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Nation Towers MallTrade Area Analysis

Introduction

2

PROJECT ESSENTIALS

Project Details

Developer International Capital Trading LLC

Project Name Nation Towers Mall

Project Location 1st Street, Abu Dhabi, Abu Dhabi Emirate, UAE

Coordinates 24°27'52.9"N 54°19'42.8"E

Retail GLA (m²) 19,659

Levels 2 main levels

Units 54 + 6 kiosks

Parking 491 (shared with offices)

Opened April 2014

Nation Towers Mall is the retail component of mixed-use development NationTowers. The two towers of the complex comprise a 64-floor residential tower with360 units, and a 51-floor tower with the St Regis Abu Dhabi hotel occupying thetop 17 levels and grade A commercial office space in the lower levels.

Nation Towers Mall occupies two main levels (L1 and L2) in the podium with twoadditional units on the Ground Mezzanine (GM) level. A further unit is located inthe office tower.

The retail offering is anchored by a Jarir Bookstore on L1 and an 8-screen VOXCinema on L2.

Parking is available in three levels (B, G and GM) of the podium for 491 vehiclesand is shared with office staff.

Nation Towers Mall: Retail Design & Feasibility Review: Final Report: 13 December 2018

Market Background

▪ The rate of economic growth in Abu Dhabi Emirate saw an uptick in the finalquarter of 2017 after a period of decline since the beginning of 2016.Nevertheless, the IMF expects real GDP growth in the emirate to pick up in2018, supported by the ongoing diversification of the economy into non-oilsectors, such as financial services, retail and tourism.

▪ The wholesale/retail sector of the economy contributed AED47.4 billion toAbu Dhabi’s GDP in 2017, down by 0.5% on 2016. 2018 figures are expectedto show a return to positive growth in the low single digits. The value of theaccommodation and foodservices (F&B) sector reached AED10.1 billion in2017, the sixth continuous year of positive growth.

▪ The population of Abu Dhabi City stands at around 1.73 million in 2018 and,driven by robust birth rates among the citizen population and an expectedpick up in the demand for foreign workers, is expected to reach 2.4 million by2028.

▪ Expansion in the population and a shift toward the nuclear family modelamong some Emirati citizens will drive growth in the number of households inAbu Dhabi from 315,000 in 2018 to reach around 429,000 by 2028.

▪ Average household spending on retail, dining and entertainment (RDE) inurban Abu Dhabi stood at around AED303,000 for Emirati households in2018 and around AED58,000 for non-Emirati households. This figure isexpected to rise to AED402,000 by 2028 for Emirati households and aroundAED77,000 for non-Emirati households.

▪ The number of hotel guests in Abu Dhabi City climbed to 4.3 million in 2017,but the average length of stay dropped slightly, leading to a small rise inoverall guest nights to just over 11.1 million. Year on year, guest nights weredown from the UAE and GCC customers.

3

KEY FINDINGS


Site Analysis

▪ The Nation Towers complex benefits from its location in a prestigious area ofthe city directly on the Corniche of Abu Dhabi Island.

▪ The immediate surrounding area of the project is occupied by governmentand commercial offices, including the presidential palace, several federalgovernment departments and ADNOC headquarters, as well as major hoteldevelopments including Emirates Palace, Bab al Qasr, Jumeirah at EtihadTowers and Hilton Abu Dhabi. In light of the commercial character of thearea, the residential population is relatively sparse.

▪ The site is located within 20mins’ drive from most residential communitiesin the north of Abu Dhabi Island, Reem Island and Saadiyat Island.

▪ Access to the project is relatively convenient and straightforward, with agood quality road network surrounding the complex on all sides andrelatively free-flowing traffic.

▪ The mall has the potential to benefit from excellent visibility of the buildingfrom the Corniche.

▪ Directional wayfinding signage on the surrounding roads helps raiseawareness of the retail offering and ease the journey for first-time visitors.

▪ The profile and identity of Nation Towers Mall as a shopping destination isgoing to be enhanced with the introduction of more prominent mall brandingand tenant signage to the northern and eastern elevations.

4

KEY FINDINGS


Northern elevation along Al Corniche St

Eastern elevation and main mall entrance

Site Analysis

5

LOCATION

Nation Towers Mall is the retail component of mixed-use development NationTowers, which is located on Al Corniche Street (1st Street), in the Al Khubeiraharea of northwestern Abu Dhabi Island.

The mall occupies two main levels (L1 and L2) in the podium of the complex,although several other units are scattered around the site: two units by the mainentrance (GF); a car showroom is accessible from a dedicated entrance in thenorthern elevation of the mall; Starbucks café in the office tower; two units inNation Riviera, a licensed beach area across 1st Street from the main complex.

As a major route along the north of Abu Dhabi Island, the Corniche locationlends the project high visibility and exposure to passing traffic.

The complex lies in close proximity to several important government offices,corporate offices and hospitality facilities. Government facilities in the areainclude the Presidential Palace, the Ministry of Justice, the Federal NationalCouncil, Abu Dhabi Capital Police Directorate. ADNOC HQ and Etisalat officesare also nearby. Important hospitality facilities in the vicinity include theEmirates Palace, Bab Al Qasr Hotel, Jumeirah at Etihad Towers, Hilton AbuDhabi, Khalidiyah Palace Rayhaan by Rotana, InterContinental Abu Dhabi inaddition to the St Regis Abu Dhabi within the Nation Towers complex itself.

Most of Abu Dhabi Island, Reem Island and Saadiyat Island can be reachedwithin a 20min drive time, while Yas Island and most communities on themainland are around 30mins drive away.

Given the length of journey time for communities on the mainland, the projectwill be reliant on local residents and visitors staying on Abu Dhabi Island, ReemIsland and Saadiyat island for its regular customers, as well the daytime visitorsfrom those working in the offices nearby. We would expect customers living inthe mainland communities to be more occasional customers, eg at weekends.

LocationAverage Drive

Distance (km)

Average Drive

Time (mins)

Emirates Palace 3 6

Reem Island 12 18

Saadiyat Island 17 20

Sheikh Zayed Mosque 18 21

Yas Island 35 32

Abu Dhabi International Airport 37 32

Dubai (Downtown Dubai) 146 90


Site Analysis

6

CONTEXT MAP

PROJECT SITE

Source: Google Maps; McARTHUR + COMPANY Analysis

ABU DHABI INT. AIRPORT

5km

ABU DHABI

SAADIYAT

ISLAND

ABU DHABI

ISLAND

MUSSAFAH

KHALIFA CITY

YAS

ISLAND


REEM

ISLAND

SHK ZAYED MOSQUE

Site Analysis

7

CONTEXT MAP

PROJECT SITE


3km

ABU DHABI

SAADIYAT

ISLAND

ABU DHABI

ISLAND

KHALIFA CITY

YAS

ISLAND


REEM

ISLAND

TO MUSSAFAH

Site Analysis

8

LOCAL CONTEXT MAP & ROAD NETWORK

PROJECT SITE


ABU DHABI ISLAND

500m

ABU DHABI


AL KASIR

MARINA MALL

EMIRATES PALACE

PRESIDENTIAL PALACE

ETIHAD TOWERS ADNOQ HQ

FEDERAL NATIONAL COUNCIL

HILTON ABU DHABI

Site Analysis

9

ACCESS/EGRESS

PROJECT SITE


500m

ABU DHABI


ADNOQ HQ

FEDERAL NATIONAL COUNCIL

HILTON ABU DHABI

Key

Access

Egress

Service Access

Service Egress

Site Analysis

10

SITE PHOTOS


Main entrance of the mall

Office entranceMall and hotel service entrance

View from the mall balcony towards the corniche

▪ Increase visit frequency

▪ Lengthen dwell time

▪ Boost conversion rate

▪ Drive spend per visit

▪ Raise awareness through marketing campaign

▪ Stimulate interest with events programme and new

tenants

▪ Deliver great first time visit experience

Demand Analysis

REVERSING THE DECLINE: TAPPING INTO THE SOURCES OF DEMAND

So

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dem

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New Customers

▪ Residents living within 10mins drive

▪ Office staff working within 1km

▪ Hotel guests staying within 2km

Existing Customers

▪ Emiratis; Affluent expats (Arab, Western)

▪ Abu Dhabi residents

▪ Family time / Meeting friends

Nation Towers Mall: Retail Design & Feasibility Review: Final Report: 13 December 2018 11

▪ New tenants aligned to customer preferences to spur

conversion rate and boost average spend

▪ Commercialisation strategy to keep offer fresh

▪ Events and promotions to drive dwell time and visit

frequency

▪ Signage to boost profile & identity

▪ Marketing to build awareness

▪ New tenants to spur interest

▪ Tenant promotional activity to delight new visitor

Tap

pin

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dem

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Demand Analysis

Taking the aggregate responses provided in the tenant survey as indicative ofactual visitors, 58% of visitors are Emirati or GCC nationals. This compares tojust 17% of the wider population in Abu Dhabi city. Combined with nationals ofother Arab countries, the total proportion of Arabs guests is nearly three-quarters of total visitors.

The heavy weighting of guest numbers towards Emiratis and other Arabs stronglysuggests that initiatives to improve the performance of the mall will depend onsuccessfully tapping into the shopping, dining and entertainment preferences ofthe Arab demographic.

The tenant survey also revealed that around 7 in every 10 people visiting themall reside in Abu Dhabi. Tourists accounted for just 12% of overall visitors(compared to The Dubai Mall, where tourists account for around 40% of visitors).

12

EXISTING CUSTOMERS: INTERCEPT SURVEY


58%

15%

6%

14%

5%2%

Visitors by Nationality

GCC

Other Arab

South Asian

Euro/US

East Asian

Other68%

12%

8%

12%

Visitors by Place of Residence

Abu Dhabi

Dubai

Other Emirates

International Visitors

Source: Tenant survey Source: Tenant survey

Demand Analysis

The 30-39 year old age group is the largest single age demographic, at 35%,among the mall’s visitors, as measured by the combined results of the customerand tenant surveys. This compares with a much lower figure of 28% for the city’soverall population. With a median age for the city estimated to be around 29years, the data suggests that the mall is currently appealing to a more maturecustomer than average for the city. As people in this age bracket tend to earnmore than their younger counterparts, and – typically among the local citizenpopulation – have young families, there is an opportunity to appeal to theaffluent and family orientated customer.

The gender profile of the mall’s visitors is, as measured by the tenant survey,weighted in favour of females. 52% of visitors are thought to be female, whichcompares to only 34% of the overall population. The data suggests therefore,that the mall has the opportunity to reinforce its appeal to ladies with theaddition of female-friendly categories.

13

EXISTING CUSTOMERS: INTERCEPT SURVEY


7%

34%

35%

16%

7%1%

Visitors by Age Group

0-18

19-29

30-39

40-49

50-65

65+

48%52%

Visitors by Gender

Male

Female

Source: Customer / Tenant surveys Source: Tenant survey

Demand Analysis

14

NEW CUSTOMERS

AED1.5 billion AED150 million

15,00080,00018,000 households

ResidentsLiving within 10mins Drive

Office WorkersWorking within 1km radius

VisitorsStaying at hotels within 2km

Annual RDE Spend

People

4,000

AED430 million


Demand Analysis

15

RESIDENTS: DRIVE TIMES

Source: McARTHUR + COMPANY Analysis; Esri, HERE, DeLorme, © OpenStreetMap.


ABU DHABI

PROJECT SITE

Demand Analysis

16

RESIDENTS: POPULATION & HOUSEHOLDS

The household residential population of the primary trade area stood at around82,000 in 2018 and is expected to reach 92,000 by 2023.

Average household sizes among Emirati residents of Abu Dhabi Region stands ataround 8.1 people per household, while for non-Emirati residents, the averagehousehold has 4.1 members.

As such, the total number of households is estimated at 18,000 in 2018, whichis expected to rise to 20,000 by 2023 and 23,000 by 2028 (households =population÷ average household size).

Primary Trade Area 2018 2023 2028

Population

- Emirati 16,408 17,348 18,414

- Non-Emirati 66,036 74,653 86,696

TOTAL 82,444 92,001 105,110

Average Household Size

- Emirati 8.1 8.0 8.0

- Non-Emirati 4.1 4.1 4.1

Households

- Emirati 2,026 2,169 2,302

- Non-Emirati 16,106 18,208 21,145

TOTAL 18,132 20,377 23,447

Source: McARTHUR + COMPANY Analysis. Note: * Excluding labourers living in camp accommodation


Abu Dhabi Island

17

To calculate the overall spending power of the residents within the primary tradearea that is relevant to the retail, dining and entertainment offering of the mall,government data on consumer spending totals and breakdown by category forAbu Dhabi, published in the Household Expenditure and Income Survey 2010,was taken into account. We have forecast the data forward through 2023 and2028 based on IMF forecasts for economic growth in the emirate.

Retail, Dining and Entertainment comprises the sum of spending on food(groceries), apparel (fashion, footwear, accessories), home (homewares andhousehold appliances), recreation (dining out, entertainment, cultural activities,private education) and miscellaneous (personal goods and services).

We expect RDE spending to increase from AED303,749 per Emirati household in2018 to reach AED347,017 by 2023 and from AED58,079 to AED66,352 fornon-Emirati households over the same period.

Demand Analysis

RESIDENTS: HOUSEHOLD EXPENDITURE

Source: McARTHUR + COMPANY Analysis; SCAD

Annual Spending per

Household (AED)

Emirati

Households

2018e

Emirati

Households

2023f

Non-Emirati

Households

2018e

Non-Emirati

Households

2023f

Food* 98,380 112,394 23,541 26,895

Apparel* 79,934 91,320 10,841 12,386

Housing 189,997 217,061 69,540 79,445

Home* 50,420 57,602 3,717 4,247

Healthcare 4,919 5,620 1,549 1,769

Transport /Comms 116,212 132,766 25,710 29,372

Recreation /

Education *28,899 33,016 9,757 11,147

Misc* 46,116 52,685 10,222 11,678

TOTAL 614,877 702,464 154,877 176,938

* Retail, Dining &

Entertainment303,749 347,017 58,079 66,352


Abu Dhabi Marina

Demand Analysis

18

RESIDENTS: TOTAL SPENDING ON RDE

We have calculated the total amount of retail, dining and entertainmentspending potential in the primary trade area (G) by multiplying: the number ofEmirati households by the average spending on RDE per Emirati household (E =A x C); the number of non-Emirati households by the average spending on RDEper non-Emirati household (F = B x D); and summing the result (G = E + F).

In 2018, we estimate that the PTA household spending on RDE is AED1,551million. This is expected to grow to AED1,961 million by 2023 as the number ofhouseholds and average spend per household grows.

Item Trade Area Unit 2018 2023

Households

A - Emirati # 2,026 2,169

B - Non-Emirati # 16,106 18,208

Average Household Spending

on RDE

C - Emirati AED 303,749 347,017

D - Non-Emirati AED 58,079 66,352

Total Spending in RDE

E - Emirati AED million 615 753

F - Non-Emirati AED million 935 1,208

G TOTAL AED million 1,551 1,961



Marasy, Al Bateen neighbourhood

Demand Analysis

19

OFFICE WORKERS

The immediate surrounding areas of the project, ie 1km radius around the mall,are dominated by commercial and government offices.

Nation Towers includes 37 floors of grade A office space within Tower 2. NearbyEtihad Towers boasts 45,000m² of grade A leasable office space and ADNOCHeadquarters building comprises 76 floors of space for employees of thenational oil company.

In addition to the commercial towers, the area hosts the Federal NationalCouncil, Ministry of Justice buildings, the Union Supreme Court, AttorneyGeneral’s office, the Capital Police Directorate and others.

Several other major facilities are located in the area including hotels, banks,retail and service businesses.

The total number of professional staff working in the area is estimated to bearound 15,000.

We have estimated the spending potential of this target group as aroundAED150 million per year, meaning that each worker spends around AED833 permonth (or AED40 per working day) on retail & dining in the area for breakfast,lunch, impulse purchases, etc.

Major Office Workplaces (within 1km of Nation Towers) Staff

Nation Towers 2,500

Etihad Towers 2,500

ADNOC 5,500

Government Departments 3,500

- Federal National Council

- Ministry of Justice

- Union Supreme Court

- Capital Police Directorate

Other (hotels, retail, etc) 1,000

TOTAL 15,000



Demand Analysis

20

HOTEL GUESTS

Abu Dhabi welcomed just over 4.3 million guest arrivals in 2017, staying a totalof 11.1 million guest nights in the capital. There were a total of 137 hotels at theend of the year and 27,000 guest rooms.

Within the vicinity of around 2km from the project, there are 10 major hotelproperties, offering a total of 3,746 rooms in the 4- and 5-star category.

The mix of local hotels includes both resorts, which take advantage of thewaterfront location, and city hotels, which benefit from being in close proximityto the urban centre of the city and nearby government and commercial offices.

Major Hotels (within 2km of Nation Towers) Star Rating Guest Rooms

Royal M Hotel & Resort Abu Dhabi 5 225

The Abu Dhabi Edition 4 198

The St Regis Abu Dhabi 5 283

InterContinental Abu Dhabi 5 390

Hilton Abu Dhabi 5 326

Grand Hyatt Abu Dhabi 5 428

Khalidiya Palace Rayhaan 5 443

Emirates Palace Hotel 5 394

Bab a Qasr 5 677

Jumeirah at Etihad Towers 5 382

Total Guest Rooms 3,746



Emirates Palace

Demand Analysis

Although occupancy rates are not available at the level of individual properties,the city-wide occupancy rate of 74% applied to the number of rooms in the areagives the average number of occupied rooms as 2,772.

Multiplied by the industry benchmark number of occupants per room of 1.5guests gives the average number of guests per day of 4,158 or 1.5 million guestsper year.

A recent Mastercard survey found that international tourists spend an average ofAED3,000 per person during their visits to Abu Dhabi, of which around 24% isspent on dining and entertainment – equivalent to AED281 per visitor per day.

In addition to the city’s international visitors, Abu Dhabi receives many hotelguests from Dubai and other areas of the UAE. Spending data is, however, notavailable for UAE-based visitors, so we have applied the same dining andentertainment spending amount across all hotel guests.

Total potential retail, dining and entertainment spending by hotel guests stayingin the vicinity of the project amounts, therefore, to an annual AED427 million in2018.

21

HOTEL GUESTS

Total Hotel Guest RDE Spending Unit 2018

Rooms # 3,746

Occupancy % 74

Occupied Rooms # 2,772

Occupants per Room # 1.5

Hotel Guests per day # 4,158

Hotel Guest Nights per annum 1000s 1,517,691

Average RDE Spending AED 281

Total Hotel Guest RDE Spending AED million 426.5

Source: McARTHUR + COMPANY Analysis; SCAD; Mastercard

Al Ain Community Retail: Market Assessment & Development Opportunity Analysis: Final Report: 1 October 2018

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