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Q3 2015 saw limited change to real estate market indicators but increased signs of caution. The expected slowdown in domestic government spending has become more apparent this quarter, in response to lower oil revenues and reallocation of funds to regional priorities. This has impacted investor sentiment and transaction volumes and is expected to impact GDP and employment growth going forward. On the positive side, supply remains under control and the new real estate regulations are expected to further slow down supply growth.
While Residential Sales prices have remained stable, the decline in investor sentiment has impacted transaction volumes and this trend is set to continue. Residential Rents have remained stable – while demand has been relatively flat, supply remains in balance with minimal vacancies in high quality, well-located schemes.
Average Grade A Office Rents have remained stable this quarter although some rental growth has been recorded in those Grade A buildings with limited vacancies. Demand for office space remains suppressed given spending cuts within oil and gas companies and government entities. While we expect Grade A rents to be upheld, Grade B rentals may soften as further Grade B space enters the market over the next 12 months.
Retail Rents remained stable and are expected to remain so 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.
The Hospitality market continued to outperform compared to the same period in 2014. ADRs increased by 3% in YT August, while hotel occupancies also registered a marginal increase, reaching approximately 72%.
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13 October 2015