The residential sector in Dubai, UAE, experienced further modest declines in rentals during the fourth quarter of 2016, with a one per cent dip in average leasing rates recorded, according to the Dubai Annual Market Update Report by global real estate advisor, CBRE.

During 2016, the average apartment sales rates fell by around 4.6 per cent, whilst the drop for villas was more pronounced at 6.5 per cent, stated the the industry expert.

According to CBRE, the residential sector is expected to see more stable sales pricing during 2017 as sentiment slowly starts to improve.  

However, there is a cautionary note with the recovery amidst rapidly rising supply levels. Approximately 70,000 units are expected to be delivered between 2017 and 2019 as developers make a major push in the build up to Expo 2020, it stated.

Mat Green, the UAE head of research and consultancy at CBRE Middle East, said: "With an expanding pipeline of new units, current deflation trends are likely to continue throughout 2017, with many new homes set to complete."

"However, there are signs that the transactional market is once again stabilising with no major change in average sales rates noted during the past two quarters, although on a year-on-year basis, residential values have still fallen by an average of five per cent," he noted.

On the commercial office market, Green, said: "It has evolved into a clear two-tiered market, with prime accommodation, particularly in the free zones, attracting strong demand amidst low levels of supply availability, sustaining rentals for well-located Grade-A office accommodation."

"However, the secondary market continues to weaken, with a 12 per cent annualised decline in rental values brought about by a persistent oversupply of strata office product and a general softening of demand fundamentals," he stated.

"With large, efficient office spaces over contiguous floors in short supply, pre-leasing activity remains buoyant, underlining the polarised market environment that has emerged," he noted.

With a robust economy underpinning the sector, the total office stock during  2016 stood rose to 9.1 million cu m, as compared to just 3 million cu m in 2007. Future supply of 0.9 million cu m is expected to be delivered between 2017 and 2019, he added.

On the retail sector, CBRE said the supply in Dubai’s retail sector expanded by around seven per cent during 2016, with the opening of several community centres and expansions to existing retail destinations.

The most notable addition was City Walk Phase Two, which has attracted various new first-to-market concepts, stated the industry expert.

Occupancy rates within prime centres such as Dubai Mall, Mall of Emirates, Ibn Battuta Mall remain exceptionally high at close to 100 per cent, although there has been some evidence of store closures in Dubai's malls as landlords look to freshen up the retail mix amidst more challenging retail conditions, noted Green.

"Dubai remains the biggest regional draw for international retailers, with a host of new names entering the market, including Antonio Marras, Mustang Jeans, Discovery Channel which all opened their first Dubai stores this year," he added.-TradeArabia News Service