The office market in Dubai, UAE, continues to see strong demand for good quality, efficient, and well located accommodations, resulting in declining vacancy rates in key sub-markets, according to global real estate consultancy firm CBRE.

In Tecom and Dubai International Financial Centre (DIFC), demand is currently outstripping supply, encouraging a new wave of development starts. This includes the highly anticipated ICD Brookfield Place at the DIFC which will comprise around 1.1 million sq ft of Grade A offices and high quality retail, stated CBRE in its 'Q1 2016 Dubai MarketView' report.

There has also been sustained demand for new free zone licences, with DMCC currently experiencing positive take-up rates, driven by demand for smaller offices spaces from start-ups and SMEs, it stated.

Mat Green, the head of research and consulting for CBRE Middle East, said: "Overall, the availability of good quality single-held offices remains tight, with a surge in pre-leasing activity over the last 24 months stripping a large portion of the recently delivered and upcoming office space from the market before completion."

"Around 800,000 sq m of new office space is expected to be completed over the next three years, with the majority to be located within the Business Bay masterplan, which will contribute roughly 25 per cent of the total - a further 10 per cent is anticipated from Dubai Trade Centre District," he noted.

According to Green, the average prime CBD (central business district) office rentals saw some marginal growth during the quarter with rates rising to Dh1,916 ($521) per sq m annually, thus reflecting the sustained demand for well-located and good quality office products.

The CBRE report pointed out that Dubai’s residential rental market has started to show more widespread deflationary trends, with average rentals declining by around two per cent during the quarter.

Residential properties have faced sliding rates across virtually all locations, reflecting the negative impact of new supply on the market and slowing new job growth caused by ongoing economic challenges in the region.

“As has been the trend in recent quarters, prime locations have experienced some of the most pronounced declines, with Downtown Dubai in particular witnessing a notable dip in rentals during the first quarter," remarked Green.  

"However, we have also seen deflationary pressures creeping into some of the more affordable leasehold locations, including Al Barsha, Oud Metha and Bur Dubai, whist freehold sub-markets such as International City have also suffered more market downturns in performance," he said.

"Average residential sales prices have also continued to fall, with a further drop of around two per cent recorded quarter on quarter, after a four per cent decline during the final quarter of 2015," he noted.

This broadly reflects current sentiment, with weaker investor demand, US dollar strength, and sustained economic challenges regionally and globally, combining to create an uncertain transactional market environment, added Green.

According to data from the Dubai Land Department (DLD), total real estate transactions were recorded at around $15 billion during the first quarter of 2016, delivered through 12,568 transactions.

This comprised 8,440 sales transactions with a value of $5.8 billion, with mortgages accounting for 3,213 transactions with a total value of $6.7 billion.  A further undefined 915 transactions with a total value of $2.2 billion were also recorded.  

The CBRE report once again had Dubai Marina on top of the list as the most prolific sub-market for sales, followed by Burj Khalifa and Business Bay. In terms of mortgages transactions, Dubai Marina was again first, followed by Muaisem 1 and Business Bay.

Based on recent construction updates, close to 15,000 new residential units could complete during the course of 2016, with the majority of these properties from secondary locations such as Dubailand (35 per cent), Dubai Silicon Oasis (20 per cent) and Jumeirah Village (six per cent).

In terms of new supply from the more established sub-markets, Dubai Marina is likely to see the highest allocation, with around eight per cent of the total new units, it added.-TradeArabia News Service