The real estate sector in Dubai, UAE, ended 2014 on a quiet note as nearly all segments of the market - office, residential, retail and hotel sectors - witnessed subdued growth levels in the fourth quarter, said a report.

The second half saw Dubai’s residential market stabilise as average rents and sale prices remained relatively flat, with marginal declines over the last quarter, stated leading real estate investment and advisory firm JLL in its review.

On an annual basis, the Reidin rental index shows growth levels dropping from 18 per cent in 2013 to 15 per cent in 2014. Similarly, the sales market saw some cooling down as the Reidin sales index points to a decline in growth levels from 23 per cent in 2013 to 20 per cent in 2014, according to the JLL's Q4 2014 Dubai Real Estate Market Overview.

This comes as the number and value of transactions dropped 30 per cent and 14 per cent respectively in 2014, stated the report citing the data from the Land Department.

According to JLL, the residential sector is likely to remain subdued over the next 12 months as the market is expected to absorb 25,000 additional units in 2015. "In reality, we remain cautious of the delivery of some of these projects within the timeframe," it added.

On the office sector, JLL said the fourth quarter saw the addition of 8,200 sq m of office space in Business Bay and now an additional 1.2 million sq m of office space is expected to enter the market this year.

However JLL said it remained cautious of the delivery of some of these projects within the projected timeframe.

As demand remains strong for single-owned buildings in established locations, rental rates and vacancy levels are expected to remain stable in the short term, the expert stated.

However as new space enters the market, average rents are likely to face further downward pressure as tenants seek to optimise or rationalise their space requirements, and consolidate their operations in one location.

Vacancy levels across the central business district (CBD) are expected to increase as more Grade A stock enters the market by the end of 2015 (Dubai Trade Centre District, Dubai Design District), it added.

On the retail scenario, JLL said the Dubai market was expected to witness the delivery of 267,000 sq m of retail space over the next 12 months, of which 118,000 sq m was due for completion in the first quarter.

This largely includes Phase Two of Dragon Mart and three neighbourhood centres including The Box Park by Meraas. While average rents continued to be high on an annual basis, they remained stable over the last quarter.

No rental growth is forecast over the next 12 months as the retail supply expands significantly. Vacancy rates are expected to remain stable as demand from retailers and new brands entering the market continues to be strong, stated the JLL report.  

On the hotel sector, the property expert said the fourth quarter saw the delivery of major properties such as the Four Seasons, Sheraton on Sheikh Zayed Road and Pullman JLT, increasing the total supply to 64,200 keys by the year-end.

Partly as a result of this increase in supply, hotel occupancy in Dubai dipped marginally in the year to November to register 79 per cent. This decrease, coupled with a one per cent fall in average daily rates (ADRs) for the same period resulted in a marginal drop in  revenue per available room (RevPar) to reach $187 year-to-date in November.

With an additional 4,700 keys due for completion in 2015, the sector is expected to witness subdued growth rates as operators face strong competition, according to the JLL report.

Commenting on the report, Craig Plumb, the head of research at JLL Mena, said: "Average prices and rentals in the residential sector appear to have stabilised over recent months, with some locations registering marginal declines."

"While cheaper oil prices are likely to dampen investment sentiment in the short term, Dubai’s success at diversifying its economy and expanding its global reach makes it less vulnerable to oil price fluctuations," observed Plumb.

"With the government’s 2015 budget announcement, which saw planned spending and revenues increase nine per cent and 11 per cent respectively, the next 12 months are expected to see a boost in business activity. We will unveil our 2015 market forecast at our Annual Top Trends event next week," he added.-TradeArabia News Service