According to Cushman & Wakefield Core’s latest Dubai Annual Report 2021-2022, Dubai in 2021 saw robust recovery across all performance metrics of rents, capital values and transaction volumes with the consultancy forecasting this upward trajectory to continue in 2022, albeit at a slower pace.
Prathyusha Gurrapu, head of research and advisory at Cushman & Wakefield Core says: “With many demand drivers including forward-thinking and strategic government initiatives, the lowering of LTVs along with business resilience while efficiently managing the pandemic, have helped Dubai in reviving strong investment interest across sectors. This has created an upward pressure on capital values and rentals over 2021, particularly in the prime office and residential districts, with many witnessing the sharpest rises in the last ten years.”
The report highlights: “In line with Cushman & Wakefield Core’s previous forecasts, Dubai saw 37,000 residential units delivered in 2021. Only 16% (5,900 units) of these were villa deliveries while the rest of the 84% of handovers were apartment units. With the phasing of many projects due to the pandemic over the last two years, we expect a higher number of handovers this year with nearly 36,000 units conservatively estimated for 2022. However, further revisions are expected on supply forecasts as developers continue to calibrate to everchanging market conditions.”
Transaction volumes were consistently high over 2021, with the highest ever quarterly value of transactions recorded over Q4 2021. 2021 secondary sales transactions volumes were 98% higher than 2020 and 132% higher than 2019. The off-plan market, after witnessing an interim slump, has bounced back with a 52% increase from 2020 volumes, however, just 8% above 2019 levels. That said, recent successful off-plan project launches are expected to increase transaction activity over 2022.
Commenting on the report, Gurrapu says: “Villa prices and rents saw sharp rises as supply in centrally located and well-established villa communities becomes limited. The city-wide villa sales price average saw a 22% year-on-year increase, although values are 16% lower than the 2014 peak, demonstrating that values are still competitively priced and potentially have further room for growth.
Mirroring the soaring demand for villas across the city, the city-wide average villa rents were up by 21% year-on-year while average apartment rents saw a modest 3% increase.” She adds: “With COVID-19 variants causing many schools and offices to go back and forth with operating protocols, the preference for private, open and additional spaces will remain in the COVID era, further underpinning the preference for villas and larger units.”
Offering a 2022 forecast of the residential market in Dubai, the report highlights that transaction volumes will see a steady increase and sales transactions, in both the secondary and off-plan market, are expected to a steady uptick in 2022 as demand continues from local and international buyers.
Moreover, the sales prices will witness a gradual, yet, continued rise, particularly in prime villa and apartment districts, with most districts expected to near 2014 peak values.
Oversupply will remain a downside risk, with a high number of handovers expected in 2022, particularly in the sub-urban apartment districts.
In terms of office supply, a total of 1.29 million sq. ft. of total office space was delivered in 2021. Major deliveries include the first phase of the Deira Enrichment Project by Ithra and the first phase in the business cluster of Dubai CommerCity and the purpose-built headquarters for Visa. In 2022, over 1.34 million sq. ft. of office space is forecast including phases of large-scale projects such as the first phase of the office portfolio in District 2020 and Uptown Tower (Uptown 2020) in JLT.
Robert Thomas, head of agency at Cushman & Wakefield Core says: “After recent downsizing activity and limited first phase expansions, 2021 saw a surge in office market demand with significantly higher enquiries, further evidenced by a record number of trade licenses issued in both on-shore and free zones locations. The range of visa reforms, open business environment, relaxations in ownership regulations and digital disruptions caused by the pandemic are driving new office demand, particularly from technology and allied tech firms (fintech, cryptocurrency etc.) who are expanding rapidly. The adoption of the new workweek is expected to further draw global business demand into the UAE and position Dubai as a global talent magnet.”
This has led occupancy levels to improve across the board for the first time in the last four years, with 2021’s city-wide office occupancy now at 78%, a 2% increase over 2020.
Thomas adds: “Although COVID-19 variants are pushing more workplaces to continue working remotely or in a hybrid system, most firms are managing their workplace strategies in a more agile way and continue to prefer employees in offices. This has led most global occupiers keeping their existing footprint while renewing leases or relocating.”
The report states: “After six years of softening, office market rents are up in most of the Dubai office districts we track. Coming off their cyclic lows in 2020, the sharpest rise in year-on-year office rents were seen in JLT (23%), Business Bay (23%), Downtown Dubai (20%) and DIFC (20%).”
The report concludes: “Despite COVID-19 variants causing uncertainty, market sentiment is expected to remain positive over 2022. The UAE government’s continued focus on making the country the most preferred place for tourists, businesses, and residents due to its pioneering policies, economic and visa reforms, agile and safe management of the pandemic without impacting business continuity is expected to continue underpinning the real estate market and bolster demand across asset classes.”