(MENAFNEditorial) JLL, the world's leading real estate investment and advisory firm, today released its second quarter (Q2 2015) Dubai Real Estate Market Overview report that assesses the latest trends in the office, residential, retail and hotel sectors.
Craig Plumb, Head of Research at JLL MENA, commented: "The Dubai real estate market continues to face downward pressure during the second quarter of the year. The residential rental index has remained relatively flat while sale prices have dropped an average of 8% since June 2014. This comes as records from the Dubai Land Department show a 69% decline in the number of residential transactions in the first half of the year compared to the same period in 2014. This single digit price correction is in sharp contrast to declines we witnessed in 2008/2009 and is a clear indication that the market is maturing. We expect transaction volumes, and subsequently sale prices, to drop further in the second half of the year. "
"Faced with new supply and a limited increase in net absorption, the commercial sector is stable and should remain so in the short to medium term given the 1.2 million sq m of Gross Leasable Area expected to enter the market over the next couple of years. The plans announced by the Dubai International Financial Center to triple in size by 2024 will solidify Dubai's position as the regional business hub and positively impact office market performance in the long-term."
He continued: "Retail performance has been steady during the second quarter, with no noticeable increases in rents across the different mall types. Retail sales, particularly in the luxury segment, have slowed, driven primarily by the decline in tourist numbers from Russia, while the current level of market saturation in the food and beverage segment is expected to put pressure on retailers to differentiate their offerings in the face of strong competition. "
Chiheb Ben Mahmoud, Head of the Hotels & Hospitality Group at JLL MEA, added: "The Dubai hotel sector maintains its position as the strongest in the region, amid continued softening of the activity indicators. Q2 continued to reflect the impact of the drop in the number of tourists from Russia and the Eurozone. ADR adjustments allowed the impact on the city occupancy rate to be relatively limited remaining in the range of the ten-year historical average. Translating the push for competitiveness, the ADR for Q2 2015 stands at 7.2% lower than the ten-year historical average, highlighting the need for hotel owners and operators to focus on operational efficiencies."
SECTOR SUMMARY HIGHLIGHTS – DUBAI:
• Office: Dubai's office market remained steady over the second quarter, with average rents across the commercial business district (CBD) registering AED 1,860 per sq m and vacancies declining marginally to 23%. With the delivery of approximately 162,000 sq m of Gross Leasable Area (GLA) made up primarily from eight buildings in the Dubai Design District (D3), four buildings at Arenco Business Park (DIP), and The One Tower in Tecom, the total current supply of office space has increased to 7.8 million sq m.
• Residential: The residential market continues to face downward pressure as rents and sale prices decline. Although the general REIDIN rental index remained flat year-on-year in June 2015, the sales index dropped by 8% for the same period, with declines in apartment sale prices exceeding that of villa prices. An additional 1,200 units were completed in Q2, increasing the total supply to 379,000 units. A further 16,000 units are expected to enter the market by the end of 2015, however the delivery of some of the projects may be delayed into 2016 and beyond, as the market continues to face declines.
• Retail: Dubai's retail market remained largely stable during Q2, as no new deliveries occurred. Retail performance remained steady across all malls in the Emirate, with a slowdown in annual rental growth levels and retail sales, largely driven by a decline in the number of tourists from Russia. The delivery of 194,000 sq m of GLA is expected throughout the remainder of 2015, comprised mainly of extensions to existing super regional malls, including Dragon Mart, Ibn Battuta, and Mall of the Emirates.
• Hotels: The hotel sector continued to face downward pressure in the second quarter of the year. Although total hotel stock increased to 65,000 rooms with the delivery of 132 keys at the Intercontinental Marina, average daily rates (ADRs) saw a 6% decrease to USD 249 in the year to (YT) May. Coupled with a marginal decline in occupancy rates, revenue per available room (RevPAR) registered USD 208 YT May, a 9% decline year-on-year. JLL anticipates ADR's may soften further in the short-to-medium term, in response to the additional 30,900 keys scheduled for delivery over the next couple of years and a slowdown in visitors from Russia and the Eurozone.
Dubai prime rental clock
This diagram illustrates where JLL estimates each prime market is within its individual rental cycle at the end of the relevant quarter
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