The third quarter (Q3) recorded an increase in construction activity with around 12,000 and 600 units handed over in Dubai and Abu Dhabi, respectively. Although this represents a significant increase in quarterly deliveries, real estate and investment management firm JLL said it remains cautious on the timely delivery of future projects.
In terms of performance, rental rates recorded an all-time low in Dubai in Q3 2020, with declines of 12 percent Y-o-Y, surpassing the lowest point of 2010/2011 on the rental index. Additionally, sale prices continued to decline, falling 9 percent Y-o-Y.
Abu Dhabi’s residential market also recorded some softening, albeit to a slower extent than Dubai. Rental rates declined 3 percent and 4 percent for apartments and villas respectively on an annual basis.
Similarly, sales prices also declined by 5 percent and 1 percent for apartments and villas respectively in Q3.
“Looking ahead, the residential market is expected to remain under pressure in the short term in light of various macro uncertainties, namely high unemployment rates and a slowdown in population growth. This is in addition to subdued investor sentiment on a global level,” JLL noted in its quarterly report.
The real estate management firm expects developers to continue offering a range of incentives (fee waivers, discounts, rent-to-own), as well as partner with banks in offering reasonable home finance options to attract new investors and end-users looking to take advantage of the lower prices.
Dubai’s office market saw its first new stock additions of the year, with a total of 190,000 sq m of office gross leasable area (GLA) delivered in DIFC, Downtown Dubai and MBR City, bringing the total stock to 8.9 million sq m of GLA.
“With the ease of lockdown measures and increased mobility during the quarter, there has been a considerable increase in the level of new leasing enquiries in the office sector. Existing tenants also continue to either consolidate operations, seek more attractive lease terms, and, in some instances, look to relocate to quality space – a trend we are seeing across sectors in the country,” said Dana Salbak, Head of Research, JLL MENA.
The market remains tenant favorable with landlords offering various incentives to either attract new tenants or keep their existing ones. Average Grade A Central Business Districts (CBD) rents (including DIFC) declined 4 percent Y-o-Y in Dubai to reach AED 1,700 per sq m. In Abu Dhabi, headline rents for shell and core Grade A offices remained stable at AED 1,600 per sq m, JLL said in its report.
(Writing by Seban Scaria firstname.lastname@example.org; editing by Daniel Luiz)
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