Market Conditions Soften for Dubai Real Estate Market

JLL, the world’s leading real estate investment and advisory firm, today released its first quarter (Q1 2016) Dubai Real Estate Market Overview report, assessing the latest trends in the office, residential, retail and hotel sectors. In Q1 2016, it has been observed that most segments continue to soften across the Dubai market, but long term outlook still remains positive due to future growth drivers.

Commenting on the report, Craig Plumb, Head of Research at JLL MENA, said:

“Various factors are bringing the market towards the bottom of its cycle. The strong dollar is impacting the USD pegged GCC currencies which is making Dubai real estate more expensive for buyers from non-USD pegged markets. At the same time, the continued period of low oil prices is tightening regional liquidity which is also affecting the real estate market.

We are witnessing a continuing decline in average  sales and rentals in the Dubai residential sector, with similar negative momentum  in the hospitality sector, where average room rates have fallen over the quarter, despite the continuing high occupancies.

Retail rents remained largely unchanged over the quarter and some centres could experience downward pressure on rents later in the year due to continued levels of new supply entering the market.

The office market has been stuck at the bottom of the cycle for a number of years and has not seen the upturn which other sectors have witnessed. Nevertheless, we are seeing some select activity and momentum for Grade A office buildings which continue to generate strong demand.

Whilst the short to medium term outlook for the Dubai real estate market is less encouraging, we remain positive on the long term outlook due to future growth and demand drivers like the Expo 2020 and other mega infrastructure developments.”

SECTOR SUMMARY HIGHLIGHTS – DUBAI:

• Office: The first quarter saw the handover of B2B Office Tower and the New Dafza building, located in Business Bay and DAFZA, respectively. The two towers added 38,400 sq m of office GLA, taking the total value to 8,465,300 sq m as of Q1 2016. Our 2015 supply number increased by 137,800 sq m, taking the total stock for the year to 8,426,900 sq m. An additional 269K and 368K sq m of GLA is scheduled to be delivered in 2016 and 2017 respectively. However, we continue to remain cautious in terms of handover timings.