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HomeWorldDubai apartment rents fall 8% in 2011

Dubai apartment rents fall 8% in 2011

Dubai’s residential real estate market is set to outperform the office sector this year due to “stronger fundamentals” and “solid population growth”, CB Richard Ellis said on Sunday.

In a new report, it said 2011 ended with mixed signals for Dubai’s real estate market.

“Although pockets of stability and even growth were to be found these are still the exception rather than the rule,” the report said.

“Oversupply issues remain prevalent with demand fundamentals being outpaced by the completion of new stock,” it added.

CBRE said the average lease rates were dragged down by apartments which fell 2 percent in the fourth quarter of last year. However, villa rates remained unchanged.

“Investor interest in residential property continues to increase, with concentration on established community projects that offer superior facilities and amenities,” the report said.

Average apartment lease rates fell by 8 percent during 2011, compared to 17 percent in 2010, CBRE said, adding that much of the decline was for studio units.

“Villas and townhouses have significantly outperformed apartments during the year. A more limited supply of units and stronger demand fundamentals saw rents decline just 6 percent over the period, less than half of the fall registered during 2010,” the report added.

With a vast development pipeline scheduled for completion over the next 12 months, CB Richard Ellis said it expected the commercial property sector to “remain under duress throughout 2012”.

Around 750,000 sq m of new stock could enter the supply during the period, provided that construction delays are kept to a minimum, CBRE added.

“Lease rates in Dubai’s central business district are expected to remain quite stable during 2012,” the report said.

“However, the market will see landlord incentives increase as new supply is completed and competition to secure tenancies intensifies,” it added.

“The residential sector will continue to outperform offices as stronger demand fundamentals are sustained by solid population growth,” CBRE noted.

Regarding the office market, CBRE said prime office rents have now remained unchanged for four straight quarters.

“Occupiers continue to seek a flight to quality, which has resulted in prime CBD offices outperforming the wider market over the past year,” it said.

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