Cityscape remains a good barometer of sentiment towards the Dubai real estate market. This year’s Cityscape Global event (held in Dubai at the beginning of October) saw very few new launches, with most developers focussing on the sale of existing inventories by offering increasingly generous payment terms.
The UAE cabinet recently approved the largest federal budget in recent history (AED 60.3 billion), with more than half of this total allocated to education and social development. The increase in government spending (supported by increasing oil prices) will be a positive to the real estate sector in the medium term. However, all sectors currently remain in the late downturn stage of their cycle, with further declines in rents and sale prices likely over the next 12 months.
The office market has been generally subdued, with rentals decreasing, as well as increasing incentives for tenants to lease the growing available supply of new and existing (second hand) space. The growth of flexible space is an emerging trend that could disrupt the office market going forward.
The residential market has continued to soften with single digit declines in both sale prices and rents during Q3 2018 despite recent government measures to inject confidence in the market by introducing 10 year residency visas for certain categories of retiree. The lack of new project launches at Cityscape reflects the subdued investor sentiment and prices are likely to decline further over the next 12 months.
Retail remains the most challenged sector of the Dubai market and continues to experience a downturn in performance. More malls are now offering leasing incentives and even ‘turnover only’ leases, to retain existing tenants and attract new ones. While the longer term prospects for the retail sector remain positive, this sector is likely to decline further in the face of very high supply levels over the next 2 years.
Despite softening in the Hotel market, Dubai was one of the world’s top 10 performing markets in 2017 (the latest period for which data is available). Dubai recorded an average RevPAR of USD177 for the full year, ahead of other major global cities such as London (USD 156), Tokyo (USD151) and Sydney (USD164).
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Author: Craig Plumb
Craig has over 20 years’ experience providing clients with quality advice on real estate market conditions in the UK, Asia Pacific and the Middle East. With a background in urban economics and spatial planning, he has particular expertise in the areas of property market research, development consultancy, transport related infrastructure projects and corporate real estate.
Since moving to the UAE in 2006, Craig has authored over 50 research reports on different aspects of the MENA real estate market. He has also provided market research and consulting services to major investor, developer and government clients and has appeared as an independent real estate expert before the Dubai International Arbitration Centre (DIAC).
Craig holds a Bachelor of Arts in Economics & Geography from Lancaster University and an M.Phil in Environmental Planning from Reading University (UK).