The commercial real estate market is recovering
Whilst the Dubai economy faced severe disruptions last year; it is clear from Q1 that the commercial real estate market is making a steady recovery. As Dubai eases its lockdown restrictions and we navigate our way out of the pandemic, there is increasing consumer confidence, with Q1 seeing investors come back into the commercial real estate market.
When it comes to office and retail spaces, the market was booming in the past quarter, which saw significant growth in transacted values and the number of transactions, with a 12% and 45% increase, respectively. However, if we also take into account hotel apartments and land data, the overall market actually showed signs of slowdown with a 4% drop in the total number of transactions.
Decline in demand for land and hotel apartments
Hotel apartment and land transactions saw a steep decline over the past three months. Hotel apartments had difficulties in attracting buyers due to the general uncertainty surrounding the tourism industry post COVID-19. The decline in land transactions is not surprising when you consider the steep drop in off-plan transactions and the fact that many off-plan projects have been put on hold. As such, we can expect that both the demand and value of land will continue to remain low in the short term.
Business is booming in Business Bay and JLT
The two most prominent areas for commercial office space were Business Bay and JLT, both of which saw continued growth in demand. CRC’s transactions increased in JLT by 60%, while Business Bay had a 50% increase. These two areas combined accounted for 82% of the total number of transactions in Q1, showing they are the two key areas for commercial office space investment. The popularity of these two areas can be attributed to their unbeatable location and their easy access to the city’s metro network and arterial roads.
The increase in demand for office spaces can also be down to the fact investors are returning to the commercial real estate sector. We saw the number of investors in the market up 19% since last quarter, with returning confidence in the market as the country begins to navigate through the other side of the Coronavirus pandemic.
The average size of offices leased increased in Q1
At the beginning of the lockdown, many companies made a knee jerk reaction, reduced the number of staff and decided to downsize their office space. However, from the start of Q1,, companies started hiring again, increasing the number of staff and deciding to return to bigger offices. With the market for offices currently at attractive prices, we can see companies securing bigger offices for longer contract terms in a bid to lock in these more affordable rates. As competition increases in Dubai’s business hubs, with new major commercial developments such as ICD Brookfield in DIFC, which has just recently opened its doors for tenants, we can expect prices to remain competitive.
For more insight into the Q1 2021 real estate market, then take a look at our full report.