(MENAFN - Khaleej Times) E rise in rents is despite sustained significant growth in office stock with over 1.Office rents in Dubai continue to surge in tandem with a strong rental growth in residential sector on the back of a buoyant economy and increasing business confidence in tandem with a strong rental growth in Residential sector global property advisor CBRE said on Wednesday.
Average prime Central Business District (CBD) rents went up three per cent quarter-on-quarter and 25 per cent year-on-year the second quarter 2014 Dubai MarketView by CBRE revealed.
Mat Green head of Research and Consultancy UAE CBRE Middle East said the average Dh1884 per square metre per annum. This is expected to increase further within the short term amidst strong economic growth and rising business confidence.
“The CBD market also continues to face a diminishing availability of good quality office accommodation specifically offices that are capable of accommodating large corporate space occupiers over contiguous floors. Occupancy rates within prime CBD offices have been rising steadily over the past 12 months with less than 16 per cent vacancy rate compared to an average of 40 per cent vacancy for all Dubai office stock” said the report.
The rise in rents is despite sustained significant growth in office stock with over 1.8 million square metres set to be delivered by the end of 2017 the report said.
“Secondary office locations continue to see an improving performance with average rents rising from Dh924/sqm/annum to Dh1148/sqm/annum in second quarter 2014. This reflects growth of 24 per cent in just one year with a five per cent rental growth recorded during the quarter” added Green.
With limited availability of good quality office accommodation in prime areas we can expect to see demand spillover into some secondary locations particularly for single owned properties in close proximity to transport links.
While there is a large pipeline of new office supply the majority of this space will be negatively impacted by its strata ownership title. During 2014 almost 0.5 million square metre is scheduled for completion with over 30 per cent of this total to be delivered in the Business Bay area said Green.
Concurrent with the office rent surge Dubai’s residential sector continues to experience strong demand from both occupation and transactional sources. However there has been a slowdown in the number of transactions for ready to move in properties said the report.
According to the Dubai Land Deparment the number of transactions dropped 10 per cent quarter on quarter and 18 per cent year on year with a total of 3545 real estate transactions completed during the second quarter. The value of real estate transactions has perhaps started to stabilise with second quarter sales exceeding a value of Dh7.7 billion with first quarter transactions valued at Dh7.6 billion. However the off-plan market remains buoyant further underlining concerns over speculation.
“Despite recent regulatory changes both rentals and sales prices continue to rise albeit at a marginally slower rate than was recorded during the previous quarter. The residential development pipeline is still increasing with a rising number of new projects being launched month by month. Whilst this pipeline is still far smaller than witnessed during the last cycle it is nonetheless growing quickly and is certainly something to monitor carefully with a danger that further down the line supply could again start to exceed demand fundamentals” said the CBRE report.
“During 2014 close to 17000 new units are expected to be completed with the majority of these set to be delivered in secondary locations such as Dubailand Jumeirah Village Circle and Silicon Oasis. Over the next four years roughly 65000 new units are penned for completion with 83 per cent of these apartments and villas and townhouses comprising the balance” commented Green.
The overall Dubai Residential Price Index is showing rental increases of almost 20 per cent over the last year with apartments registering an increase of 21 per cent while villa rentals have grown by almost 10 per cent noted the report.
“With sustained demand for both occupational and investment properties we anticipate that residential rental and sales growth will continue throughout 2014. However we expect growth levels to be lower than 2013 performance as affordability becomes a more influential driver of property moves” said Green. Real estate investment and advisory firm JLL in its recent report said although the residential sector saw prices and rents increase across most areas the rate of growth has started to slow from that seen earlier in the year. Average sale prices grew by six per cent in the second quarter down from 10 per cent in the previous quarter.
In the office sector while continued economic growth has improved sentiment and generated demand for commercial space the high level of both current vacancy and future supply continue to constrain the market JLL noted.