Average apartment lease rates in Dubai fell by 8% in 2011, compared to 17% in 2010, the study found. Much of the decline in apartment lease rates during the year was for studio units, which fell by 11% year on year. The smallest fall was the 5% recorded for three bedroom units.
By contrast, villas and townhouses performed ‘considerably better’ during the year, the report said. 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.
Overall, the year ended with mixed signals for Dubai’s property market, the report said. “Although pockets of stability and even growth were to be found these are still the exception rather than the rule. Oversupply issues remain prevalent with demand fundamentals being outpaced by the completion of new stock,” the report noted.
Looking ahead, CBRE predicts that Dubai’s residential sector will outperform the office market this year due to stronger demand fundamentals and solid population growth.
“Investor interest in residential property continues to increase, with concentration on established community projects that offer superior facilities and amenities,” the study said.
Developments with completed infrastructure and community facilities will again attract the majority of interest, particularly within the emirate’s more popular “lifestyle” projects, the study added.
Office market under pressure
With a vast development pipeline scheduled for completion over the next 12 months, the commercial property sector in Dubai will “remain under duress throughout 2012″, the study found.
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 said prime office rents have now remained unchanged for four straight quarters.
“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.”
“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.