Dubai Real Estate Market Overview Q2 2014 By Jll (Jones Lang Lasalle)Posted on April 27th, 2018
Dubai Market Summary
The Dubai real estate market maintained its positive performance in Q2 2014. Although the residential sector saw prices and rents increase across most areas, there are signs that the rate of growth is slowing down with Q2 seeing a marked slowdown in the volume of residential sales, particularly in respect of existing villas. While the retail and hotel sectors continue to experience growth, recovery in the office sector remains patchy, constrained by the large level of supply and high vacancy rates, that are placing pressure on overall rental values.
Dubai Prime Rental Clock
|Q2 2013||Q2 2014|
* Hotel clock reflects the movement of RevPAR
Note: The property clock illustrates where JLL estimates each prime market is within its individual rental cycle as at end of the relevant quarter - Source: JLL
Dubai Residential Market Overview
Although the residential sector saw prices and rents increase across most areas, the rate of growth has started to slow from that seen earlier in the year.
Average sale prices grew by 6% in Q2, down from 10% in the previous quarter. With signs of reduced sales activity (particularly in the secondary villa market), it is likely that asking prices in this sector will decline further in coming months. Sales volumes have declined in all sectors recently, with data from the Dubai Land Department showing villa sales in May 2014 down by almost 50% on the same month in 2013.
With the residential sector witnessing continued demand from investors, the market has witnessed a number of new project launches and announcements. Contracts have been awarded for around USD 5.4 billion of residential projects over the first half of 2014, while other new projects remain at the announcement or launch stage with no construction work yet occurring.
A common theme across many of these projects is an emphasis on sustainability and energy saving features, in line with the recent decision of the Dubai Government to extend its green building codes and regulations to all new real estate projects.
|Dubai Residential Supply||Dubai Residential Performance|
Dubai Office Market Overview
While continued economic growth has improved sentiment and generated demand for commercial space, the high level of both current vacancy and future supply continue to constrain the market. The Dubai office market operates as a number of quite different submarkets, based upon location, tenure (strata or single ownership), licence structure (freezone / onshore) and quality. While overall market vacancies remain high (25%), there are pockets of shortage that have resulted in major occupiers seeking to have new space built for their requirements rather than occupy sub optimal space in existing buildings.
With vacancy rates falling in preferred locations / buildings, there is likely to be upward pressure on rental levels in selected locations over the second half of 2014. An indicator of this trend is the decision by TECOM to revise its rentals for both existing and new tenants to reflect continued demand and the low vacancies within TECOM owned premises in Internet City / Media City.
TECOM have replaced their previous rental matrix with a standard rate of AED155 per sq ft, plus service charges of AED30 per sq ft, with these rates now applying to leases of all sizes.
|Dubai Office Supply||Dubai Office Performance|
Dubai Retail Market Overview
With limited additions to stock and continued interest from retailers, rents in the best performing super regional malls have increased by as much as 12% over Q2.
Increases have been more modest in smaller centres and secondary malls but the retail sector has benefitted from higher spending from both tourists and local residents.
Confidence in the retail market is reflected in the announcement of the Mall of the World, a planned new mall around twice the size of the Dubai Mall, on Sheik Zayed Road immediately opposite the existing Mall of the Emirates.
This announcement recognises the importance of tourism spending on the Dubai retail market, with plans for up to 100 new hotels to be linked to the new mall within a massive air conditioned dome.
|Dubai Retail Supply||Dubai Retail Performance|
Dubai Hotel Market Overview
Despite the completion of around 1,500 additional rooms in Q2, the Dubai hotel market continues to grow, recording the highest RevPAR levels since 2008.
Average occupancies remained relatively stable at around 85% during the year to May 2014, with room rates increasing by 3% to USD276 making Dubai one of the stongest performing hotel markets globally.
The major news within the hotel market has been the proposal to develop additional hotel supply in the vicinity of the proposed Mall of the World in the Umm Sequeim area.
This area already has an existing cluster of beachside hotels operated by the Jumeirah Group, with the new plan envisaging a major expansion of this cluster rather than the development of a new cluster of hotels (Bawadi) within the Dubailand area as previously envisaged.
|Dubai Hotel Supply||Dubai Hotel Performance|
Definitions & Methodology
The supply and stock data is based on our quarterly survey of 37 sub markets, starting from 2009. This data excludes labour accommodation and local Emirati housing supply.
Completed building refers to a building that is handed over for immediate occupation.
Residential performance data is based on the REIDIN monthly index. REIDIN.com Dubai Residential Property
The supply data is based on our quarterly survey of 20 sub-markets, starting from 2009.
Prime Office Rent represents the top open-market net rent (exclusive of service charge) for a new lease that
Vacancy rate is based on estimates from the JLL Agency team.
Classification of Retail Centres is based upon the ULI definition and based on their GLA:
Primary Malls are the good performing malls with high levels of turnover. Secondary Malls are the average
Prime Rent Shopping Centre represents the top open market net rent that could be expected for a notional
Vacancy rate is based on estimates from the JLL Retail team, and represents the average rate across standard
Hotel room supply is based on existing supply figures provided by DTCM as well as future hotel development
STR performance data is based on monthly survey conducted by STR Global on a sample of more than 32,000
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