The emergence of Dubai, UAE, as a global hub has had a major impact on the real estate sector, with higher levels of occupier demand being generated across the office, industrial and hospitality sectors, said a report.

In the residential sector too, the emirate has been performing well with its prime home prices witnessing an uplift of 59 per cent over the five years to end-2014, higher than major global players like London (52 per cent), New York (47 per cent), Hong Kong (31 per cent), Paris (18 per cent), Singapore (7 per cent) and Sydney (2 per cent), stated property expert Knight Frank in its inaugural The Hub Report 2015 released today.

But as widely reported, Dubai’s residential sector has faced headwinds over the past year, leading prices to see a downward adjustment.

In annual terms, prime home prices fell by 4.5 per cent in the second quarter of 2015, however this was a smaller magnitude of decline compared to the mainstream segment’s 12.2 per cent decrease, it added.

The expert pointed out that the new residential supply pipeline for the prime segment was not significant, suggesting that prices over the next 12-18 months should maintain a greater degree of resilience.

"Admittedly, the residential sector has faced some headwinds over the past 12-18 months," remarked Khawar Khan, the research manager at Knight Frank Middle East.
     
"However the wealthy continue to be attracted to Dubai due to the fact that it remains one of the safest locations in the world, with excellent connectivity, strong economic prospects, a low tax regime, and strong lifestyle factors," he noted.

Over the last couple of decades, the growth in financial and business services, trade and logistics and tourism activity has played an important role in fuelling Dubai’s emergence as a global hub, the Knight Frank said in the report.

Dubai has its own advantages as the emirate remains one of the safest locations in the world, with excellent connectivity, strong economic prospects, a low tax regime and a stable political system. Combined, these factors will undoubtedly play an important role in paving the way for its success as a global hub, it added.

On the industrial property scenario, Knight Frank said the robust growth over the past decade in manufacturing and exports has been an important driver of demand for logistics facilities in and around Dubai.

A number of reasons have supported this, including the excellent quality of the UAE’s transport infrastructure (it has been rated as the best in the world by the World Economic Forum) and the emirate’s strategic location between Europe, Africa and the Far East. In fact these factors have been critical in helping Jebel Ali to attain its current position as the busiest port between Singapore and Rotterdam, it added.

The property expert said forecasts from the IMF suggest that the UAE’s economy would be outperforming the likes of the UK, US, Germany, Hong Kong and Singapore over 2015-2020.

This, alongside the fact that the federation is among the easiest places to do business globally, should help to extend Dubai’s lead as a financial and business services hub in the Middle East.

"Thanks to its safe, family-friendly and low tax environment, Dubai has been attracting the world’s growing population of high-net-worth individuals. Naturally then, demand for luxury residential property has been gathering momentum," remarked James Lewis, the head of Knight Frank Middle East.

All else equal, this suggests that tenant demand for good quality, Grade A office space will remain healthy in the short to medium-term, he added.

Prior to the 2008-09 crisis, Dubai saw the launch of a significant number of office construction projects - most of which were gradually delivered in the subsequent two to three years. However with tenant demand simultaneously low, the emirate’s vacancy rate inevitably rose, said the Knight Frank in its report.

But since 2011, the financial and business services sector has returned to growth, office takeup has been rising and the availability rate has been heading down - leading to increasing investor demand for institutional-grade buildings.

On the hospitality sector, Knight Frank said Dubai continues to make strides as a tourist destination and an air travel hub.

"Visitors to Dubai are staying longer to enjoy the city’s attractions, with the average length of stay rising from 2.6 nights in 2004 to 3.8 nights in 2014," observed Lewis.

"What’s more, Dubai International overtook London Heathrow last year to become the world’s top airport for international passenger traffic - impressive given that less than a decade earlier the former was handling around half the number of travellers compared to the latter," he added.-TradeArabia News Service