Looking ahead, an additional 152,000 sq m of GLA is scheduled to be delivered in Q4, almost three times that delivered during Q3. Business Bay continues to be the focus for completions, with projects also expected to complete in Silicon Oasis, the Greens and TECOM.
The trend seen in Q3 showed a move towards smaller offices with few large transaction during the quarter. This is a result of the measures the occupiers are taking to be cautious in the face of more challenging economic conditions in the region, where a number of firms are reviewing their staffing and space requirements. The demand for small units are currently strong in the market and this trend is expected to continue.
A number of office towers across Dubai are catering for this trend towards smaller units.
Residential: The completion of 5,400 residential units during Q3 2016 marks the highest quarterly completion since Q4 2012 (when approximately 6,200 units came into the market).
Apartment units comprised the majority (63%) of total residential units completed during the past quarter, with Wasl Oasis II (a 13 building project) releasing approximately 690 units. The largest completion of villas was the 400 units completed and delivered in Rahat Villas (the second phase of the Mudon project).
The supply pipeline remains active, with a further 11 thousand units scheduled to enter the market in Q4 2016, although not all of these projects are likely to be delivered on schedule. Completions scheduled for Q4 include approximately 2,500 townhouse and apartment units in the Akoya project by Damac on Al Qudra Street.
Jumeirah Central master plan announced by Dubai Holding group at Cityscape Global 2016 is a milestone project that will establish new levels of infrastructure, environmentally friendly transportation and a new pattern of urban form and community within Dubai.
The location of this mega project replaces Mall of the World which was announced in 2014. Jumeirah Central will include 11,000 residential units. Construction of phase one, which will include 13 residential buildings encompassing 3,000 units, will start in 2017, on a land plot on the opposite side of Sheikh Zayed road from the Mall of the Emirates.
Retail: The third quarter saw the delivery of two retail projects with a total GLA of 28,000 sq m, the majority (25,000 sq m) of which is the Outlet Village; a community type development in Saih Shuaib, while the other community centre was located in Dubai Silicon Oasis.
A further three projects (with a total of 20,000 sq m) are scheduled to complete in Q4. These centres will be located in Al Furjan, Al Badrah and International Media Production Zone (IMPZ).
Dubai Opera with its dhow-shaped structure in the middle of the Downtown Dubai skyline opened its doors on 31st August 2016 with 2,000 seats in the main auditorium and a series of smaller studio and classroom spaces.
Given its proximity to the Dubai Mall, the opening of the Dubai Opera is expected to support additional footfall for the major expansion of the mall (due to open in 2017) as well as generate additional demand for additional F&B outlets along Mohammed bin Rashid Boulevard.
Hotel: A total of 5,500 hotel rooms have entered the market since the beginning of the year, indicating the continued momentum in Dubai’s hospitality and tourism sector. Among the projects completed in Q3 were Westin Al Habtoor with around 1,000 rooms, and Atana Hotel in TECOM with 830 rooms.
Major projects expected to complete by the end of 2016 include the Jumeirah Al Naseem (430 rooms) and Dukes Dubai on Palm Jumeirah (279 hotel rooms and 227 serviced apartments). The 117 key Nikki Beach Resort on palm Jumeirah is also expected by the end of the year, following the opening of its beach club earlier during 2016.
Hotels performance in Dubai remained under pressure over the third quarter of 2016 due to the combination of low oil prices (affecting business travel) and the strong US Dollar (reducing demand from many traditional leisure source markets).
The relatively diversified spread of source markets and the growth of demand from new markets (especially in Asia), helped minimize the impact on occupancy rates which remained almost stable at around 76% over the YT August. Average daily rates were more strongly impacted, with a 11% decrease to USD 191.
While a further decline in room rates and yields can be expected over the short term, the medium term outlook for the market remains positive due to the heavy government investment in expanding the city’s tourism infrastructure.