Moving forward: The market remains level, while ongoing development projects continue to advance

While Jordan’s property market slowed in 2012, the sector remains healthy, and this strong trend is expect-ed to continue throughout 2013. Current market con-ditions can be attributed to several factors, including a growing middle class, an influx of newcomers from Syria and Libya in need of homes and the caution among developers due to the geopolitical situation in the region. By and large, the residential market is outper-forming the kingdom’s commercial segment.

BY THE NUMBERS: According to the Amman-based Arab Bank, average demand for apartments in Jordan fluctuates between 20,000 and 25,000 units per year, with the majority of demand – around 90% – deriving from nationals. Asteco, a property consultancy based in Dubai, indicated in its most recent report that aver-age rental rates in the capital remained relatively con-stant during the first three quarters of 2012. The real estate consultancy also noted that out of a group of six neighbourhoods in Amman, rental rates ranged from JD3500 ($4920) per year for a one-bedroom apartment in Al Rabiah, to JD5125 ($7200) per year for a one-bed-room in Abdoun during the third quarter of 2012.

Asteco also reported that residential sales prices in Amman stayed mostly constant during the first nine months of 2012. Average sales prices varied between JD800 ($1125) per sq metre in Al Rabiah to JD1075 ($1512) per sq metre in Abdoun during the third quar-ter of 2012. The consultancy noted that prices in Al Rabiah dipped slightly during this period due to greater supply, which has pushed up competition among land-lords. Overall, prices in West Amman – the newer and more affluent part of the capital – are far higher than prices in the older neighbourhoods of East Amman.

One important trend within the sales market over the past several years is a general reduction in unit size. Historically, the average homebuyer in Jordan aimed to buy a three-bedroom unit with a separate dining room and sitting area in addition to a private living room. According to real estate developers in Amman, these units typically ranged from around 170 sq metres to 200 sq metres. However, Comprehensive Land Devel-opment and Investment, a publicly traded Jordanian property developer, recently reported that land prices have jumped by 10% over the past three years. As a result, the majority of homebuyers cannot afford a 200-sq-metre unit. Most buyers now either purchase a larger space outside of Amman or buy a smaller unit in the city. The latter option is reportedly more popular.

NEWCOMERS: Regional geopolitical conditions have also affected Jordan’s real estate market. Unrest in Syria and Libya has led to an influx of foreigners in the country, and while many of these refugees are living in border cities such as Mafraq and Ramtha, a significant percentage have settled in Amman. However, many of these newcomers to the capital are postponing pur-chasing property with the hope of moving back to their home country in the near future, and are opting to rent instead. As such, Amman’s rental market has seen some increase in prices, while the flood of new arrivals has not significantly shifted the sales market.

RECENT MOVES: Although Jordan’s commercial real estate segment has been affected by oversupply, aver-age office rental rates in Amman slipped only slightly over the first three quarters of 2012, said Asteco. Rental rates along the popular Wadi Saqra Street, for exam-ple, dropped by less than 3%, and rates in the Shmeisani area saw a decrease of just over 3% between the first and third quarters of 2012. Rates elsewhere in the cap-ital, such as Um Uthainah and Sweifieh, remained steady when comparing the first and third quarters of 2012.

Out of a group of six neighbourhoods in Amman, aver-age commercial rental rates during the third quarter of 2012 ranged from JD85 ($120) per sq metre per year along Al Madina Al Munawara Street up to JD118 ($166) per sq metre per annum in Um Uthainah. On the sales side, average prices varied from JD825 ($1160) per sq metre along Al Madina Al Munawara to JD1000 ($1406) per sq metre in Um Uthainah during the same period.

Asteco reported in 2012 that commercial property prices in Amman slipped by around 2% on average between the first and third quarters of the year. How-ever, the report notes that in areas such as Shmeisani, Sweifieh and along Wadi Saqra, sales prices remained constant when comparing these two time periods.

Oversupply in the current market can be traced back to the influx of Iraqis moving to Amman, many of who brought their businesses with them. Developers quick-ly began building new office space in an effort to meet this rising demand, and the jump in new construction eventually surpassed the need. Much of the current demand for commercial property in Jordan comes from local companies, and many customers prefer to rent rather than buy, according to Asteco.

BUILDING UP: A recent addition to Amman’s commer-cial property market is the Al Waleed Atrium, a build-ing developed by Dubai-based Al Waleed Real Estate. Completed in 2012, the new facility offers six floors of office space, retail units at the ground level and 108 underground car park spaces spread over four levels. In mid-2012 the property developer cited Jordan as a prime area for investment due to the country’s stable economic and political environment.

The Al Waleed Atrium is part of the Abdali project currently under development in Amman. At over 384,000 sq metres, Abdali is the largest mixed-use development project to be built in central Amman to date, as well as the biggest real estate project under construction in the capital. It will include a total builtup area (BUA) of more than 1.8m sq metres and will comprise residential apartments, office property, serviced apartments, retail units, entertainment spaces and hotels, according to the project’s developer, Abdali Investment and Development (Abdali Investments).

NEW CENTRE: The aim behind Abdali project is to cre-ate a new downtown in the capital and attract larger international companies to Amman by providing high-quality office and residential space in an urban envi-ronment. The developer estimates that the total cost of the project will exceed $5bn. Abdali is being built on former military land that in the 1950s was still locat-ed outside Amman. When the military complex relo-cated as the city began to expand, it left behind a large and relatively undeveloped area of land that was now near the capital’s centre. The government decided to use the land as an expansion of Shmeisani, a large but poorly planned business district nearby. In 2004 the gov-ernment created Abdali Investments, a joint venture between Horizon International, a global construction conglomerate that specialises in investing and devel-oping large property projects, and National Resources Investment and Development (Mawared), a local gov-ernment-owned property developer. Abdali Invest-ments was created to develop the Abdali project and is not meant to construct projects elsewhere.

BUILDING BUSINESS: Abdali Investments has also established several subsidiary and affiliate companies. Abdali Boulevard Company was created in 2006 to develop and manage The Boulevard, a mixed-use com-mercial, retail and hotel apartments’ project with a BUA of 121,000 sq metres. One of the key attraction of this new project is the fact that all facilities will be pre-wired with deep fibre-optic capability, providing reliable, high-speed data connections at a minimum of 1 giga-bit per second (Gbps), that goes up to 10 Gbps. Anoth-er subsidiary, Jordan District Energy, was set up in 2007 and is tasked with supplying thermal energy to the Abdali development. The Abdali Mall Company was established to develop and run Abdali Mall, which will measure over 84,000 sq metres of BUA when complet-ed, according to Abdali Investments.

PHASE 1: Abdali is being constructed in two phases. The first is to provide a total BUA of 1m sq metres and will be opened in stages. Office space will be the largest segment of this space, at 36% of the total area and meas-uring 368,000 sq metres. Residential units will cover 290,000 sq metres of BUA, making up 29% of the first phase, and retail shops will occupy a BUA of around 246,000 sq metres. Hotels will measure 111,000 sq metres of BUA. While the core of this first phase will be finished at some point in 2013, it is currently ready for operation, and The Boulevard is expected to open before the end of 2013. Abdali Investments anticipates Abdali Mall to begin operations by year-end 2014.

“Amman does have an oversupply of office space, but The Boulevard will be attractive to businesses, partic-ularly international companies, due, in part, to the large telecommunications infrastructure, including a volumi-nous network of deep fibre-optic cables that will enable an optimal business environment.” Taher Al Jaghbir, CEO of Abdali Boulevard Company, told OBG PHASE 2: The second phase was launched in 2008, but later put on hold due to the global economic down-turn. Abdali Investments is now looking into new means for developing the second phase of the project in line with the current economic conditions.

The developer has also indicated that any major progress on the second phase will not take place until the first phase has been opened. In total, phase 2 is to encompass 30,000 sq metres of land, the majority of which will be allocated to residential units, providing more housing space than the first phase. The second phase will also include some 42,000 sq metres of BUA of commercial and hotel facilities, as well as a pedes-trian and landscaped area.

TOP HEIGHTS: One of the most significant residential projects in the first phase of the Abdali development is being carried out by DAMAC Properties, a private real estate developer headquartered in Dubai.

Set up in 2002, the firm is building four residential properties in Abdali. These include the Heights, which will be the tallest residential tower in the kingdom; an annex to the Heights known as the Lofts; and the Court-yard 1 and 2, a seven-level building adjacent to the Heights. All four properties will primarily be residential with some retail units located on the ground floors. The project began in 2006, and turnover for the Heights and the Lofts was expected in June of 2013. Courtyard 1 and 2 are due to be turned over in April 2014.

FURTHER GROWTH: Amman is not the only site of large, mixed-use real estate projects. The city of Aqa-ba is also home to a number of such developments. Located on the Red Sea coast around 300 km south of Amman, the port city has built a strong tourism industry, and many of Aqaba’s current real estate projects include tourist-related components. The Saraya Aqa-ba development, for example, includes several five-star hotels; entertainment facilities, including a beach club, a water park and a conference area; and a mix of retail space and residential units. The project’s resi-dential space is made up of a range of villas, townhous-es, apartments and duplexes. Upon completion, the mixed-use development will measure some 635,000 sq metres, and a man-made lagoon will increase the prop-erty’s waterfront area by 1.5 km (see Aqaba chapter).

The Saraya Aqaba Real Estate Development Compa-ny (SAREDC), a private shareholding firm operating with paid-up capital of JD335m ($471.2m), is develop-ing the project. One of the SAREDC’s major sharehold-ers, Saraya Holdings, notes the investment value of the project to be in excess of $1bn.

OASIS: Another tourism-oriented development in Aqa-ba is the Ayla Oasis, which is also using man-made lagoons to expand its shoreline. Construction on the project’s four lagoons has been completed, adding 17 km of shoreline. Building efforts on major infrastruc-ture, including utilities networks and 25 km of roads, has also been concluded, according to Ayla Oasis Devel-opment (OASIS), the project’s developer.

Sahl Dudin, managing director at Ayla Oasis, points to the importance of implementing effective energy solutions. “Every industry and every major project in Jordan must tackle energy issues. The lagoons in Ayla Oasis’s mega development are no different. The water is being pumped in and out of the Red Sea supported by a 3-MW photovoltaic plant. This will help alleviate some of our energy burdens,” he told OBG.

Construction has already begun on the develop-ment’s second phase, which includes residential units, a 300-room Hyatt Regency hotel, an 18-hole golf course, a floating marina with over 300 berths, and retail space made up of restaurants, shops, cafes and entertainment centres. According to OASIS figures, the entire project covers 4300 dunums (430 ha) of land.

OASIS is funded by a Saudi conglomerate, the Sup-ply and Trading Corporation (ASTRA), with holdings in a range of industries. Investment in the first phase of the Ayla Oasis project, which includes the lagoons, roads and utilities networks, amounted to JD250m ($351.6m), while the second phase is estimated to cost some JD200m ($281.3m), according to OASIS.

Marsa Zayed, another large mixed-use, real estate proj-ect in the port city, is being built in the downtown area of Aqaba. The development will be made up of over 30,000 residential units, including townhouses, apart-ments and villas; eight hotels offering a total of 3000 rooms; office, retail and recreational space; and a cruise terminal. Construction has already begun on the pro-ject’s first phase, which includes infrastructure work across 200,000 sq metres of land, in addition to a res-idential and retail area known as the Al Raha Village.

As of early 2013 building efforts on the first phase were still on track to be completed by 2015. Accord-ing to the project’s developer, Al Maabar, an Abu Dhabi-based development firm, Marsa Zayed’s BUA is set to equal 6.4m sq metres once completed. Aqaba Devel-opment, a key development group in the city, report-ed that the investment value of the project is $10bn.

AFFORDABLE HOMES: There is particularly high demand for affordable housing in the kingdom. Indeed, the Housing and Urban Development Corporation (HUDC), a government body responsible for carrying out housing policies and programmes, has noted that around 70% of residential demand in Jordan is for hous-ing targeted at the moderate and low-income groups.

Such a trend in housing demand is common across the region. Global property consultancy Jones Lang LaSalle noted in a September 2011 report that the Middle East and North Africa region’s major markets lacked a total of roughly 3.5m affordable homes. Much of the demand in Jordan, according to the HUDC, can be attributed to socioeconomic changes that have driv-en up the income levels needed to buy a home.

The HUDC has implemented a number of programmes and agreements to meet the rising demand. In 2008 the body launched its Royal Initiative, which aims to pro-vide suitable housing for government employees through two main tracks, the first building housing units (often in cities), and the second providing serv-iced land. The HUDC constructed over 8800 housing units, and turnover of these homes began in 2010.

According to recent HUDC figures, approximately 43% of the units had been sold by the end of 2012, and the remaining units are due to be sold throughout remained of 2013 and into 2014. Progress on the ini-tiative’s second track has also advanced.

The HUDC has implemented 30 projects, which include approximately 4000 plots of land. All of the plots are located outside of Jordan’s major cities, and roughly 1000 have been distributed. Much of the HUDC’s work is carried out via public-private partnerships (PPPs). Since 2000, the HUDC has signed 52 PPPs in the construction of either serviced plots or apartments. The government body has signed a further 14 PPPs with private companies as part of the implementation of its Royal Initiative, according to recent HUDC data.

COMMUNITY DEVELOPMENT: Looking forward, the HUDC aims to concentrate its efforts on larger-scale projects that provide schools, markets, mosques, med-ical centres and other necessary amenities of commu-nities alongside its affordable housing developments. The HUDC has adopted this strategy because some of its development plots are far away from other social or urban services, such as schools. To make the new communities more attractive, the HUDC is now taking a more holistic view. Previously, the HUDC successful-ly implemented the large-scale, mixed-use Abu Nuseir project, which was launched in the early 1980s.

Abu Nuseir’s second phase, which focuses on serv-icing and selling plots, began back in 1998 and is still under way today. When construction first commenced, the development was located outside of the capital. Abu Nuseir has now become contiguous with the cap-ital city, as both Amman and the development have expanded in recent decades.

FINANCING: Average terms for home loans in the king-dom range from 20 to 30 years, and banks were first permitted to lend money on a long-term basis in 1996. According to recent HUDC figures, home financing in Jordan grew by more than 6% between 2010 and 2011, from roughly JD1.32bn ($1.86bn) in 2010 to over JD1.4bn ($1.97bn) in 2011. Between 2004 and 2011, home financing has surged by close to 650%.

Traditional loans from commercial banks made up the bulk of loans extended to homebuyers between 2004 and 2011. The HUDC reported that commercial banks financed some JD984m ($1.4bn), or over 70% of total loans in 2011. However, sharia-compliant financial products issued by Islamic banks are becoming more popular and totalled JD417m ($586.5m) in 2011, up from JD149m ($209.57m) in 2009.

Indeed, between 2004 and 2011, Islamic home financ-ing in the kingdom rose by over 900%, according to HUDC data, and Islamic financial products remain especially popular outside of Amman. Some of the increased pop-ularity of Islamic banking can be attributed to greater competition among sharia-compliant banks, which has driven borrowing rates down.

OUTLOOK: Although not a strong period for the king-dom’s property market, average residential rental and sales rates in Amman appear to be holding steady for the most part, while average rental and sales prices in the capital’s commercial segment have dipped only slightly, despite the recent oversupply.

Additionally, while socioeconomic changes have made it increasingly difficult for some to purchase a home, many Jordanians have adapted by buying small-er housing units in the city or purchasing property out-side of expensive urban areas.

Progress is also being made to increase Jordan’s sup-ply of affordable housing, and Islamic home financing schemes are becoming ever more popular and com-petitive. Most encouragingly for the sector, however, is that construction continues to progress on several large mixed-use developments in Aqaba and Amman.