Continuing from the previous quarter, average sales prices and rents softened across most communities in Dubai in the third quarter of 2019, the latest Cavendish Maxwell UAE Property Market Report says.
The average apartment prices declined by 16.5% over the 12-month period from Q3 2018 to Q3 2019 while the average villa/townhouse prices declined 15% during the period. Rental declines for apartments in Dubai averaged 15%, whilst villas/ townhouses registered a 12% fall during Q3 2018 to Q3 2019.
Price declines in Abu Dhabi were slightly less steep than Dubai, averaging 15% for apartments and 12.7% for villas/townhouses from Q3 2018 to Q3 2019. The average annual rental decline for both apartments and villas/townhouses was 13.7% for the same period. The Northern Emirates continue to be impacted by falling rentals and sales prices in Dubai and Abu Dhabi. Supply remains the primary driver for price declines with developers attempting to entice buyers with attractive payment plans.
Office rents continued their decline into the third quarter with landlords settling on lower effective rates and providing incentives. In Q3 2019, businesses have continued to restructure their operations and limit exposure to real estate by consolidating multiple offices spaces into one. The office market in the capital saw rents decline 2-3% on a quarterly basis on muted interest from the oil and gas sector which is one of the bigger tenants. Due to Dubai’s oversupply and rental climate, rents in the Northern Emirates have also been under pressure.
In the industrial segment, landlords are having to align price points with occupier budgets as supply continues to outweigh demand. As a result, an increasing number of transactions continued, despite vacancy levels still rising. In Abu Dhabi, the Khalifa Industrial Zone Abu Dhabi (KIZAD) has waived charges for over 75% of its services whilst lowering fees for many of the other services. Warehouse lease rates in Ajman and Ras Al Khaimah ranged between AED 15 and 25 per sq ft, proving to be competitive alternatives to Sharjah where rates were slightly higher in the range of AED 15 to 30 per sq ft.
Extending the trend of the previous quarter, occupancy and rents continued to fall in most locations and across retail categories in Dubai. Retail landlords are prepared to incentivise new entrants with service charge waivers, revenue share agreements and capital expenditure contributions if they believe that these measures would lead to longer lease terms from credit-worthy tenants. Abu Dhabi saw the opening of the extension of The Galleria Al Maryah Island which had over 400,000 people visit in the first few days post the launch. Recent deals by developers suggest confidence in the retail sector of Abu Dhabi.
The rise of the sharing economy and an increasing proportion of millennials and Gen Z in the consumer mix has seen higher demand for short-term rental accommodation and holiday homes. In Dubai, hotel occupancy declined 1.9% in January-August 2019 versus the same period a year ago, with the decline most evident in the luxury sector. On the other hand, occupancy rates in hotels and resorts across Abu Dhabi showed a marginal increase in January-August 2019 versus a year ago. Occupancy, Average Daily Rates (ADRs) and Revenue Per Available Room (RevPAR) for hotels in the Northern Emirates of Ras Al Khaimah and Fujairah were lower in January-August 2019 versus the year ago period.
Also published on Medium.