The residential rents in Dubai witnessed a modest growth of around seven per cent over the course of the year, as compared  24 per cent last year, according to global property consulting firm CBRE’s year-end market update.

More than 20,000 new units are expected to enter the market during the course of the next 12 months which could have a deflationary impact on sales and rental rates, it said.

Mat Green, head of research and consultancy UAE, CBRE Middle East, said: “Over the past 12 months the sales segment has comprehensively out-performed the rental market, recording an 18 per cent growth year-on-year as compared to 30 per cent in 2013.  

“This disconnect is highlighted as a potential area of concern for the market, with mounting pressures on rental yields as a result.  However, despite the slowdown, the market continues to see strong occupier and investment demand for well located, good quality residential apartment buildings, a fact backed up by recent transaction numbers in the established community locations.”

“Over the course of the year, the residential market has progressively slowed with transaction volumes well down on 2013 performance.  While values have grown steadily during the period, the growth is just a fraction of the 30 per cent growth achieved last year. A similar story has also been evident in the residential leasing market, wherein rentals suffered a first quarterly decline since the last downturn in 2008.”

Despite a rise in new stock and high vacancy ratios, office lease rates have surged across the prime and secondary locations. Solid economic growth and improved business confidence has paved the way for the entry of new SMEs while existing firms are solidifying by way of expansion/consolidation culminating in a strengthening of lease rates.

Single held quality office assets across prime and secondary areas have benefitted the most, recording rising lease and occupancy rates.

“Overall, we expect the scheduled pipeline of offices to help constrain rental inflation and add more balance to the market in the coming quarters. As of end of 2014, the total office stock stands at close to 8.1 million sq m rising from 7.7 million sq m as of the end of 2013.  This reflects an addition of 0.4 million sq m and an increase of six per cent year on year,” said Green.

According to the CBRE annual market update, the retail sector remained buoyant during the year, with major retail centres recording occupancy rates of over 95% and with strengthening lease rates.

“While all sectors have performed well, perhaps two of the most promising have been the retail and hospitality sectors which have seen rising demand amidst increasing visitors to the emirate,” added Green.

A positive economic outlook and an increase in tourist numbers, combined with a rise in per capita income and changing consumer behaviour are currently acting as a growth catalyst for the sector.

Dubai remains the principal regional draw as an established ‘retail tourism market’ which is further reflected by the continuous rise in new brands and in footfall figures reported by the malls.

“Total retail stock in Dubai has now reached nearly 2.3 million sq m, rising three per cent from the same period last year. Recent growth has been a result of a number of factors, including rising visitor numbers, an increasing population, and a strong brand affiliation. This has been underpinned by the development of mega sized destination malls, which are anchored with large-scale leisure attractions, with entertainment forming an increasingly important part of the retail mix,” said Green.

The rising tourist numbers along with planned festive activities should see another strong year for the retail sector.  

However, with no new major retail space expected to enter next year, the quandary of retailers is likely to continue.  With strong fundamentals, the sector is expected to see further growth with addition of new retail brands waiting to enter the market.

By the end of 2017, more than 27,000 new hotel keys and hotel apartments could be delivered, adding capacity for close to 10 million room nights a year to Dubai’s annual room inventory.

While the next year is set to see significant new supply with over 5,500 new hotel keys, 2016 and 2017 are the real growth years with close to 15,000 new hotel keys in these two years alone.  Over the next 12 months there will also be 1,500 new hotels keys delivered in the Dubai Marina, JBR, Jumeirah Beach and Palm Jumeirah sub-markets, although the main focus of supply in the short term is very much business focused.

“With a solid economic outlook, Dubai’s position as the headquarter city of choice for global corporates in the Middle Eastern region looks set to continue. However, with limited good quality and efficient office properties available in the market, it is likely that this segment of the market could see a growing demand and supply imbalance in the coming quarters,” concluded Green. - TradeArabia News Service