Dubai real estate further softens in Q3 2015
Slowdown Continues in Dubai residential and hotel markets while retail sector reaches cyclical peak and office sector remains stable
The Dubai real estate market continued to experience a slowdown in performance during the third quarter of 2015, said JLL, the real estate investment and advisory firm.
In its third quarter (Q3 2015) Dubai Real Estate Market Overview report, assessing the latest trends in the office, residential, retail and hotel sectors, Craig Plumb, head of research at JLL MENA, said: “The slowdown trend is expected to continue over the remainder of 2015. Residential sale prices continued to decline (villa prices have declined by 11% over the year to August). For the first time, rental prices have also declined (albeit marginally) over Q3."
JLL has recently highlighted the region’s shortage of middle-income housing.
Plumb said, "This quarter, we have seen increased recognition of the issue with the introduction of a number of initiatives from both developers and the government targeting the affordable housing market. In addition, the lack of major new mega projects and the increased emphasis on housing for the middle-income segment of the population signifies the maturing of Dubai’s residential market.”
“The hotel market continued to witness a slowdown in performance, partly attributable to a decrease in the number of tourists from Russia, South Asia, Far East Asia and Africa visiting Dubai. Despite this, occupancy rates are still high when compared to other international markets, but we expect this to soften with the delivery of an additional 450 rooms at the Intercontinental in Dubai Marina, Ibis Styles in Jumeirah and Hyatt Place in Deira. We are also seeing efforts to diversify Dubai’s tourist base away from leisure and entertainment with the potential to establish Dubai as a leading medical tourism hub. Initiatives such as this will help to ensure a constant stream of visitors.,” he added.
He continued: “The commercial sector has been largely stable with demand focussed on the higher quality offices of the Central Business Districts, most notably the DIFC, which continues to see increased demand and thus higher rents. Conversely, lower occupancy rates have resulted in a marginal softening in rents in secondary locations. One notable trend is tenants are now migrating between free zones as licensing requirements are relaxed. The limited supply of new office space in TECOM has resulted in many tenants moving to the nearby JLT free zone. ”
He concluded: “The retail market remained subdued over the third quarter as annual rental growth rates across all mall types continued to slow down. There are signs that landlords have recognised this softening and have adjusted rental levels to more realistic levels in order to differentiate their offerings in the face of strong competition. We expect rents to drop over the 12 months as the market moves through its cyclical peak.