New report says developers poised to add significantly to residential supply by end-2019
The supply of residential units in Dubai continued to increase over the course of the third quarter, according to new data from JLL’s Q3 2017 Dubai Real Estate Market Overview report.
The data shows that there are over 487,000 units in the residential sector, with as many as 80,000 units expected by the end of 2019, with a number of developers, including Nakheel and Deyaar, announcing projects worth AED3.2 billion ($871 million) and AED1 billion ($272 million) respectively at Cityscape Global in September.
“This renewed sentiment does however raise the prospect of a potential over supply on the back of sales achieved through more attractive payment terms,” said JLL’s MENA head of research, Craig Plumb.
The research shows that a large portion of completions during Q3 were apartments, with 3,300 units delivered, compared to 660 villas and 75 townhouses. The largest completions were Duja Tower in Trade Centre First (679 units), Polo Residence in Meydan (595 units), District 1 (267 units) and Lila in Arabian Ranches (219 units)
JLL data suggested that 80,000 units could be delivered by the end of 2019, although actual deliveries will likely fall below this figure.
Sale prices for villas and apartments was found to have remained largely stable over Q3, with rents continuing low single-digit declines. According to JLL, anecdotal evidence suggests that residential buildings – even those within in-demand areas such as Downtown and Dubai Marina – are seeing increased vacancies, resulting in tenants being able to renegotiate rents downwards by between five and seven percent.
The total value of transactions, not including land, was shown to have gone up over the course of 2017, with sales in August exceeding AED3.7 billion ($1 billion), a 28 percent increase from the AED10.7 billion ($2.9 billion) recorded in the YT August 2016. A total of AED2.7 billion of sales were recorded in August alone, with 20 percent occurring in Dubai Marina and another 20 percent in the Business Bay and Burj Khalifa area.
In the office sector, Q3 saw the delivery of 35,000 square-metres of gross leasable area across Dubai, with the largest completion being the Offices 3 tower in DTCD.
The JLL report noted that “believes there is some risk with the materialisation of certain projects owing to volatile global markets and geopolitical conditions, which may result in corporates delaying or scaling back future growth plans.”
Office rents were found to have softened across Grade A quality buildings as increasingly favourable renewal terms are presented to retain tenants throughout the central business district in the face of competition from “best in class” projects such as ICD Brookfield Place. JLL expects the trend to continue into Q4.