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Deloitte Corporate Finance said in its second annual Real Estate Predictions Report for Dubai that the number of new homes to be delivered in the emirate in 2016 could be about one-quarter of conventional estimates.
“Whilst published pipeline forecasts estimate that some 40,000 units will get delivered in 2016, consultations with key developers suggest that a more realistic number will be approximately 10,000 units,” the report said. “2015 saw average residential sales prices across Dubai decline by approximately 10 per cent and in 2016, so it is predicted that average residential prices will decrease further, reflecting a transition to a more mature market.”
Deloitte forecast a hotel occupancy rate of 70 -75 per cent are compared with 77.5 per cent in 2015.
“As operators compete for occupancy, it is expected that Average Daily Rates will soften further, which should encourage growth in visitor volumes required to support the investment in tourism infrastructure,” the report said. “Serviced apartments are likely to be an area of focus in 2016, driven by key source market trends, growing visitor demand for longer average lengths of stay and better value accommodation.”
Deloitte also said that office rental growth will be slow in some submarkets as a result of supply growth and the power of negotiation will, in general, shift from landlords to tenants in 2016.
“There will be a trend towards more mixed use office led developments and a greater allocation of space to amenities, which will enable schemes to differentiate against competition as well as a strategy for developers to diversify risk and generate more robust cash flows,” the report said. “Given the shortage of high quality office space in Dubai, some companies will be more amenable to leasing additional space than is required at present in order to accommodate future expansion, with a view to subletting surplus space in the short term.”
The retail property sector will also be adversely affected though food and beverage retail will “go from strength to strength in 2016.”