Category Archives: Offices

Dubai needs 30,000 new homes by 2018 to maintain rent stability

Dubai needs to build an additional 30,000 residential units through to 2018 to maintain rent stability in the emirate, a new report claimed on Monday

Phidar Advisory said in a research note that residential sales prices and rents were still on the rise in Dubai during the second quarter of this year, but the rate of growth slowed dramatically for both sale prices and lease rates.

Based on transaction data from the first six weeks of Q3, the report also said that nominal prices for single family homes declined four percent and apartments declined 0.6 percent.

“This has led to yield compression but the report also states that as many as 30,000 additional units are needed through 2018 to maintain rent stability,” the report said, adding that the figure is based on Phidar’s monitoring of announced, launched, stalled and ongoing projects.

Phidar said its House Price Index reflects real prices adjusted in representative projects across Dubai that have been completed since 2009.

Its report said residential development opportunities are still ample in Dubai, but added that the market would benefit “exponentially” from developer specialisation, particularly in the most under-supplied assets.

It said middle income housing could be a tangible and powerful catalyst, with Phidar research indicating that another 15,000 units could be reactivated from stalled projects.

Phidar said that in the short term, Dubai’s property sector is likely to display volatility which could lead to a price correction, following a two-year period of “exuberant investor sentiment”.

The report also suggests that long term capital appreciation due to strong demographics is a foreseeable scenario but the current supply trends and affordability constraints will pose challenges to sustained long term growth.

Last month, Knight Frank said in a report that annual growth in prime property prices in Dubai almost halved in the second quarter of 2014 compared to the previous quarter.

Prime prices rose by 6.3 percent in the year to June, down from 11.7 percent in the last quarter, its Prime Global Cities Index for Q2 showed.

Dubai was ranked the 13th best performing real estate market tracked by the property consultancy, a sharp fall from previous quarters when the emirate has featured in the top two positions.

Knight Frank said moves to introduce a mortgage cap and double transfer fees at the end of 2013 has “influenced buyer activity more than forecast”.

Phidar Advisory is a recently established advisory firm specialising in real estate in the UAE and led by Jesse Downs, a former senior executive at Jones Lang LaSalle.

Where next for rents in Dubai's Office space?

Dubai Office Prices bottomed out?

As the Dubai residential property market continues its resurgence, what of the commercial space?

The average asking rents for prime office buildings in Dubai has remained unchanged over the past year, according to the latest Jones Lang LaSalle report.

In fact, prices have been flat since the end of 2010, with space in Dubai International Financial Centre (DIFC) attracting prices of AED 2,370 per sq m, down from a Q4 2009 peak of just under AED 4,500 per sq m.

Prices elsewhere in Dubai saw more modest falls with prime rent in the central business district (Excluding DIFC) at AED 1,615 per sq m, compared to AED 2,500 in 2009, with citywide rent elsewhere attracting slightly lower prices.

With a further 1.4 million sq m of office space due to come online in 2013, the trend for rental prices in the commercial sector looks set to remain for another 12 months at least, even as more international companies relocated to Dubai as the economy strengthens. Expect office space in secondary locations to continue to fall in the short term.

However the macro perspective for office space in the Dubai property market shows signs of opportunity. As residential prices continue to improve, due to a growing population (50% of the UAE population is under 20) and positive sentiment, companies will need to expand their workforce, and with it their office space in the coming years.

The UAE is the most confident country in the Middle East according to a recent Nielsen survey and the World Bank rated UAE 2nd in a list Arab countries for ‘Doing Business in 2012’ due to the friendly business policies, government supported initiatives and simple registration procedures.

The Dubai economy is also targeting growth of 4.5% in 2012 according to Dubai Supreme Fiscal Committee – 50% higher than 2011 and up from 2.5% in 2012.

Having said that, supply is outstripping demand for the commercial sector at the present time and a delicate global economic outlook, especially in Europe, will continue to impact on the short to medium-term expansion plans of international companies.

It is going to take a concerted effort to attract new business into Dubai, highlighting the tax-free benefits, ease of doing business and ideal geographical location to entice overseas companies. The emirates pitch to host the World Expo 2020 on the eve of the countries 50th anniversary will certainly reignite the global focus on Dubai and drive new investment.