2011 ended with mixed signals for the sector but it is still stronger than the office property market, according to the latest report from CBRE.
‘Oversupply issues remain prevalent with demand fundamentals being outpaced by the completion of new stock,’ the CBRE report said.
It pointed out that average lease rates have been dragged down by apartments which fell 2% 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% during 2011, compared to 17% 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% 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, CBRE said it expects the commercial property sector to ‘remain under duress throughout 2012’.
Around 750,000 square meters 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. However, the market will see landlord incentives increase as new supply is completed and competition to secure tenancies intensifies,’ the report explained.
‘The residential sector will continue to outperform offices as stronger demand fundamentals are sustained by solid population growth,’ it added.
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 concluded.
