OFFICE MARKET
- A large portion of demand for office space in Dubai continues to stem from relocation and consolidation activity, with tenants taking advantage of softer market conditions.
- We are also seeing many large occupiers consolidating into purpose-built offices, with HSBC and Huawei moving into their respective premises while MasterCard, Mashreq Bank and Flydubai offices are currently under construction.
- According to Emirates NBD Dubai Economy Tracker Index, employment indices remained flat, while new business activity in the non-oil private sector has seen a significant rise over the last few months.
- While supply-side deterrents continue to exert downward pressure, we are witnessing a raft of demand-side drivers by the government such as the recent announcement of a single freezone passport. This move is aimed to ease current regulations and allow companies registered with any single Freezone to operate in other free zones without the need for additional licenses.
- We are witnessing a spike in office supply, led by the delivery of several projects including Innovation Hub Phase One, One Central Office 4 and 5 and other smaller Grade B offices, bringing current total office stock to 102.32 million sq. ft.
- From Q4 2019 until the end of 2020, we forecast nearly 3 million sq. ft. of office space to be handed over, taking the total Dubai office stock to over 105.26 million sq. ft.
- Rentals have contracted across the board, except the smaller free zones such as D3, One Central and DAFZA.
- We have seen secondary market locations such JLT, Business Bay and older Dubai districts (Deira, Bur Dubai, Garhoud and DHCC) witness significant year-on-year drops as relocation activity intensifies and landlords struggle to maintain occupancies.
- We are also witnessing landlords become increasingly flexible during new leases and rent renewals in order to maintain occupancies.
- Number of cheques is limited to one to four cheques while the trend for fitting out units and extending rent-free periods is increasing.
- Clients continue to prefer fitted and plug-and-play offices and this has seen a rise in co-working and serviced office spaces
RESIDENTIAL MARKET
- Dubai is on track to deliver nearly 29,500 units by the end of 2019.
- Although demand remains stable as evidenced by steady transaction volumes, particularly in the secondary market, the supply side deterrents continue to exert downward pressure on sales prices, rents and in-turn occupancies.
- Tenants are either climbing the property ladder with a raft of options now becoming available, both in the ready and heavily incentivized off-plan market or relocating/upgrading to units with similar or lower rents.
- The highest rental reductions in villa communities were witnessed in Emirates Hills (13%), Jumeirah Park (13%) and Dubai Land (-13%).
- The weakest performing apartment districts in terms of rental reductions were Discovery Gardens (13%), and Dubai Land (12%), as competition intensifies in the affordable market segment with more options becoming available, either within the community or in nearby areas.
- Centrally located districts such as Business Bay, Dubai Marina, and DIFC have observed relatively lower levels of rental falls when compared to outer areas.
- We expect rental prices to remain under pressure in 2019/2020 and the rental market to continue being tenant friendly.
- Sale prices softened across most of the districts, with villas in Jumeirah Village (-13%) and apartments in Dubai Land (-19%), Discovery Gardens (-15%) and Dubai Sports City (-15%) witnessing the sharpest drops in the last 12 months.
- Interestingly, apartments in Palm Jumeirah, Jumeirah Village and Business Bay saw an uptick in average sales prices as newly developed projects in these areas are in the higher price range, thus elevating the area average whilst the older stock continues to show a subdued performance.
