, increased mobility, and have aided in re-designing workplaces. SUSTAINABILITY 5 Occupiers attitudes towards green building features and specifications are now changing as real financial benefits are being increasingly recognised. Those buildings able to demonstrate lower occupancy costs will enjoy a rental premium, as occupiers focus more on total occupancy costs over the period of their lease, rather than just on the initial rent. SUSTAINABILITY PREMIUM PROVIDING OPERATIONAL COSTS CAN BE REDUCED Although generally lags behind other global regions on green building legislation, there is an increasing recognition among corporates of the impact that sustainable buildings have on businesses from an operational standpoint. This is evident from our discussions with corporates, which reveal there is a willingness to pay a rental premium for sustainable buildings providing they result in savings in operating costs, and therefore total occupancy costs over the length of a corporates tenure. Responding to this trend, more developers are now seeking LEED certification to differentiate their buildings from the rest of the market, particularly in Dubai.

6 Dubai Emaar Square Building 1, Office 403 Sheikh Zayed Road PO Box Dubai, UAE Tel: Fax: Abu Dhabi Office No. 3, 7 th Floor Abu Dhabi Trade Centre Building (East Tower) Next to Abu Dhabi Mall Tourist Club Area PO Box Abu Dhabi, UAE Tel: Fax: Riyadh 18 th Floor, South Tower Abraj Attawuniya King Fahd Road PO Box Riyadh 11414, Saudi Arabia Tel: Fax: Jeddah Level 4, Suite 406 Jameel Square Tahliya & Andalus Streets PO Box 2091 Jeddah , Saudi Arabia Tel: Fax: Cairo Star Capital 28 th Floor Office 86 2, Aly Rashed Street Heliopolis Cairo, Egypt Tel: Fax: Contributors Dana Williamson Head of Agency dana.williamson@eu.jll.com Craig Plumb Head of Research craig.plumb@jll.com Toby Hall Head of Office Leasing toby.hall@eu.jll.com Dana Salbak Senior Research Analyst dana.salbak@eu.jll.com jll-mena.com This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.