Report says continuing rental, sales price declines is driving the progression of a tenant-led market
Dubai’s residential market witnessed a very minor contraction during the second quarter of 2017, with both sales and rental rates seeing modest declines, real estate advisors CBRE has said.
Its Q2 2017 Dubai MarketView said this is driving the progression of a tenant-led market, with landlords becoming more generous in their negotiations with prospective new tenants.
However, tenants on existing leases are generally not finding the same level of flexibility from landlords, although rental increases are becoming less prevalent, it noted.
“The sales market has witnessed an improvement in transaction numbers during 2017, with off-plan properties remaining favourable amongst investors, underlining the speculative nature of the local market,” said Mat Green, head of research and consulting UAE, CBRE Middle East.
Residential sales prices fell by close to 1 percent during Q2, with the sector slowly edging towards the bottom of the market, with just a 2 percent drop recorded year-on-year.
Future supply levels continue to grow at a rapid rate, which is a longer-term concern for the market, with a significant pipeline of new properties set to be completed in the build- up to 2020, with annual deliveries rising already well above the five-year average, said Green.
CBRE said Dubai’s office market remains fragmented, with stable conditions for many prime free-zone and non-free-zone properties, but continued to experience declines in the secondary market. The report said average prime rentals have now remained unchanged for five straight quarters.
Secondary office rentals have continued to fall, declining by around 4 percent during the quarter, the report said.
It added that with additional new supply expected to be completed in locations such as Business Bay, Dubai Silicon Oasis and JLT in the short to medium term, further softening of rentals is expected.
Green said: “Latent demand for Grade-A office spaces remains quite resilience, particularity for those properties that are able to offer tenants a dual licensing option for their accommodation. However, demand for typical onshore buildings in the traditional business districts continues to weaken, resulting in declining rental trends and greater flexibility in leasing terms.”