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Covid-19 Economy Impact

Saudi government’s drive to increase home ownership for nationals

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Riyadh, KSA: The Saudi government’s drive to increase home ownership for nationals continued to gather momentum in the first quarter of this year, according to JLL’s Q1 2020 KSA Real Estate Market Performance report.

With the government focused on increasing home ownership to 60 percent by the end of 2020, the delivery of residential units for Saudi nationals in Riyadh and Jeddah remained active during the opening quarter. In Riyadh, 7,500 units were delivered while in Jeddah, approximately 1,800 units were handed over during the same period.

The Sakani program is being delivered under Vision 2030 and was launched to provide more than 500,000 residential units across the Kingdom, costing an estimated SAR 500 billion. The aim is to achieve 70 percent home ownership for Saudi nationals by the end of the decade.

“In the short-to-mid-term, demand remains supported by the Sakani program and the various mortgage products launched over the past couple of years,” said Dana Salbak, Head of Research MENA at JLL. “However, in light of the current conditions and with no specific stimulus package in support of the residential market, we can expect somewhat of a slowdown in demand over the coming period.”

Meanwhile, in the office sector, the drop in oil prices combined with shifts in the work environment towards remote working practices has resulted in a slowdown in demand for office space. This has reflected on the performance of office spaces in Riyadh and Jeddah, resulting in declines of between four - six percent across both Grade A and Grade B spaces.

The retail sector in the Kingdom has enjoyed an improved performance over the past year, however, it is expected to see a prolonged period of lower consumer appetite due to the current global pandemic. By contrast, demand for retail-driven warehousing will be active as restrictions on movement and trade have led to a shift in consumer behaviour, with online shopping (e-commerce) becoming more popular.

“This aligns with some of the strategic goals of Vision 2030, which aims to increase the proportion of online payments from a target of 28 percent this year, to 70 percent by 2030,” said Salbak.

As with other markets around the world, the hospitality industry in Saudi Arabia kicked off the year strongly, with occupancy rates in Riyadh and Jeddah, registering improvements in the YT February 2020 when compared to the same period last year, recording 74% and 58% respectively. However, the period which followed, saw hotel performance levels decline as travel restrictions took effect.

With the suspension of the Umrah season and uncertainty around the Hajj pilgrimage, which begins in late July, the performance of the tourism and hospitality market in the Kingdom is likely to remain sluggish for the remainder of this year, particularly in Jeddah, which is considered a transit city for pilgrimages to the Holy Cities.

Covid-19 Economy Impact

E-commerce in Cairo is witnessing an exciting wave of transformation, says JLL

Egypt ecommerce

Cairo, Egypt – The global Covid-19 pandemic has resulted in a new wave of transformation in e-commerce in Cairo and across Egypt, according to JLL’s Q1 Cairo Real Estate Market Performance report.

Due to the closure of malls, the logistics landscape in Egypt is transforming. Consumers have had a taste for the efficiency associated with e-commerce, and therefore the sector is now striving to keep up with the exceptional increase in demand for online shopping.

From this, according to the report, stems the need to innovate and adopt new agile ways of working, whilst abandoning the traditional models of doing business in order to thrive. As a result, more and more retailers are examining the interplay between bricks-and mortar, as well as online retailing, in order to compete in a rapidly changing environment. This is also increasing the demand for new and better-quality warehouses and distribution centres as retailers continue to grow their consumer base and promise more choice and convenience.

“E-commerce is a popular investment sector with growing interest globally,” said Ayman Sami, Country Head, JLL, Egypt. “It will need strong government support, comprising a key element of plans for the city’s continued economic growth. This will also reflect positively on the active warehousing and logistics sector in Egypt with great potential to grow.”

Despite the challenging times affecting Cairo’s real estate market, most sectors remained stable in the first quarter of 2020. The office sector in particular recorded strong performance.

Cairo’s office sector has seen a 9% increase in average prime rents on an annual basis despite the unfavourable market conditions, due to the limited supply of high-quality offices. The average vacancy rates have also remained stable at 12% over the last quarter which also reflects an overall strong office performance in Q1 2020. Various measures that have been taken, including the ‘work from home’ initiative, will see demand for office space likely remain subdued in the short-to-mid-term, with requirements focused on smaller fitted out spaces, to minimize capital expenditures.

The retail sector in Cairo has seen positive performance during the first quarter of the year where average rental rates increased by 10% across primary and secondary malls. However, the current market conditions have suffered from the pandemic and caused an increase in downward pressure on operations and sales volumes, resulting in landlords offering rental exemptions to support tenants. This is expected to reflect even further in the second half of this year provided the temporary lockdown of all retail operations and other preventative measures remain active.

The residential sector remains almost unchanged with limited units delivered in the first quarter of 2020 keeping the total residential units at 159,000. An additional 58,000 units are expected to be completed by the end of 2020, but given the current market condition these are expected to spill over into 2021/2022. As there is still a large amount of future supply currently under construction in East Cairo, this has placed downward pressure on sale prices over this quarter while the shortage of supply in 6th of October City makes it the better performer in Q1 2020. The rental market remains landlord-favourable, as rents in both New Cairo and 6th of October City continue to witness an increase.

The hotel sector has been the most severely impacted as a result of the pandemic and this is evident especially towards the end of the first quarter with a 30% annual drop in average daily rates (ADRs) while an even sharper decline of 81% took place in occupancy rates. The hotel supply remained stable at 23,000 keys with no additional completions in the first quarter of 2020 and around 400 keys are still expected to be delivered by the end of the year.

Government initiatives are also in place to support the hospitality sector during these uncertain times with the support of the Central Bank of Egypt (CBE) allocating EGP 50 billion for two-year loans with a six month grace period to contribute towards salaries and maintenance payments. The CBE has also recently granted hotels and tourist facilities a financing plan to support hotel development and renovation.

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How Retailers are Navigating the ‘New Normal’

18_RS

Retail has faced a unique dichotomy, with high streets all but abandoned, consumers are turning to ecommerce to buy essentials and luxury items have been redefined to include impulse, pastime and pleasure purchases.  

But, with some regions across the globe opening certain stores, adapting consumer journeys to fit social distancing standards and with new buying trends emerging each week, what exactly does this ‘new normal’ look like today? 

After opening 34 of their 111 stores, with more adopting curbside-pickup systems, Neela Montgomery, chief executive officer, Crate & Barrel shared the company's ongoing journey toward life after lockdown in a recent webinar with the National Retail Federation

“It’s interesting to how this whole crisis has evolved,” says Montgomery. “When we first learned of the virus, it was really about a supply-side issue with China. It was only in early March that we started to think this could become such a widespread issue. Now we’re a little bit more in that new normal. We have seen a number of different trends and we have been able to keep our distribution centers operating, and I’m very grateful to our associates for that. Effectively they’ve been dealing with peak ecommerce volumes for six weeks.” 

“From February, 50% of our sales were already through the ecommerce channels so we were evenly split between online and in-stores at that point,” adds Montgomery. “It’s interesting now, we’ve had stores open for about 10 days. [Customer] traffic is inevitably very much at rest especially in the limited opening hours which is about – 60% right now, but conversion has been very high. Any customer walking into your store is probably on a mission to buy something, they’re not just browsing. If you think about the trend of bricks-and-mortar retail over the years, it has been a trend of lower traffic and higher conversion and making every visit count. I think we’re moving into an era where that’s more exaggerated.” 

This new normal is an enhanced iteration of the retail evolution that has been underway for some years. A move toward targeted buying and curated purchase journeys, low footfall in-store and higher engagement online as well as an emphasis on consumer convenience. 

“Shoppers are looking for brands that can solve their needs, which today are both physical and emotional,” says Erik Rosenstrauch, founder, FUEL Partnerships. “The number of people who are now doing ‘clicks-to-bricks’ is rising. Walmart has picked up 40% growth in that area alone in sales, in one month. The Walmart online app is the most downloaded shopping app in the states. It's surpassed Amazon. It's about speed for retailers right now, it's about value and it's about convenience. I believe that for retailers to win, they must deliver on those three things.”  

The trends emerging from consumers are being mirrored by retailers, who are investing in click-and-collect, opening trial stores in certain regions and carefully plotting out supply chains to ensure buyer demand is looked-after in Q4 2020. But, this new era for retail could differ drastically from in-store to ecommerce. 

Speaking with License Global, Bryan Flynn, founder, Super7 and Hybrid Design,  discussed today’s new normal from the point of view of a nostalgia-inspired toy and apparel licensee and ecommerce retail brand. 

“Mostly we are seeing people looking for ways to find some entertainment and normalcy in all of this, which has translated into a healthy online retail business for us,” says Flynn. “Of course, people are prioritizing their health and safety needs, and we hope they continue to do so. Beyond that, we are seeing consumers continue to make space in their lives for enjoyment of their hobbies. There are always real-life difficulties in the world, and it's nice to have a fun and healthy outlet.” 

Speaking to License Global in April, Pat Wood, founder, online retailer TruffleShuffle, gave us his view of the post-pandemic buyer landscape in the U.K. as ecommerce continues to dominate the country’s consumer culture. 

“You’re not going to open shop and have the footfall you had pre-Coronavirus,” says Pat Wood. "Most consumers will still be very cautious and limit their visits to stores. Realistically, over the coming years, there will be a huge shift online, and I would be very, very surprised if most high street retailers didn’t use this as an opportunity to reduce their brick-and-mortar presence.” 

Another major online retailer in the U.K. is Character.com, who have been facing new seasonal demands and adapting their workflow to nurture the consumer journey online as they prepare for another new normal to land in Q4 2020. 

“My advice to companies during this time is to make sure that you consider your supply chain in any plans that you make," says Karen Hewitt, co-founder, Character.com. "It will take working as partners to have the biggest long-term gains in terms of sustainability for all businesses. Q4 is going to be more important than ever in 2020, so plan with positivity.” 

So, with so much to consider from ecommerce to brick-and-mortar, the new normal (today) means curating existing demand, planning for the future, communicating with buyers regularly and building the future for your brand to stay front of mind for consumers. What normal looks like tomorrow is, quite simply, anyone’s guess; however, the efforts of the global retail community are ensuring a constantly changing solution to the consumer needs that will emerge once lockdowns lift and life returns to the ‘next normal’. 

This article is from License Global, the leading news source for the brand licensing industry

Socially Distanced Dining: Restaurant Design for the 'New Reality'

restaurant social distancing

About this time last year, NAME architecture began to think about the future of social interactions in hospitality environments. How could design overcome the disconnect that technology has created and help strengthen the opportunities for real life social connection between patrons and customers? 'Our work coincided with the annual Sleep and Eat event and our response looked at encouraging social interactions whilst still allowing for some choice and flexibility about where or how you might sit in relation to others.'

Find out more about the 'Where do you sit' interior concept in the document below.

This article is from Sleep and Eat  | Sleep & Eat 2020 will celebrate 15 years of bringing the entire hospitality supply chain together. 

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Covid-19 Economy Impact

Trends of the regional commercial property amidst pandemic

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Sentiment towards global real estate has fallen emphatically among both investors and occupiers following the spread of COVID-19, according to the Q1 2020 RICS Global Commercial Property Monitor.

Globally, confidence among occupiers has deteriorated in the last three months in 33 of the 34 countries surveyed, with the same proportion also now showing negative readings. RICS’ Occupier Sentiment Index (OSI), a gauge of sentiment amongst occupiers, has slipped to -61 this quarter in the UAE from -41 in Q4 2019, which is the weakest reading since 2010, indicating to a further deterioration in occupier demand.

However, the Kingdom of Saudi Arabia, even after seeing a sharp decline in sentiment due to the global pandemic and low oil prices weighing on the outlook, still saw a softer reduction in occupier confidence compared to other countries globally, with the OSI falling from -10 in Q4 to -19 this quarter.

The same trend is evident among investors too. Confidence has fallen in all countries. RICS’ Investor Sentiment Index (ISI), reflecting sentiment among investors, is now in negative territory in majority of countries surveyed, with the UAE recording -41 on the index. Respondents in the country noted a sharp reduction in both domestic and international investor enquiries over the quarter.

KSA saw a slip in investor confidence as well, with the overall investor demand declining slightly in retail and office sectors and the ISI contracting to -2 this quarter, compared to +15 in Q4 2019. However, this was not the case for industrial properties, with investor enquiries remaining steady in this sector over the quarter.

Outlook weaker yet for real estate market

Both investors and occupiers fear that we are not yet over the worst when it comes to the impact on the real estate sector. Looking at the expectations for the next twelve months, in the case of rental values, UAE expects a decline of 5% in headline rents, with secondary retail rents expected to see the sharpest decline. KSA, on the other hand, records highly varied rental growth projections across the sectors, with the most acute rental decline in secondary retail spaces by 4%. Prime industrial sector, however, sees a rise of 2% in rents in the next twelve months. Capital value is also expected to rise to some degree in the Kingdom across most areas of the market, led by prime industrial and office values.

Shift in sentiment in offices most marked, as working patterns shift

While retail is the most depressed across the world, following the impact of global lockdowns, the deterioration in sentiment has been most marked for offices. Anecdotal evidence from survey respondents bear out the sector patterns with some highlighting the scope for agile working to become more commonplace in the aftermath of the virus, lowering the demand for office space. The acceleration in the structural trend towards e-commerce is also noted, with increasing interest in prime logistics space viewed as a likely outcome.

Simon Rubinsohn, RICS Chief Economist, commented: “The impact of COVID-19 on sentiment in the commercial property sector was always going to make for painful reading. However, the erosion in confidence is stark. What’s even more worrying for investors and occupiers alike is that the full extent of the toll it will take on businesses and the underlying economy is still unclear. Given these conditions, respondents are clear that there will be no quick rebound.

Although hard to generalise, this hostile environment makes government support more vital to underpin a global recovery as lockdowns begin to ease. There is also a strong case for a more collaborative approach between landlords and tenants to manage the challenges presented by the current set of circumstances.

What started as a public health crisis morphed into an economic one, and we will see further structural, long-term change as a result of this pandemic. We have already seen the impact on retail as consumer behaviour changed by necessity, and remote working affecting how office spaces are viewed. The ongoing rise of e-commerce and a shift in supply chains towards ‘Just in Case’ is likely to trigger a further change in the investment dynamic.” 

Global Commercial Property Monitor

RICS’ Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets. The report is available from the RICS website www.rics.org/economics along with other surveys covering the housing market, residential lettings, commercial property, construction activity and the rural land market.

 

Sharjah’s Tilal City Community Centre project 80% completed

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SHARJAH, 8th June 2020 (WAM) -- Tilal Properties, the first real estate development company in the emirate of Sharjah, announced 80 percent completion of construction work on their upcoming community centres. The community centres named the "Tilal Oasis", are being constructed in Tilal City’s Naseem Villas and Naseem Residences.

Khalifa Al Shaibani, Director-General, Tilal Properties, said, "The goal of setting up Tilal Oasis in two different complexes is to provide the residents of Tilal City and surrounding areas with diverse options for active living and recreation in a safe, inclusive environment boosting optimum service facilities at a high level of quality, with an integrated living style."

He pointed out that the two centres are designed in a modern architectural style that caters to all tastes and will provide all necessary daily services required to satisfy every segment of society, age and nationality.

The first community centre which is located in the "Al-Naseem villa complex", encompassing a total area of 1,417 sq.m, and includes four restaurant lounges and three retail units. The second is located in the "Al-Naseem Residence" encompassing a total area of 2,428 sq.m, and will consist of six restaurant lounges along with four retail units.

A sports centre extending over an area of 350 sq.m, will be located in each complex separately, to promote a healthy lifestyle among residents. Some of the other facilities and services common across both centres include an outdoor shared area, kids play area and many others.

Tilal City is a mixed-use project that provides unique opportunities to purchase land for housing and investment in a carefully planned and fully coordinated environment.

The total area of the Tilal City project amounted to 25 million sq.ft, divided into eight integrated regions, services and facilities, and is the first project in the emirate to be designed in a unique style that helps to create a harmonious community to live and work.

With a 48 percent open area, Tilal City is designed to accommodate 65,000 residents. The infrastructure is 100 percent ready and the landowner can start construction immediately after making the complete payment. All necessary utility services are already in place including Tilal City’s electric station and sewerage station in addition to a water and gas network.

This article is from the Emirates News Agency (WAM).

 

Meraas to join forces with Dubai Holding

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On Tuesday, the Dubai Media Office announced that under the directive of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, Meraas will join forces with Dubai Holding.

Meraas is set to become part of Dubai Holding, under the leadership of His Highness Sheikh Ahmed bin Saeed Al Maktoum. According to the directive, the move comes in an effort to sustain and advance growth through a unified and integrated vision that builds on gains, spurs efforts and boosts Dubai’s global competitiveness.

Dubai Holding lists Jumeirah Group, Dubai Properties and TECOM Group among its portfolio. TECOM Group alone owns and operates ten sector-focused business clusters, with Dubai Internet City and Dubai Media City being the flagships. Meraas has launched several projects in multiple sectors including real estate, retail, hospitality, food and beverage, leisure and entertainment and healthcare. Meraas will join Dubai Holding to further develop a highly diversified conglomerate operating in several sectors across real estate, tourism, hospitality, leisure and entertainment and investments. This move is set to combine a complementary suite of services and expertise to diversify the economy and maximise their competitiveness in the global marketplace.

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Dubai CommerCity: A 'city' for online shopping

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Dubai CommerCity (DCC) introduces the growing opportunities available to the e-commerce companies within the MENASA region.

Middle East’s e-commerce market is set to reach around $69 billion by 2020, becoming one of the world’s fastest growing international markets. DCC will play a pivotal role in the development of the e-commerce sector. It will provide growth opportunities for global and regional manufacturers, as well as distributors and global e-retailers. DCC will offer a unique e-commerce ecosystem for companies in the industry such as software as a service, logistics as a service, call centers, web developers, photoshoot studios, amongst others.

Dubai CommerCity is the first e-commerce free zone dedicated to the growing E-commerce market in the Middle East, North Africa and South Asia (MENASA) region. It is a joint venture between Dubai Airport Freezone Authority (DAFZA) and Wasl Asset Management Group with an investment of AED 3.2 billion spread over an area of approximately 2.1 million square feet. The free zone is a strategic project, aimed at elevating Dubai’s position as a leading centre for e-commerce. It is set to shape the future of e-commerce in Dubai, becoming a regional hub for the industry by providing unique services that add value to customers’ businesses.

DCC will be the ideal regional hub for e-commerce businesses looking to offer services in the Middle East and beyond, given its strategic location close to Dubai International Airport (DXB), the world’s busiest international airport. It will optimize the experience of foreign investors by offering solutions that ensure ease of doing business.

DCC promises efficient customs procedures and full-service one-stop shop for regulatory bodies to facilitate trade. It offers smart infrastructure and world-class services for the e-commerce industry players attracting the right pool of foreign direct investors to benefit from DCC’s unique value proposition and its top-notch ecosystem. To facilitate e-commerce business, Dubai CommerCity has fostered tie-ups with third party service providers to ensure all the elements of the ecosystem are provided for the investors. 

Commenting on Dubai CommerCity’s contribution, Ms. Amna Lootah, Assistant Director General, DAFZA said: “DCC is committed to boosting the growth of the regional e-commerce industry. Through cutting edge technologies, state-of-the-art services and the right infrastructure - we are establishing a base for e-commerce companies to feed into a greater ecosystem that works in an integrated way. DCC will offer growth opportunities and a specialized offering for global and regional investors in the industry”.

Dubai CommerCity is spread across a total built up area of 520,000 SQM with office spaces of 240,000 SQM and logistics units covering 54,000 SQM. Dubai CommerCity is divided into three modern and innovatively-designed clusters: the Business Cluster containing 12 modern g +6 office buildings and green spaces; the Logistic Cluster consisting of 105 logistic units (dedicated and multi-client) equipped with the latest technology; and the Social Cluster comprising of multi-purpose halls, flagship and super stores where customers can exhibit their products, science labs to innovate, photoshoot studios, modular exhibition centers, wellness centers, and a range of restaurants and cafés. Dubai CommerCity has implemented state-of-the-art technologies to provide investors with a smart & quality-focused business ecosystem. First batch of Phase-I is scheduled to be delivered in Q4 2020.

Covid-19 Economy Impact

Industrial and logistics post solid take-up results at start of year

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Frankfurt/Main, 27 April 2020 – According to Colliers International, Germany’s top 8 industrial and logistics markets generated roughly 452,000 sqm in take-up in the first three months of 2020. This result reflects a YoY decrease of 13% (2019: 520,000 sqm) and a 21% dip compared to the 3-year average. For the sake of comparison, take-up was recorded at roughly 650,000 sqm in 2017.

“This 13% drop once again highlights the ongoing lack of available space that continues to hamper results in some markets and has given us the third subsequent YoY decrease in total take-up recorded in Germany’s top 8 markets,” says Peter Kunz FRICS, Head of Industrial & Logistics at Colliers International.

We are currently seeing increased demand from the food and pharmaceutical sectors for warehouse space available for immediate tenancy due to higher consumption and the need for warehousing capacity as a result of the corona pandemic. Owners are working hand in hand to make their space available.

Large-scale leases remained scarce in Q1 2020 in line with the trend seen in previous quarters. Two leases signed in the Hamburg logistics region were the only ones involving more than 20,000 sqm, one of which was an owner-occupier deal in the City South submarket for 30,000 sqm of usable area. More than half of the leases signed in Düsseldorf can be attributed to units of over 5,000 sqm. This includes a lease signed by Japanese logistics company Yusen Logistics for 11,000 sqm in Langenfeld. The largest lease signed in the Stuttgart logistics region involved a light industrial property encompassing 17,500 sqm in the Ludwigsburg submarket. Leases signed for over 10,000 sqm accounted for only 36% of total take-up in Germany.

Logistics service providers were most active in terms of demand, accounting for more than 34% of total take-up. In the previous year, retailers claimed the lion’s share with 40%.

Rents remain stable in all top markets

Prime and average rents in Germany’s top 8 logistics markets remained stable in line with levels posted in the previous quarter. Limited supply and ongoing high demand continue to put pressure on rents. However, in light of current uncertainties and average take-up results, this trend does not come as a surprise. In a flash poll conducted by Colliers International among market participants from the logistics real estate sector in early March and April, 63% of those surveyed (including property developers, investors and occupiers) reported that they expected rents to remain stable and demand to increase in the next 12 months.

The market reacts

“There’s no way to gauge how this will affect the logistics property market in terms of annual results for 2020. On the one hand, we expect heavy losses in the automotive industry’s contract logistics sector. On the other, multiple segments of the e-commerce, food and pharmaceutical industries are likely to experience higher demand due to the current restrictions. A number of companies are making a short-term shift to online delivery, which could have a positive long-term effect on demand for warehousing and logistics space. However, at this point in time, the market is merely reacting to current circumstances and proving very flexible. There may be some lessons to be learned from the current situation in the medium to long term, for example when it comes to restructuring supply chains and expanding regional warehousing and production capacities,” concludes Peter Kunz.

 

This article is from Colliers International.

Covid-19 Economy Impact

UAE Industrial & Logistics Market Review - Q1 2020

industrial

From the ease of doing business to industrial rents and yields, this report aims to provide an outline of the UAE’s Industrial & Logistics Market over the first 3 months of 2020.  “Despite the challenges brought about by the Covid-19 outbreak, the long-term fundamentals underpinning the industrial and logistics sector in the UAE remain steadfast. In the short term, both the Abu Dhabi and Dubai governments have focused their respective stimulus packages to support this sector through the pandemic.” To know more about the potential of the industrial & logistics market in the UAE, read the report or visit https://www.knightfrank.ae/.

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