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New government announcements to reduce the market fee imposed on businesses from 5% to 2.5% and to allow 100% foreign ownership outside of free zones could stimulate additional demand in the Dubai office market
This quarter, the Dubai Government has made a number of announcements designed to promote foreign investment and investor confidence, which is likely to boost demand in the office market in the medium term, says JLL's latest report.
Two key announcements have been made during Q2 as the government seeks to stimulate demand and support the office market. These include a reduction in the fee charged on businesses by the Dubai Municipality from 5% to 2.5%, and the relaxation of existing regulations to allow 100% foreign ownership in businesses located outside of free zones.
"These new government announcements should help improve market sentiment and have the potential to directly increase investment and office occupancy across the emirate. The potential surge in foreign investment, particularly from businesses operating in the non-oil sector, could ultimately lead to a boost in demand for quality commercial space,"' said Craig Plumb, Head of Research, JLL MENA.
"Although there were no office completions this quarter, the availability of space increased across the CBD over the past year, with around 10% of the current stock being vacant. This is favorable to tenants, providing them with an increased choice of potential premises in a market where demand for quality space remains high. Demand is likely to persist as a result of the relaxation of foreign ownership requirements"" he continued
The Government's strategy to attract foreign investment was further demonstrated by Dubai retaining its position as the most transparent real estate market in the region, according to JLL's recently released Global Real Estate Transparency Index for 2018.
The Dubai Land Department continues to focus on attracting more investment through increased transparency in line with a mission to establish Dubai as one of the world's premier real estate destinations.
"The increased transparency, coupled with new initiatives to attract further foreign investment paint a positive outlook for Dubai's real estate sector overall," he continued.
The recent announcement of 10 year residency visas for certain categories of staff is also likely to have a long term positive impact on the residential sector with instilled confidence amongst the expatriate population on their right to remain in the UAE boosting sales activity.
Although the retail market continues to face downward pressure, the longer-term outlook is positive, supported by the hospitality market, which is expected to receive an influx of visitors, particularly in 2020 / 2021 with the world Expo.
This quarter the hotel sector in Dubai was one of the few local markets to witness a stronger performance during Ramadan than the previous year. Typically, the Holy month of Ramadan sees a reduction in hotel night demand followed by a spike during the Eid holidays. Despite room rates and occupancies declining over the first 5 months of the year, compared to the same period in 2017, Dubai remaining one of the top performing hotel markets globally.
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