Dubai office rents continue to rise: CBRE
Dubai, July 23, 2014
Dubai’s office rents are continuing to rise due to the growing economy and increasing business confidence, according to a CBRE report.
The Q2 2013 Dubai Market View by the property advisor, said the average Central Business District (CBD) rents have increased three per cent quarter-on-quarter and 25 per cent year-on-year.
Mat Green, head of research and consultancy UAE, CBRE Middle East, said: “The average prime rental rate now measures Dh1,884 ($512) sq m per annum and this figure is expected to increase further within the short term amid strong economic growth and rising business confidence.”
The CBD market also continues to face a diminishing availability of good quality office accommodation, specifically offices that are capable of accommodating large corporate space occupiers over contiguous floors, said the report.
The occupancy rates within prime CBD offices have been rising steadily over the past 12 months, with less than 16 per cent vacancy rate compared to an average of 40 per cent vacancy for all Dubai office stock, it said.
“Secondary office locations continue to see an improving performance with average rents rising from Dh924 sq m per annum in Q2 last year to Dh1,148 sq m per annum in Q2 this year. This reflects a growth of 24 per cent in just one year with a five per cent rental growth recorded during this quarter,” added Green.
With limited availability of good quality office accommodation in prime areas, the demand could spill-over into some secondary locations, particularly for single owned properties in close proximity to transport links, the report said.
“Office stock in Dubai continues to see significant growth with over 1.8 million sq m set to be delivered by the end of 2017. However, while there is a large pipeline of new supply, the majority of this space will be negatively impacted by its strata ownership title,” said Green.
“During 2014, almost 0.5 million sq m is scheduled for completion, with over 30 per cent of this total to be delivered in the Business Bay area,” he said.
Meanwhile, Dubai’s residential sector continued to experience strong demand from both occupation and transactional sources, according to the CBRE reprot.
However, there has been a slowdown in the number of transactions for ready to move in properties, it said.
The number of transaction dropped 10 per cent quarter-on-quarter and 18 per cent year-on-year, with a total of 3,545 real estate transactions completed during the second quarter, according to the Dubai Land Department (DLD).
The value of real estate transactions has started to stabilise, with second quarter sales exceeding a value of Dh7.7 billion, with first quarter transactions valued at Dh7.6 billion, it said. The off-plan market, however, remains buoyant, further underlining concerns over speculation.
Despite recent regulatory changes, both rentals and sales prices continued to rise, albeit at a marginally slower rate than was recorded during the previous quarter.
The residential development pipeline is still increasing, with a rising number of new projects being launched every month, stated the CBRE report.
While this pipeline is still far smaller than witnessed during the last cycle, it is nevertheless, growing quickly and is certainly something to monitor carefully, with a danger that further down the line supply could again start to exceed demand fundamentals, it said.
“During 2014, close to 17,000 new units are expected to be completed with the majority of these set to be delivered in secondary locations such as Dubailand, Jumeirah Village Circle and Silicon Oasis. Over the next four years roughly 65,000 new units are penned for completion, with 83 per cent of these apartments, and villas and townhouses comprising the balance,” said Green.
The overall Dubai Residential Price Index is showing rental increases of almost 20 per cent over the last year, with apartments registering an increase of 21 per cent while villa rentals have grown by almost 10 per cent, noted the report.
For the sales market, the quarterly change in sale prices was registered as a little over five per cent, the same figure that was recorded the previous two quarters, suggesting that demand remains strong despite the implementation of higher transaction fees.
The prices are, however, 31 per cent higher than the same period last year. Similar to the leasing market, growth was strongest among the more budget focussed locations including International City and Jumeirah Village Circle.
“With sustained demand for both occupational and investment properties, we anticipate that residential rental and sales growth will continue throughout 2014. However, we expect growth levels to be lower than 2013 performance as affordability becomes a more influential driver of property moves,” added Green. - TradeArabia News Service