The Dubai government's recent business-friendly decisions will help to boost demand for office space over the medium term, according to property consultancy JLL.
Among the two key announcements made in the second quarter 2018 include a reduction in Dubai Municipality fee charged on businesses from 5 percent to 2.5 percent, and the relaxation of existing regulations to allow 100 percent foreign ownership in businesses located outside of free zones.
“These new government announcements should help improve market sentiment and have the potential to directly increase investment and office occupancy across the emirate.
The potential surge in foreign investment, particularly from businesses operating in the non-oil sector, could ultimately lead to a boost in demand for quality commercial space,” said Craig Plumb, head of research, JLL MENA.
“Although there were no office completions this quarter, the availability of space increased across the CBD over the past year, with around 10 percent of the current stock being vacant.
This is favorable to tenants, providing them with an increased choice of potential premises in a market where demand for quality space remains high.
Demand is likely to persist as a result of the relaxation of foreign ownership requirements," he added.
Office supply remained stable at 8.84 million square meters of gross leasable area (GLA) in Q2 2018.
Currently, more than 240,000 square meters of GLA is under construction and due for completion by year-end.
Meanwhile, the Dubai government’s strategy to attract foreign investment was further demonstrated by the emirate retaining its position as the most transparent real estate market in the region, JLL said in its recently released "Global Real Estate Transparency Index for 2018."
“The increased transparency, coupled with new initiatives to attract further foreign investment paint a positive outlook for Dubai’s real estate sector overall,” Plumb noted.
The consultancy also believes that the recent announcement of 10-year residency visas for certain categories of staff is likely to have a long-term positive impact on the residential sector.
Nearly 7,000 new residential units entered the market in the second quarter, pushing prices and rents down by 1 percent.
The consultancy expects 50,000 and 36,000 units to enter the market in 2019 and 2020, respectively.
Although the retail market continues to face downward pressure, the longer-term outlook remains positive, supported by the hospitality market that is expected to receive an influx of visitors, particularly in 2020 and 2021 with the Dubai Expo 2020.
The hotel sector in Dubai was one of the few local markets to witness a stronger performance during Ramadan than the previous year.
However, average daily rate (ADR) and revenue per available room (RevPAR) fell 4 percent and 8 percent to $198 and $159, respectively, in year-to-May compared to the same period in 2017, the consultancy added.
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