Dubai’s commercial market proving attractive to regional and international investors

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  • Dubai Economic Department figures state that AED 22 billion (USD $5.9 billion) of foreign investment has been injected into the real estate sector in the first half of 2012
  • Transactions totaling AED 2 billion (USD $545 million) recorded over the traditionally quiet month of July
  • Improving financial results of local banks has enhanced accessibility to funding
  • Improved leasing structures are falling in line with those offered in mature markets

Dubai, UAE; 2 October 2012 Cluttons, the real estate specialist which has enjoyed a dedicated Middle Eastern presence since 1976, today announces its Q3 market report for Dubai’s commercial property investment market in 2012.  Increased investment activity and a modest level of positivity in the office market means that the outlook is one of cautious optimism.

Recent investment purchases made within the first half of 2012 have involved both GCC purchasers and international entities.  Recent Dubai Economic Department (DED) figures state that AED 22 billion (USD $5.9 billion) of foreign investment has been injected into the real estate sector in the first half of 2012 alone, with Indian, Pakistani, Iranian and Russian investors dominating the figures.

A surprising number of transactions were recorded during the normally quiet summer months this year, totaling AED 2 billion (USD $545 million).  Major commercial deals taking place in the DIFC, TECOM and Downtown areas are clear evidence that the Emirates is on the way back as a viable real estate investment option.  In addition to these fundamentals, improving financial results from the majority of local banks has led to enhanced accessibility of funding which has undoubtedly increased confidence and tempted risk adverse investors back to the market.

In the leasing market such a modest level of positive sentiment has stabilised rents, while occupier requirements seem to be slowly increasing.  At the top end of the market, office rents in the DIFC have remained steady at 250 AED per square foot per annumQ1/Q2 2012, the same figure for Q1/Q2 2012.  A similar picture is presented for Grade B space, with rents in TECOM remaining at AED 100 square foot per annum for the past year.

Cluttons Dubai Report on Dubai Property Market
Cluttons Dubai Report on Dubai

The overall picture is optimistic; Cluttons is noticing increased queries from start-up businesses, supported by recent figures published by Dubai Economic Department that suggested a 9% increase in new trade license applications during the month of July 2012.  Whilst many of these new enquiries require space of under 2,000 square feet (185 square metres), they are helping to reduce vacancy levels in some of the more recently built areas such as JLT, Business Bay and Dubai Silicon Oasis.  These areas particularly have been suffering from a general oversupply of stock, pushing the average vacancy rate for the market to 40%.

Positive signs in the Dubai commercial market can also be seen through the introduction of new lease structures. The typical lease terms which landlords are offering and agreeing to are becoming far more consistent with those offered in more developed markets including Europe and the US.

In the hospitality sector, Dubai’s ranking as the world’s eighth most attractive tourist destination by MasterCard’s Worldwide Index of Global Destination Cities has certainly boosted the market, which has been enjoying sustained occupancy levels and profitable room rates.  Security of income in this sector has attracted new landlords and operators alike to take advantage of Dubai’s tourist pull and visitor spend.

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