- Office: Prime office rentals continue to witness increase in rates

- Residential: Residential rental and sales rates continue to experience fragmented declines

- Hospitality: Close to 4,000 new rooms are expected to be delivered during H2 2016

Dubai, 13 October 2016 — Prime office rentals continue to witness an increase in rates, buoyed by limited supply and sustained demand from global corporate occupiers, according to the Q3 2016 Dubai MarketView by global real estate consultancy firm, CBRE.

Dubai’s real estate market remains highly fragmented across different sectors and sub-markets, which is also reflected in the market outlook, with varied performances expected in 2017.

Prime office rentals witness rising rates 

Prime locations and good quality accommodation, particularly in TECOM, DIFC and the CBD, continue to see rental rates rising whereas the overall market is impacted by the lack of good quality and efficient office accommodation availability.

Matthew Green, Head of Research & Consulting UAE, CBRE Middle East, said, “Although the prime office rates are rising, a two tiered market is again emerging in Dubai’s commercial office sector, with secondary locations and strata impacting properties typically facing declining rentals and rising vacancy rates”.

The market recorded limited availability of good quality and efficient office accommodation over adjoining floors, resulting in major corporate occupiers seeking consolidations from multiple existing locations into single large premises. Pre-leasing activity is also rising in prominence, encouraging developers to commence speculative development.

Economic concerns have potentially led to landlords of existing onshore offices offer greater flexibility on lease and rental terms with the aim to secure larger tenancies.

Average prime yearly gross rentals remain unchanged at AED1,920/m2/annum in Q3 2016 and secondary rental rates continued to decline, falling by around 3% during Q3, reaching to AED1,072/m2/annum.

Average residential rental and sales rates have continued to decline across Dubai

The Dubai residential market continues to show signs of fragmentation, with individual sub-markets experiencing varying levels of performance. While negative growth was apparent, average rates declined by less than 1% underlining the gradual improvement in investor sentiment in recent quarters.

“The drop in performance reflected a relatively universal dip in rentals, which has been brought about by increasing supply levels across the Emirate in recent quarters, as previously delayed units were finally released to the market,” commented Green.  

The overall supply levels are likely to see a further increase in the coming quarters, with a spate of new development launches during and after this year’s Cityscape Global event, which took place in September

The housing pipeline is anticipated to witness growth in the coming years as developers view the build up to Expo 2020 as a prime time for maximising off-plan sales revenue.

Dubai hotel occupancy expects deflationary ADR pressure sustained into 2017

Hotel occupancy rates have continued to remain positive during 2016, although 2017 predictions foresee deflation of ADR pressures. According to data from STR Global, Dubai’s hospitality market continues to witness declining Average Daily Rates (ADRs) and lower room revenues, as hoteliers battle to sustain higher occupancy rates by cutting room rates amidst mounting competition from new supply.

ADRs during August were down around 9.5% versus the same month last year at AED513/room/night, with RevPAR down 6.3% at close to AED390/room/night. While room revenues are down, hotel occupancies have remained more resilient with an increase of 3.6% recorded for August versus the same month last year, although the year to date occupancy is down 0.5% on the same period last year.

“The volume of supply continues to grow with around 24,000 new hotel keys and hotel apartments due to be delivered before the end of 2018 alone, underlining the rapid expansion of room inventory which is currently taking place in the build up to Dubai Expo 2020”, commented Green.

Close to 4,000 new rooms are expected to be delivered during H2 2016, following on from a similar delivery schedule in H1.  The annual total is expected to increase further during 2017 and 2018, when close to 10,000 rooms are due to be over in each year.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue).  The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide.  CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.  Please visit our website at www.cbre.ae

© Press Release 2016