The latest ‘Dubai Real Estate Market Overview – Q2 2012’ was released today by Jones Lang LaSalle. The report covers the Dubai office, residential, retail and hospitality market segments.
Here are the key highlights:
The Dubai economy is expected to grow by between 4% and 5% in 2012, according to upward revised projections by the Dubai Economic Council. The GDP growth is expected to be driven by strong trade and tourism sectors.
A recent survey by the Department of Economic Development, shows investors’ confidence is increasing. The Business Confidence Index (BCI) for Dubai reached 120.5 points as of March 2012.
Signs of improved investor confidence have flowed into the real estate sector, with continued demand for quality, well located, income producing assets. The main transactions that took place in the first half of 2012 were the sale of Building 6 in Gate Precinct in DIFC and the transfer of the 50% Kerzner share in Atlantis the Palm Jumeirah to
Istithmar World. In addition, around 11,400 sq ft of mixed use space was sold in Burj Khalifa in June.
There has been limited new office supply entering the market over the first half of the year. Asking rents for prime office space remained flat in Q2 2012 but secondary rents have softened. Occupier consolidation remains a key focus and in line with global trends, portfolio optimisation has been noticeable in Dubai during the first half of the year. Larger companies continue to show interest in upgrading premises with more flexibility in their leases.
The overall residential market is seeing a positive trend with the villa market continuing to outperform the apartment sector in Q2 2012. Prime residential buildings in well established locations continue to see improved performance, but secondary locations are still suffering from rental and pricing declines.
There remains strong demand for retail space in the best performing super-regional shopping malls (eg: Dubai Mall, Mall of the Emirates), resulting in an increase in prime rents to AED 5,400 / sq m. However the retail market is becoming increasingly two-tier and older, less popularmalls are seeing weakened demand from consumers and retailers, with mall owners having to consider new marketing techniques and product positioning.
The recovery of the hotel sector witnessed during 2011 has continued further over the first half of 2012, with occupancy levels improving to 83% from 79% in the same period last year. The growth has been mainly supported by a strong tourism sector and a very encouraging number of visitors. The recovery of Dubai hotels has been reflected by an increase in both Average Daily Rates (ADRs) and Revenue Per Available Room (RevPar) levels.