The property market in Dubai is witnessing strong rental growth mainly in emerging masterplan locations as corporate occupiers continued to seek out high quality offerings across the emirate, said a report.

The emergence of strong demand has accelerated rental growth in the Central Business District (CBD) area with the average rates now Dh1,615/sq m/annum, representing an increase of around 7 per cent quarter-on-quarter, according to the latest Dubai MarketView by CBRE, the leading international real estate consultancy.

The third quarter witnessed strong leasing activity, despite being a traditionally quiet period for the real estate market.

Rental growth was recorded across all key sub-markets as corporate occupiers continued to seek out high quality offerings in established office locations, the report stated.

According to CBRE, the residential market in Dubai remains firmly set on an upward track led by the villa sector which has registered a 19 per cent year-on-year growth in its rental rates.

The apartment sector witnesses highest increase with a 4.5 per cent growth quarter-on-quarter, it added.

Mat Green, the head of Research & Consultancy, UAE, CBRE Middle East, said: "As new supply has been delivered, demand for offices in many ageing properties has waned, driven by the widespread migration of tenants towards better quality assets. This trend has also resulted in a growing divergence in performance between the top and bottom of the market."

"Despite the high headline vacancy rate across the market as a whole, the availability of good quality office accommodation over contiguous floors is somewhat limited. This is likely to lead to further rises in rental values over the next 12 months as landlords seek to achieve premiums on remaining space spaces as occupancy levels near capacity," he noted.

For now this trend will remain largely building specific, with premium products in the more attractive office locations garnering the majority of occupier interest,” added Mat Green.

According to the CBRE MarketView, as availability shrinks further, there is likely to be spill over of demand in secondary locations.

Secondary office property locations are experiencing a marginal strengthening of performance with rising rental and occupancy rates despite the entry of new office stock, said the market review.

Secondary office rents (excluding Tecom A& B) are currently averaging Dh955/sq m/annum, representing an increase of 3 per cent quarter-on-quarter, it added.

The residential market witnessed sustained growth being achieved across both rentals and sales segments. Sales activity remains robust, with a total of 5,175 residential properties transacted during the quarter with a total value of Dh11.15 billion.

This figure is marginally lower than the previous quarter, but is significantly higher in both numeric and value terms over the same period last year.

"As with the transactional market, the leasing market continues to show positive momentum with rising activity across all Dubai locations. The average quarterly rise in residential rents (covering both villas and apartments) has been 3.5 per cent, similar to the second quarter. The highest increase has been noted in the apartment sector with a 4.5 per cent growth quarter-on-quarter and 28 per cent year-on-year," said Mat Green.

Smaller sized units covering studios and one bedrooms have seen the biggest jump during the quarter as demand for more affordable properties continues to influence relocation decisions,” he stated.

According to the MarketView, a number of regulations have now been implemented to try and discourage speculator activities, and whilst they may dampen demand, it is thought unlikely that these steps alone will be sufficient to fully curb such activities in the short term.

This is highlighted by the continued interest in off-plan properties, with the majority of recent launches achieving high absorption of units.

As has been the trend over the last 24 months, most new projects have been launched by developers with a proven track record in the local market, highlighting a slight deviation from the previous cycle where there was greater involvement from smaller scale private developers.

"This trend has been the result of the enforcement of RERA regulations requiring developers to have 100 per cent ownership of their land and an unconditional performance guarantee for 20 per cent of the construction costs should they wish to sell off plan before 20 per cent of the construction is completed," said Mat Green.

This requirement has been implemented by authorities to help safeguard the interests of investors by ensuring the appropriate financial standing of developers,” he added.

Significant improvements made to road connectivity and the opening up of new retail and other complimentary facilities has resulted in developments such as Business Bay, Jumeirah Village and Dubai Silicon Oasis being able to command higher rental rates as well as solidifying occupancy rates.

With limited residential stock and proximity to the Downtown and CBD area, the Business Bay development has seen rents increase by close to 9 per cent quarter-on-quarter and by 36 per cent year-on-year, said the expert.

“The villa sector which had been leading growth in the residential sector has now started to slow slightly, witnessing an increase of just under three per cent quarter-on-quarter, with two, three and four bedroom units recording the highest level of increase," he noted.

"Overall the villa sector has seen rental rates rise by around 19 per cent year-on-year," added Mat Green.-TradeArabia News Service