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News Release


Subdued Demand and Limited New Supply Characterise UAE Market

According to JLL’s UAE Real Estate Market Overview for 2015

​​JLL, the world's leading real estate investment and advisory firm, today released its annual review of the  UAE Real Estate Market for 2015, assessing the latest trends in the office, residential, retail and hotel sectors.

The report noted that real estate performance during 2015 remained largely stable as developers adjusted to lower oil prices, reduced government spending and a significantly slower rate of economic growth than in recent years by reducing levels of new supply.

UAE Residential

Across the two cities of Dubai and Abu Dhabi, just 8,000 residential units were completed in 2015, less than half the number completed in 2014, as developers responded to more subdued market conditions and tightened liquidity, a trend likely to continue into 2016. The residential sales market has been affected by a decline in investor sentiment driven by lower oil prices and a slowdown in government spending, as well as regional geopolitical unrest, while US dollar strength is making UAE real-estate more expensive for overseas investors.

Craig Plumb, Head of Research at JLL MENA, said: "Following a rapid increase of residential rents and prices between 2012 and 2014, the market has now clearly stabilised, with sales prices falling in Dubai and remaining stable in Abu Dhabi during 2015 – but with a significant decline in transaction volumes in both markets. Prices softened by around 11% in 2015 according to RERA in the Dubai residential market and are expected to decline further over the next 6 months."

A slowdown in the pace of economic growth has also affected the rental market – although with supply also generally subdued, there has been a lesser impact on residential rents compared to sales prices – with residential rentals in Dubai falling marginally (by around 3%) and rents in Abu Dhabi increasing marginally over the year.

UAE Commercial

Average commercial rents have remained largely unchanged in both Dubai and Abu Dhabi.  While there has been rental growth recorded in a number of the best quality schemes in both markets (those with low levels of availability) this is not an accurate reflection of the overall market where rents have generally remained unchanged in the face of significant levels of vacant space.

UAE Retail

Retail rents have remained largely unchanged in both Dubai and Abu Dhabi – although the retail market is generally likely to move more in the tenants favour in both markets in the short term as the rate of growth in retail sales slows down at a time of increasing new supply.

Craig Plumb commented: "The growth in retail sales has slowed in the UAE during 2015 with some retailers struggling to meet high rental rates.  This in turn has forced landlords to offer discounts and attractive deals to gain and retain tenants. Further rental growth is likely to be limited to turnover provisions rather than base rental increases in most malls during 2016""

UAE Hospitality

The UAE hotel market saw mixed performance throughout 2015. While ADR's remained flat in Abu Dhabi, room rates in Dubai saw a 9% decline during the year to October. Occupancy levels remained healthy in both markets, at 74% and 77% in Abu Dhabi and Dubai respectively. The hotel market is now at more competitive levels than in 2014, partly attributable to a decrease in the number of tourists from Russia, South Asia, Far East Asia and Africa visiting Dubai (due to a slowdown in their domestic markets and the strengthening dollar) as well as the addition of new hotel rooms. 

Craig Plumb noted: "Looking ahead, Dubai's hotel market is expected to record a further softening in 2016, followed by a pick-up in activity from 2017 onwards with the delivery of Dubai Parks and in the run up to Expo, where the government is expecting 20 million guests by 2020. Conversely, hotel demand continues to improve year-on-year in Abu Dhabi largely due to improvements in tourism offering and the expansion of Etihad's network."


  • Office: The Dubai office market saw the delivery of 700,000 sq m of GLA in 2015, increasing the total stock to 8.3 million sq m. Of the new supply, 26% was delivered in Business Bay, followed by the new Dubai Design District (17%), TECOM and Logistics City (13%). The year-end also saw the delivery of the first building in the new Dubai Trade Center District (DTCD). Looking ahead, an additional 600,000 sq m of GLA is expected to be delivered between 2016 & 2017, with around 35% of this proposed supply expected in Business Bay.

    Dubai remains two tiered office markets, with strong demand for single owned Grade A office, but little interest in secondary locations. While Grade A space with developed infrastructure and surrounding amenities are retaining rental levels, demand has slowed down throughout 2015 as overall commercial activity remained subdued and corporate activity focused on consolidation of operations as opposed to expansion. Meanwhile, rents in Grade B space (typically strata owned and located in less developed areas) continued to face downward pressure as supply outstrips demand in that segment. As more Grade A stock is delivered to the Dubai market over the next couple of years (e.g. Dubai Trade Center District/ICD Brookfield), rental rates across the Central Business District (CBD) are expected to remain flat. Vacancy rates across the CBD, currently at 22%, are expected to increase. 

  • Residential: In Dubai, data from the Land Department reveals falls of 33% and 28% in the volume and value of transactions respectively in the YT November 2015, compared with same period in 2014. This comes as rents and sales prices dropped 2% and 11% respectively in the YT November according to the REIDIN General Index.

    Rents have performed better than sale prices in all sectors of the residential market in 2015, increasing rental yields and the future attractiveness of the sector. With average rentals declining in the Dubai market, 2015 has seen a widening of the gap between residential rents in Abu Dhabi and Dubai.

  • Retail: Dubai added 193,000 sq m of GLA dominated by the delivery of the extension to Mall of the Emirates. In Dubai, the supply of retail mall space is expected to increase 14% over the next two years to reach 76,600 sq m of retail GLA, dominated by extensions to existing super regional malls. As developers continue to build retail centers the market is likely to face an oversupply of mall space, which, coupled with lower demand, is expected to reflect negatively on the sector's performance.

  • Hotels: Dubai's hotel market saw the addition of 2,700 hotel keys in 2015, increasing the total supply to 67,100 keys. With pressure on tourist arrivals due to the strength of the US$ and regional security issues, this increased supply resulted in a decline in hotel performance of around 10% in 2015 and downward pressure on Average Daily Rates (ADR's) is expected in 2016.


Commenting on the Abu Dhabi real-estate market, David Dudley, International Director and Head of Abu Dhabi Office at JLL MENA said: "Abu Dhabi's recent bull-run came to an end in Q4 2014, triggered initially by the decline in oil price.  The general trend during 2015 has been a slow-down in demand – largely driven by a reduction in government spending and investor sentiment – but with limited new supply, market conditions have remained stable.  "Real estate value performance was generally flat over the year with the exception of the hospitality sector witnessing improved performance and slight increases to prime residential and office rents."

  • Office: Much less office space was completed in Abu Dhabi in 2015, with just 146,000 sq m added, increasing the stock to around 3.3 million sq m of GLA. Projects delivered in 2015 included Addax Tower on Reem Island and IRENA HQ in Masdar City. Approximately 340,000 sq m of office GLA is expected to enter the market in 2016, dominated by the delivery of Bloom Central and ADIB HQ on Airport Road, Al Hilal Bank HQ on Al Maryah Island and ADNOC HQ on the Corniche.  David Dudley commented: "The decline in oil prices has led to a contraction in Abu Dhabi's dominant oil and gas sector. Reduced oil prices, coupled with the government re-allocating funds to deal with regional matters, has also led to a major reduction in government domestic spending – also causing a contraction of the government sector and the pace of economic diversification. While demand has reduced, so has supply and therefore on balance, the market remains relatively stable, with some prime buildings experiencing an uplift in rents throughout the year."​

  • Residential Sales:  David Dudley commented: "The residential sales market boomed during 2013 and 2014 with 25% per annum growth and a major increase in transaction volumes. As the market softened during 2015, prices have remained stable but transaction volumes have dropped significantly. During 2016, we expect transaction volumes to remain low with a slight reduction in prices in some market sub-sectors."

  • Residential Rentals: David Dudley commented: "The residential rental market grew at a slower pace than sales growth during the last upswing – with prime average rents growing at 17% during 2013 and 11% during 2014, driven by demand growth outstripping supply, the removal of the rent cap and government policy changes. The slowdown in demand during 2015, balanced with a slow-down in supply completions led to a reduction in rental growth – with prime rents increasing 4% in the first quarter of 2015 and remaining stable for the rest of the year. Vacancy rates remain low in high quality schemes and with limited new quality supply, we expect prime rents to generally be upheld."​

  • Retail: Abu Dhabi saw the delivery of just 53,000 sq m of retail GLA in 2015, comprised mainly of non-mall retail space within mixed developments. Looking ahead, the supply of retail malls in Abu Dhabi is expected to pick up from 2018 including the delivery of Al Maryah Central and Reem Mall.   David Dudley commented: "Retail Rents remained stable and are expected to remain stable over the next 12 -18 months. While significant retail space is set to enter the market from 2018, the development pipeline has reduced and demand growth remains positive, particularly linked to hospitality growth. With greater competition, we expect the market to polarise with lower quality malls needing to be re-positioned. In the meantime, retail rents are expected to remain stable."​

  • Hotels: In Abu Dhabi, an additional 1,000 keys were delivered in 2015, increasing supply to 20,700 keys at year end. The decision by the Abu Dhabi Tourism and Culture Authority (ADTCA) to limit the number of new hotel licenses is expected to control hotel supply in Abu Dhabi over the next couple of years. An additional 4,900 keys are however scheduled for delivery between 2016 and 2017 in the Emirate. Major projects leading to increased tourism demand include the expansion of the airport and Etihad Airline, increased capture of stopover demand, the delivery of major new visitor attractions on Saadiyat Island and Yas Island, ongoing sports, entertainment and corporate events supported by global marketing initiatives. David Dudley commented: "The Hospitality market has continued to improve – as tourism growth outstrips supply growth. The recovery initially led to an improvement to occupancy rates, and now also ADRs given year-on-year growth in tourism arrivals. Medium term hospitality demand trends are highly positive as the government's various initiatives to grow tourism result in major increases to annual visitor arrivals."  ​

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.​

Abu Dhabi 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.

Source: JLL

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