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JLL, the world's leading real estate investment and advisory firm, today has released its first quarter (Q1 2015) Dubai Real Estate Market Overview report that assesses the latest trends in the office, residential, retail and hotel sectors.
Craig Plumb, Head of Research at JLL MENA, commented: "The Dubai real estate market continued to experience subdued activity during the first quarter of the year. Residential sale prices saw a marginal decline across both apartments and villas, although rents remained relatively flat. We expect this trend to continue with average sale prices declining by up to 10% during 2015. Sale prices normally move ahead of rents and this appears to be happening in the residential market in Dubai at present. While this is resulting in increased rental yields, this is likely to be a temporary factor with more attractive yields eventually increasing demand and therefore sale prices again. Middle income end-users have assumed an increasingly important role in Dubai's residential market of late, with a number of initiatives underway from both developers and the government that target the affordable housing sector including the launch of two phases of Nshama's Town Square project near the Arabian Ranches and a proposal by the Dubai Municipality to introduce mandatory affordable housing quotas."
He continued: "We anticipate the commercial sector will see a significant increase in supply during the next couple of years, particularly of Grade A office space. Reflecting confidence in the market, the DIFC has announced an AED 200 million expansion plan which will include completing Building 11 of Gate Village in 2017, and ICD Brookfield's USD 1 billion development in DIFC is scheduled to be delivered in 2018. The retail market continues to be constrained by the decrease in spending, restricting overall growth levels. We expect performance of the retail market to remain stagnant throughout 2015, following estimates of a slowdown in retail sales growth figures. The latter is likely to put pressure on retailers and push out some of the small and mid-sized tenants, as they face difficulty achieving targets to meet high rents."
Chiheb Ben Mahmoud, Head of Hospitality at JLL MENA, added: "The hotel sector continued to face competition in the first quarter of the year. The increase in supply on one hand and the perceived softness of the inbound travel market on the other are leading some hotels to review their pricing and revenue management strategies. While occupancy rates remain healthy at 86% and above the MENA average, RevPARs declined 11% to USD 234 over Q1 2014. Visitor trends in the tourism market are changing with the stronger U.S. dollar, which is a detractor for Russian and Eurozone tourists, and evolving consumer habits in emerging markets, which is resulting in higher guests from South Asia, Far East Asia and Africa."
SECTOR SUMMARY HIGHLIGHTS – DUBAI
Dubai prime rental clock
This diagram illustrates where JLL estimates each prime market is within its individual rental cycle at the end of the relevant quarter.
*Hotel clock reflects the movement of RevPAR.
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Head of Research, MENA
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Senior Marketing & PR Manager, MENA