Jones Lang LaSalle publishes Q3 2012 Dubai Real Estate Market Overview report
- Selective growth predicted for Dubai’s real estate sector as rents and values continue to improve for prime properties in the hotel, retail and residential sectors.
- Despite demand for high quality retail space, most sectors of the Abu Dhabi market remain tenant favourable, with rents yet to bottom out.
Commenting on the reports, Mr Alan Robertson, CEO of Jones Lang LaSalle, Middle East & North Africa, said: “Market sentiment is definitely improving and both Dubai and Abu Dhabi remain major drivers in the regional real estate market, but we are continuing to move away from one holistic model. As the market continues to mature we will see more divergence. Well managed, high quality assets in prime locations will continue to perform whilst those in secondary locations will need to be ever more creative to attract and retain tenants who now have ever more choice and are moving with their feet to source and find the best deals available.”
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He adds: “In terms of market specifics, it’s a very fragmented picture. Dubai is generally ahead of the curve as rents are finally starting to pick up whilst indicators suggest Abu Dhabi has yet to bottom out. In terms of sectors, retail remains a driving force with significant opportunities in both Emirates. On the investment and development fronts, we expect to see more major deals announced in the weeks and months ahead, reflecting the improved economic climate. However we also expect the market to move away from a construction led environment to one more focussed on asset management as owners look to safeguard their investment and drive rental growth.”
Summary highlights, Dubai Market Overview, Q3 2012:
The Dubai economy is still on a recovery path. Gross Domestic Product is projected to grow by 4.5% in 2012.This performance is being driven by the strong growth of key sectors such as tourism, commerce, retail, hospitality and logistics.
The real estate investment market has been quiet over the summer months, with no major open market commercial transactions reported in this seasonally quiet period. The most significant sale over the quarter was a residential tower in the Deira area of Dubai that was reportedly sold to a Saudi investor for AED 130 million.
Asking rents for prime office space remained flat in Q3, while secondary rents faced more downward pressure. In line with global trends, occupier consolidation and portfolio optimisation remain the key focus in Dubai. Larger companies continue to show interest in upgrading premises with more flexibility in their leases. There has been limited new office supply entering the Dubai real estate market in the third quarter and a number of projects have been delayed into 2013.
The overall residential market has recorded another positive quarter, with the villa market continuing to outperform the apartment sector in Q3. Prime residential buildings in well established locations continue to see improved performance, but secondary locations are still suffering from rental and pricing declines as tenants relocate to new high quality projects.
There remains strong demand for retail space in the best performing super-regional shopping malls (eg: Dubai Mall, Mall of the Emirates), resulting in sustained prime rents of AED 4,700 / sq m. However the retail market is becoming increasingly two-tier and older, less popular malls are seeing weakened demand from consumers and retailers, with mall owners having to consider new marketing techniques and product positioning.
The hotel sector of the Dubai real estate market has continued its strong performance in Q3 with occupancy levels improving to 77% from 74% in the same period last year. This growth has been mainly driven by the increase in tourist arrivals compared to the same period last year. The recovery of the Dubai hotel market has been reflected in an increase in both Average Daily Rates (ADRs) and Revenue Per Available Room (RevPar) levels.