Jones Lang LaSalle today published its Dubai Real Estate Market Overview for Q3 2013. The report, which covers the latest trends in the office, residential, retail and hotel sectors, concluded that all sectors of the Dubai real estate market maintained their positive performance during the seasonally quieter summer months.
Commenting on the report, Alan Robertson, CEO of Jones Lang LaSalle MENA, said: “With just weeks to go before a decision is announced, speculation around Dubai’s bid for Expo 2020 continues to contribute to a prevailing sense of positive sentiment concerning the city’s real estate market. While there has been concern over the possibility of another residential property bubble, and Dubai is as ambitious as ever, we believe these concerns are limited. We are seeing a more mature and considered approach which is only going to benefit the long term health and credibility of the real estate sector. .
Mr Roberston added: “The broad based recovery in the residential sector is resulting in price and rent increases across most areas. Unlike last year, the fastest growth is now being experienced in mid-market and affordable projects and there are signs that the rate of increase is slowing in some high end locations.”
He concluded: “While the retail, hotel and industrial segments continue to experience solid growth, the recovery of the office sector remains more selective and concentrated in the prime segment with the large level of supply and high overall vacancy rates depressing rental pressure elsewhere.”
Other key findings include:
The Dubai economy is expected to maintain its strong growth and expand at more than 4% in 2013, supported by the growth of sectors such as hospitality, trade, transportation and logistics, in addition to the recovery of the construction and real estate segments.
While there were few significant commercial real estate transactions in Q3 (an office building in TECOM being the only major deal completed), there remains active demand for residential and hotel investments market across Dubai. There remains more buyers than sellers, creating a seller’s market. In particular, interest has been noted from Kuwaiti investors for all asset classes in the Dubai real estate market.
- The residential market continues to lead the Dubai market and experience a broad-based recovery in Q3 2013 with prices and rental values picking up in almost all locations. Interestingly, it has been the secondary and more affordable locations that have seen the greatest increases in Q3, while the primary areas are now seeing slower paces of growth.
- Activity in the Dubai retail market was quiet in Q3 due to the summer period. However, as demand remains strong and retailers are upbeat, the sector is expected to end the year on a strong note in both its primary and secondary segments.
- The hotel sector has continued its strong performance, on the back of the booming tourism and aviation industries. Year-to-date (YTD) occupancy rates have risen to 79% while YTD Average Daily Rates (ADRs) are also higher at USD 235. A number of hotels are due to open in the short run but the sector is expected to maintain its positive performance
- The industrial market continues to perform well. Demand has started to shift to the newer areas in the south of Dubai, which are witnessing strong growth and are benefiting from well-developed infrastructure, good connectivity, proximity to major infrastructure projects, as well as better quality products.
- The office market witnessed limited leasing activity in Q3. There is definitely more active tenant interest, with a number of major pre-commitments being close to fruition. However, demand remains focussed on a few prime buildings in each location and other buildings in the same precinct are experiencing little tenant interest. There has been some rental growth in prime buildings in new locations such as Business Bay and JLT, but high vacancies and the significant level of new supply remain obstacles to a broad-based recovery.
Craig Plumb, Head of MENA Research for Jones Lang LaSalle, concluded: “Recent data continues to be relatively positive, confirming the stronger outlook for the Dubai economy. This has resulted in more positive sentiment towards the Dubai real estate market over the past three months. While there is no doubt that the real estate market is currently recovering, this recovery is currently uneven, with concerns remaining about the level of existing vacancies and future supply (particularly in the office market), and the continued reliance of the residential market on demand from investors rather than end users”.