Dubai outperformed most global cities as the government’s efficient measures to mitigate the impact of COVID-19, which coupled with major reforms in real estate pave the way for a stronger 2021.
Office Market
- Although flexibility around remote working will remain prevalent with hybrid models the largely accepted workplace strategy, the importance of the physical office is unlikely to be diminished as businesses will need common spaces to foster innovation, productivity, company culture and teamwork that are hard to sustain through remote working.
- We expect a second wave of relocations in 2021 when global corporates inevitably adjust their workplace strategies. Most of the demand for these relocations/ consolidations is expected in the Grade A market.
- Landlords, particularly of single-owned assets are hesitant to sharp rental reductions to minimize the impact on the overall portfolio value, however, they are providing a variety of incentives to attract and retain tenants as tenant retention continues to be the most important issue for landlords.
- As most new office demand is dominated by relocation or downsizing activity while sub-leasing activity also gathers pace, we foresee maintaining occupancy levels and retaining tenants be the main focus for commercial landlords
- Globally, technology and allied sectors are the new major landlords, superseding the BFSI and service industries. We are also seeing rising volumes of technology clients and take-up in Dubai.
- As most enquiry levels are for fitted/plug-and-play offices, we expect landlords to increasingly convert their shell and core assets to CAT A fit-out (raised floor and ceiling) or completely furnish to aid absorption.
- With some of the older stock underperforming, developers and landlords are looking at refurbishing office units or repurposing retail/mixed-use into office space to optimise asset classes and footprint.
- With nearly 67% of new supply coming in the Grade A segment (2018 - 2020), most of the large occupier activity is expected to be in this segment in the next few years.
- With the pandemic accelerating acceptance of online retail, retail logistics is a growing segment, and we expect more players expanding to improve their omnichannel offerings.
Residential Market
- Capital values and rents are expected to continue softening with apartment districts facing further headwinds while established villa districts that saw strong take-up over H2 2020 and currently have limited supply are expected to see price resilience.
- As the market remains price sensitive, with most landlords willing to negotiate to retain tenants, flexibility in lease and payment terms are expected to continue.
- Residential secondary sales transactions are expected to be steady as underlying demand is supported by lower capital values and demand drivers such as financial, visa and social reforms.
- While the market continues to see significant handovers and unabsorbed inventory with oversupply concerns persisting in the near term, new launch volumes were at the lowest level in 2020 compared to the last 8 years.
- We expect new launch volumes to further reduce in 2021 as developers re-strategize and focus on the absorption of existing inventory.
