The Dubai real estate market, which boomed before and after the announcement in November 2013 that Dubai had been named to host the World Expo 2020, is showing signs of stabilising, according to the fourth quarter Dubai Real Estate Market Overview report published today by JLL.
“Dubai’s real estate sector ended the year on a quiet note as nearly all segments of the market witnessed subdued growth levels in Q4,” says head of research at JLL MENA Craig Plumb. “Average prices and rentals in the residential sector appear to have stabilised over recent months, with some locations registering marginal declines.”
Plumb said oil prices are likely to dampen investment sentiment in the short term.
“Dubai’s success at diversifying its economy and expanding its global reach makes it less vulnerable to oil price fluctuations,” Plumb says. “With the government’s 2015 budget announcement, which saw planned spending and revenues increase 9 per cent and 11 per cent respectively, the next 12 months are expected to see a boost in business activity.”
According to JLL, features of the Dubai real estate market in the final quarter of 2014 included the addition of 8,200 square metres of office space in Business Bay.
“An additional 1.2 million square metres of office space is expected to enter the market in 2015, however we remain cautious of the delivery of some of these projects within the projected timeframe,” Plumb says. “As demand remains strong for single owned buildings in established locations, rental rates and vacancy levels are expected to remain stable in the short term. However, as new space enters the market, average rents are likely to face further downward pressure as tenants seek to optimize or rationalize their space requirements, and consolidate their operations in one location. Vacancy levels across the CBD (commercial business district) are expected to increase as more Grade A stock enters the market by the end of 2015.”
JLL says the second half of 2014 saw Dubai’s residential market stabilise as average rents and sale prices remained relatively flat, with marginal declines over the last quarter.
“The residential sector is likely to remain subdued over the next 12 months as the market is expected to absorb 25,000 additional units in 2015,” JLL says. “In reality, we remain cautious of the delivery of some of these projects within the timeframe.”
The Dubai retail market is expected to witness the delivery of approximately 267,000 square metres of retail space over the next 12 months, of which 118,000 square metres is due for completion in the first quarter, JLL says.
“This largely includes Phase II of Dragon Mart and three neighbourhood centres including The Box Park by Meraas,” JLL says.
The final three months of 2014 saw the delivery of major hotel properties including the Four Seasons, the Sheraton Hotel on Sheikh Zayed Road and Pullman JLT. This increased the total supply of keys to 64,200.
“Partly as a result of this increase in supply, hotel occupancy in Dubai dipped marginally in the year to November to register 79%,” JLL says. “This decrease, coupled with a 1 per cent decline in ADRs for the same period resulted in a marginal drop in RevPar.”
An additional 4,700 keys are due for completion in 2015, JLL says.