Funds for investment in the UAE commercial property market are beginning to rise with capital values expectations turning positive for the coming quarter - first time since 2008, says the Royal Institution of Chartered Surveyors (Rics).
As per the second quarter 2012 report by the UK-based institution, rents will continue to decline at a slower pace since 2008 due to new supply coming on to the office market, but transaction numbers are set to increase in the third quarter.
Although many property experts believe continued supply of commercial space will hold off recovery, Simon Rubinsohn, chief economist, Rics, believes the “torrid” period for the commercial property sector may be over.
“It is encouraging that there are now some tentative signs of a turn in the real estate market in the UAE. At the moment, this is more visible in the investment market and it will take some take some time to work off the excess space that has built up in recent years,” Rubinsohn said.
“As a result, it may be premature to envisage any upturn in rent levels but after a torrid period, the indications are that that they are at least now close to stabilising.”
According to Rics report, purchaser enquiries, on the investment side, have risen for the second consecutive quarter and transactions are forecast to increase in the coming months. Occupier demand, led by an active retail sector, continued its rise, though at a slightly slower pace in the second quarter, while expectations for capital values will show a modest increase for the first time since 2008 in the third quarter.
According to the survey, 16 per cent more respondents indicated that money available for investment in real estate increased during the second quarter of the year.
Jones Lang LaSalle said in July prime buildings were witnessing stable rental levels, while secondary locations were expected to see further rental decline in the second half of 2012.
It expects an additional 640,000 square metres of office supply to enter the market in the second half if all the projects are delivered without delays. Total office stock stood at 6.1 million square metres at the end of second quarter with only 58,000 square metre being delivered in Q2.
Vacancies have been high in secondary locations and as reported by us one can rent an office space in Jumeirah Lakes Towers for Dh25 per square feet per annum.
Stress signs in Europe
Globally, following on from strong first quarter results, Rics said the real estate market in North America and Canada remained buoyant in both occupier and investor markets despite the global economic slowdown. China and Hong Kong appear to have relatively resilient occupier markets for the time being.
However, their survey shows a generally weaker picture across Europe, with signs of stress spreading from the periphery to other markets. Greece, Spain, Portugal, France and Italy in particular showed signs of distress during this quarter of the year, with both sentiment and activity levels suffering on the back of elevated uncertainty.