The UAE commercial sector is stabilising as demand from occupiers topped neared a four-year high, according to a new report.
The Royal Institution of Chartered Surveyors (Rics), in its third quarter UAE commercial property survey, said: “There was a further gradual recovery in real estate sentiment in the UAE during the third quarter, as occupier and investment indicators improved on the more positive mood seen in the second quarter. Indeed, strong demand for both office and retail space has seen the headline net balance rise to the highest reading since 2008.”
Although the UK-based institute expects further rise in available space despite a relative oversupply of office space, rental levels are expected to remain unchanged.
On the investment side, purchaser enquiries rose once more across all sectors and expectations for future transaction activity picked up smartly.
Anecdotal evidence suggests the country is benefiting from its safe haven status in the region and a subsequent influx of capital is being directed into the real estate sector.
“With demand high and finance available, it isn’t surprising to see capital value expectations rally,” the report said.
Dwindling supply of assets in distress was one of the reasons for the optimism about future values.
“Expected supply of foreclosed property largely stabilised in the third quarter, after rising for the past three years. Alongside this, demand for distressed real estate remains high and this is likely to be supporting values,” Rics stated.
Jones Lang LaSalle, in its Global Market Perspective Fourth Quarter 2012 report, has already emphasized that the Dubai office market will become neutral (balanced) in 2014 and 2015 though 2013 still remains tenant-favorable.
As per its global office market conditions matrix (2013-2015), Washington DC, Brussels, Frankfurt, Madrid, Stockholm will join Dubai as tenant-favorable markets next year.
The matrix puts New York, San Francisco, Toronto, London West End, Moscow and Beijing as landlord favorable markets, while Chicago, Los Angeles, Mexico City, Sao Paulo, Paris, Hong Kong, Mumbai, Tokyo will hold a neutral status.
“While the overall office market continues to be tenant-favorable in Dubai, demand is still concentrated on just a few buildings and locations, and the range of prime buildings in single ownership is more restricted than the overall vacancy figures would suggest,” JLL said.
The global property consultants estimate around 460,000 square metres of office space to have been delivered over the first nine months 0f 2012 with additional 335,000 square metres likely to enter by year-end. The current office stock in Dubai stands at 6.9 square metres.
Citi, last week, emphasised that Dubai’s real estate market recovery was in sync with the wider economic upturn and strong economic fundamentals of the emirate.