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Quick guide to UAE’s real estate sector

June 2016

June 8, 2016 | 16:00 | Dubai

The real estate sector in the UAE witnessed sluggish growth during the first half of 2016. Here are some highlights from the report UAE Real Estate, 2016 Mid-Year Market Review by Knight Frank

  • Office Market

The performance of the office market in Dubai and Abu Dhabi is likely to remain muted for the remainder of the year as corporates scale back on expansion plans under the current global economic conditions.

  • Industrial Market

According to the World Trade Organization (WTO), growth in the volume of global trade is expected to remain subdued in 2016 (2.8%). Further slowdown in the Chinese economy, financial market volatility and sharp exchange rate movements are expected to impact the performance of the sector in the short-to-medium term (WTO).

With the industrial and logistics sectors being a main pillar of Dubai’s non-oil economy, the sluggish performance of the global trade market is likely to reflect on the performance of the sector in the short-to-medium term. Consequently, rents are expected to remain stable as occupier demand softens. In Abu Dhabi, while demand has slowed significantly on the back of the decline in oil prices, the limited supply of quality industrial space is expected to keep the market stable.

  • Hospitality Market

Many of the challenges seen in 2015 such as a strong US dollar, lower visitor numbers from Russia & neighbouring CIS countries (which dropped 23% Y-o-Y in 2015 according to DTCM), and slower economic growth in China and the Eurozone are expected to continue throughout 2016, which will invariably impact demand levels – and in turn profitability – in the short term.

However in the medium-to-long run our outlook for the hospitality sector remains positive for both cities, and will be rooted in the delivery of major demand generators that will help drive tourism demand – particularly from the leisure segment. The expected delivery of the theme park complex, Bluewaters Island, the Opera District and major retail destinations in Dubai, along with Abu Dhabi’s commitment to developing entertainment and cultural districts of its own, will stimulate visitation and maintain the competitive positioning of both cities.

  • Retail Market

The retail market in Dubai & Abu Dhabi is expected to see slower growth levels over the second half of the year, as economic uncertainty and unfavorable currency exchange rates continue to impact both tourist and domestic spending.

  • Residential Market

Looking ahead, the residential market in the UAE is expected to soften over the second half of the year. While it’s difficult to predict when the next growth cycle will be, we expect the residential market to level out by the end of 2016 before seeing gradual recovery in 2017. On a segment split, we expect prime residential properties will continue to outperform the market average in the short-to-medium term. Further volatility in oil prices, the EU referendum (June 2016), US presidential elections (November 2016) and on-going geopolitical tensions are likely to impact the behaviour of currencies, investor sentiment, and demand for property.

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