UAE real estate market sentiments remained cautious in Q4, according to survey
Occupier demand deteriorated sharply in the industrial and retail sectors
Sentiment in the UAE’s real estate investment and occupier markets remained cautious in the fourth quarter of 2017, according to RICS latest global commercial property survey. According to the report, occupier demand in the UAE fell for a ninth consecutive quarter, with a marginal decline in office space but a steeper deterioration in the industrial and retail sectors. As demand fell, leasable space continued to diminish, as with did the incentive packages offered to tenants. Most respondents queried for the report forecast rents to drop by 2.7 percent over the course of the net year, with rents expected to fall across all areas of the market.
Despite the conditions, in Q4 the survey’s occupier sentiment index went from -36 to -49 in Q3, with the average three-year rental projections being comparatively more upbeat. Momentum in the investment market was found to have worsened, with the Investment Sentiment Index falling from -28 to -38. Investment enquiries deteriorating with a net balance of -33 percent, suggesting a drop in demand, particularly from foreign investors across the industrial segment. Of respondents, 53 percent said they believe the current cycle to be a downturn phase, while 35 percent said they believe it is approaching the bottom.
The report noted, however, that the performance of property in the UAE has been more resilient than its regional peers, largely because of its more diversified economy. Internationally, investors were found to continue to find the London market attractive, with about 60 percent of respondents saying they believe it to be in a downturn phase despite being seen as expensive on most valuation metrics. Other markets such as Berlin, Madrid and Amsterdam were found to be the most attractive for both investors and tenants.
India, China and Brazil also saw improvements in Q4, with cities such as Bengalaru, Mumbai, Beijing and Shanghai scoring high in the report’s forward looking indicators.
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