Dubai property sector sees big activity in Q2
Dubai, July 15, 2013
The real estate investment market in Dubai remained active in the second quarter (Q2) of the year with increased volumes of commercial and residential transactions as investment sentiment in the Emirate continues to improve, a report said.
Interest in single-owned well let buildings continue to draw interest from investors from the GCC, who are attracted by the “safe haven” status of Dubai, its legal system and the overall recovery in the market, according to latest ‘Dubai Real Estate Market Overview – Q2 2013’ covering the Dubai office, residential, retail and hospitality market segments from Jones Lang LaSalle, a leading real estate investment and advisory firm.
The office market continues in its recovery path with rental growth recorded mainly in the prime locations and new high quality buildings. The “flight to quality” remains a main trend in the market, especially as the new areas like Business Bay and JLT have been improving.
At the end of Q2 2013, the total office stock within areas monitored by JLL stood at approximately 7.2 million sq m. Around 312,000 sq m of office space has been delivered in the first half of 2013, more than twice the space delivered in the same period of 2012.
The majority of upcoming office space in 2013-2015 will be in Business Bay (56 per cent of total upcoming supply). Other locations that will see new office supply are DIFC (10 per cent), JLT (10 per cent), Dubai World Central (7 per cent) and Dubai Investment Park (5 per cent).
The residential market is now experiencing a broad-based recovery, with prices and rental values picking up in the secondary and more affordable locations, while the primary areas are now witnessing slower paces of growth. Projects in newly developed areas are still lagging behind and will need more time before picking up.
The total residential stock in areas monitored by JLL stood at around 360,000 units as of June, with around 3,400 residential units, mostly apartments, being handed over in Q2 2013.
By 2015, around 38,000 additional residential units are expected to be added to the market, the report said. Most of the upcoming residential supply will be located outside of Central Dubai in areas to the South and East of the city.
Asking rents for apartments went up by 12 per cent year-on-year during Q2. The recovery is being more broad-based in 2013 with rental values are growing at a slower pace in general.
Asking apartment sale prices went up by 17 per cent Y-o-Y. Sale prices, especially in the well established areas, are growing at a slower pace. Villa rents have increased by 13 per cent Y-o-Y. Asking rents for villas in the secondary more affordable locations have been increasing, even faster than in the well established areas. Asking prices for villas have increased by 12 per cent Y-o-Y but overall the growth is at decelerating rate.
The retail market continues to improve and remains dominated by the best performing super-regional malls (eg: Dubai Mall, Mall of the Emirates). As retail space is becoming more difficult to find in those large centres, the near future may see an increase in demand for retail space in secondary malls.
With no new major completions, the total stock of mall based retail space in Dubai remains unchanged at around 2.8 million sq m in Q2 2013, while the much awaited opening of Phase I of The Avenue by Meraas has now been postponed to Q3 2013.
In the second half of the year, we expect the delivery of 48,000 sq m of retail space, including the 35,000 sq m phase 2 of Al Ghurair Centre, and the 13,000 sq m Phase I of The Avenue.
The hotel sector maintained its strong performance, supported by a growing number of tourist arrivals in Dubai. Year-to-date (YTD) occupancy rates have reached 85 per cent while YTD Average Daily Rates (ADRs) are at $267. This hotel sector is expected to continue to perform well throughout 2013 and beyond.
The second quarter of 2013 witnessed only one major opening in the branded hotel segment, The Oberoi hotel with 250 rooms in Business Bay. The hotel marks the entry of The Oberoi Group in the UAE. The current stock of hotel rooms in Dubai stands at 58,100 rooms.
The sector is likely to add 10,900 rooms until 2015, while the major openings scheduled for 2013 include the Conrad Sheikh Zayed Road, Novotel Al Barsha, Sofitel Palm Jumeirah and Anantara Royal Amwaj amongst others.
The industrial market continues to perform well overall. Demand has started to shift to the newer areas in the south of Dubai, which are witnessing strong growth and are benefiting from well developed infrastructure, good connectivity, proximity to major infrastructure projects, in addition to better quality products.
The Dubai economy continues to expand and the Gross Domestic Product recorded a 4.4 per cent growth in 2012 as per the Dubai Statistics Centre. The expansion was mainly supported by the strong performance of sectors such as hospitality (17 per cent growth in 2012), manufacturing (13 per cent) as well as transport, storage and communication (7 per cent).
The business outlook of Dubai continues to be strong with the Department of Economic Development’s Business Confidence Index (BCI), standing at 113 points during the first quarter of 2013. Confidence is still rising and businesses continue to be upbeat as the survey showed 91 per cent of firms reporting either improvement or stability in business conditions. – Reuters