Average apartment rents in Dubai rose 17 per cent in 2012 compared to last year, outshining the villa market, which saw an increase of 14 per cent, according to CB Richard Ellis (CBRE).

The consultancy expects the residential sector to continue its upward trend for sales and leasing rates, but is unlikely to match the 2012 performance.

“Residential rental rates increased by 16 per cent during 2012, with average apartment lease rates rising 17 per cent year-on-year and eight per cent quarter-on-quarter,” the global real estate consultant said in its fourth quarter report on the Dubai property market This is the first time in the past few years that apartment rents rose more than the villa rents.

“After several years of sustained declines, renewed confidence has returned to the sector, driven predominantly by increasing activity from cash investors. Dubai continues to dominate the region as the major investment destination with its safe haven status firmly cemented,” the report pointed out.

CBRE expects fresh supply of nearly 36,000 new residential units in the next three years with the majority of upcoming supply is expected from secondary locations in Motor City, Dubai Sports City, Liwan and Dubailand Residences.

Average office rents fell by four per cent last year as number of tenants relocated from older properties to newer, better quality buildings.

Although some offices in prime locations managed to increase their headline rents, Business Bay and Dubai Silicon Oasis continued to suffer from high vacancy rates.

“Strata title office buildings area still considered unattractive by most large occupiers and corporate tenants due to the complexities of multiple ownership across the property and the resulting inefficiencies this creates,” CBRE added.