Residential market leading Dubai property recovery
Dubai, October 9, 2013
The residential market continues to spearhead the Dubai property sector recovery with prices and rental values picking up in almost all locations across the emirate, said a report.
Interestingly, it has been the secondary and more affordable locations that have seen the greatest increases in the third quarter, while the primary areas are now seeing slower paces of growth, stated property expert Jones Lang LaSalle in its Q3 market overview for Dubai market.
The report, which covers the latest trends in the office, residential, retail and hotel sectors, concluded that all sectors of the Dubai real estate market maintained their positive performance during the seasonally quieter summer months.
Commenting on the report, Mena CEO Alan Robertson said, "With just weeks to go before a decision is announced, speculation around Dubai’s bid for Expo 2020 continues to contribute to a prevailing sense of positive sentiment concerning the city’s real estate market. While there has been concern over the possibility of another residential property bubble, and Dubai is as ambitious as ever, we believe these concerns are limited."
"We are seeing a more mature and considered approach which is only going to benefit the long term health and credibility of the real estate sector," stated Robertson.
According to him, the broad-based recovery in the residential sector is resulting in price and rent increases across most areas. "Unlike last year, the fastest growth is now being experienced in mid-market and affordable projects and there are signs that the rate of increase is slowing in some high end locations," observed Robertson.
The JLL survey said the Dubai economy was expected to maintain its strong growth and expand at more than 4 per cent in 2013, supported by the growth of sectors such as hospitality, trade, transportation and logistics, in addition to the recovery of the construction and real estate segments.
While there were few significant commercial real estate transactions in the third quarter (an office building in Tecom being the only major deal completed), there remains active demand for residential and hotel investments market across Dubai, said the JLL in its review.
There remains more buyers than sellers, creating a seller’s market. In particular, interest has been noted from Kuwaiti investors for all asset classes in the Dubai real estate market, it added.
On the retail sector, JLL said the activity was quiet in the third quarter due to the summer period. However, as demand remains strong and retailers are upbeat, the sector is expected to end the year on a strong note in both its primary and secondary segments, it stated.
On the hospitality sector, the property expert said the hotel sector has continued its strong performance, on the back of the booming tourism and aviation industries.
"The year-to-date (YTD) occupancy rates have risen to 79 per cent while YTD average daily rates (ADRs) are also higher at $235.
The JLL report pointed out that a number of hotels were due to open in the short run but the sector is expected to maintain its positive performance.
The industrial market too continued to perform well in the third quarter. The 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, as well as better quality products, the report stated.
“While the retail, hotel and industrial segments continue to experience solid growth, the recovery of the office sector remains more selective and concentrated in the prime segment with the large level of supply and high overall vacancy rates depressing rental pressure elsewhere,” remarked Robertson.
On the office scenario, JLL said it had witnessed limited leasing activity for the period. "There is definitely more active tenant interest, with a number of major pre-commitments being close to fruition. However, demand remains focussed on a few prime buildings in each location and other buildings in the same precinct are experiencing little tenant interest," the JLL report said.
There has been some rental growth in prime buildings in new locations such as Business Bay and JLT, but high vacancies and the significant level of new supply remain obstacles to a broad-based recovery, it added.
Craig Plumb, the head of Mena Research for JLL said the recent data continues to be relatively positive, confirming the stronger outlook for the Dubai economy and this has resulted in more positive sentiment towards its real estate market over the past three months.
"While there is no doubt that the real estate market is currently recovering, this recovery is currently uneven, with concerns remaining about the level of existing vacancies and future supply (particularly in the office market), and the continued reliance of the residential market on demand from investors rather than end users," he added.-TradeArabia News Service