Property & Asset Management is increasingly important in distinguishing between the ‘winners and the losers’ in the UAE real estate market in 2011 according to JLL’s recently released Top Trends for 2011. While the overall market is expected to move further in favor of tenants (with average prices and rentals declining in most sectors), selected stability will emerge for well located, well leased and well managed assets.
Excess supply is commonly regarded as the key challenge. While supply levels are indeed increasing in Abu Dhabi, the Dubai market has now passed through the peak in the construction cycle, with many projects delayed and at least 115 officially cancelled. New supply in 2011 will therefore be below the levels experienced in 2010 in most sectors of the Dubai market.
Other predictions for 2011 include:-
- The light industrial / logistics sector will be the strongest performing asset class, with continued demand from both occupiers and investors for high quality product.
- The Dubai hotel sector is currently the closest to the bottom of its market cycle, with stability in both occupancies and operating performance expected in 2011. With many new hotels opening in Dubai in recent years, there are now opportunities to reposition and redevelop older properties.
- Leasing activity is expected to increase in the office markets in both Dubai and Abu Dhabi in 2011 as tenants benefit from the availability of higher quality and more affordable space.
- While investment in real estate is expected to increase globally in 2011, transaction levels in the UAE are likely to remain subdued. There are certainly more cashed up investors seeking opportunities but the market remains characterized by a shortage of realistically priced investment grade stock.