Friday, September 16, 2011

New supplies continue to add pressure on Dubai realty market

With new supplies continuing to hit the market, the real estate sector in Dubai will continue to be under pressure, states the leading commercial real estate advisory firm, CB Richard Ellis (CBRE).

The latest CBRE report mentioned that prime locations with well-developed infrastructure and community amenities will continue to draw investors and tenants alike, and will continue to outperform other markets during the rest of the year.

The commercial office market will continue to reel under pressure, although better stability will be witnessed in the second quarter of the year. Rentals in the prime business locations including the CBD area were largely unaltered during the quarter, despite having fallen 18percent year-on-year, the report pointed out.

The CBRE report also observed that the current lease rates are applicable to office towers in the CBD, but, the lease rates at Dubai International Financial Centre are in the range Dh.110 to Dh.180 per square feet per annum, thereby reflecting lower levels than those that prevailed in 2005.

The privately owned buildings in DIFC have begun to feel the pinch of new supplies, as the rents for strata office range from Dh.160 to Dh.200 per square foot, marking 30 percent decrease in the past one year.

According to CBRE, weak outlook for global economy and the current regional unrest have led to further constraints on the capital expenditure spend, thereby delaying the decision making process for corporate occupiers.

Last month, CBRE reported that it anticipates a quite real estate market in Ajman, Sharjah and Ras Al Khaimah for second half of the year, with new supplies likely to increase vacancy levels in residential sector, marking further decline in rental rates.

The office market at Sharjah, Ajman and RAK will feel the pressure for rest of the year, with new office supply, existing vacant spaces, and growing competition from landlords further exacerbating lease rates.

Jones Lang LaSalle (JLL), leading real estate consultancy company in its report, mentioned that office rents and occupancy levels in Dubai stabilized during second quarter. However, this is only temporary, as anticipated supply deliveries will apply downward pressure in the short-term.

During 2011 alone, nearly 600,000 square meters of new space is likely to be added into the current office stock of 5.6mn square meters. Within next three years, office supply will grow by more than 30 percent, bringing about a tenant-friendly market in the coming years, JLL said.

According to JLL, in Dubai, housing prices are already 60percent off their peak levels, and they are likely to drop by another 10percent before stabilizing.

By the end of 2011, real estate market will witness an additional 18,000 homes being added up to the already oversupplied market of the emirate, thereby pushing prices further down. Nearly 2000 new homes have been completed in Dubai during second quarter, with another 18000 likely to be ready by the fourth quarter, bringing total residential stock in the current market to 32,000, said the JLL report.

1 comment:

virtual office malaysia said...

Additional supply will only jeopardize the current demands. They need to regulate the construction as well.