Cushman & Wakefield Core Dubai annual report 2023/2024
Residential Off-Plan Launches: Off-plan apartment launches are up by 78% year-on-year as developers capitalize on the positive market sentiment. Villa launch volumes ironically decreased by 31%
Dubai, UAE: According to Cushman & Wakefield Core’s Annual Report 2023/2024 report, “With continued upward momentum in transaction volumes and strong increases witnessed across all performance indicators over 2023, Dubai is firmly demonstrating its position as a global economic hub and investment destination.”
Prathyusha Gurrapu, Head of Research & Consulting at Cushman & Wakefield Core says “The underlying sentiment in the residential market is that of rising prices, rents, and project launches. While the pace has started to moderate over Q4 2023, we don’t see any signs of contractions in the market yet.”
RESIDENTIAL MARKET
Supply: While 39,4000 units were handed over in 2023, the highest since 2020, the city is gearing up for population growth in line with the 2040 Dubai Urban Master Plan. The resident population is expected to rise from 3.65 million to 5.8 million by 2040, requiring over 30,000 new units annually until then. The recently reported lowering of the golden visa requirements along with existing socio-economic demand drivers are expected to continue bolstering long-term demand.
Project Launches: Prathyusha says “The apartment market saw a 78% increase in new launches during 2023 compared to 2022. That’s a staggering 221 projects offering 53,500 apartment units. Due to relatively lower ticket sizes and higher development returns, the majority of developers are directing their focus towards the mainstream apartment market.”
Despite the growing demand for villas, developers are slower to respond to this surge. In 2023, the number of new villa project launches was significantly lower, with a decrease of 31% compared to 2022. As a result, the limited supply of new villas is expected to exert additional upward pressure on villa sales prices and rental rates.
Transaction Trends: 2023 continued to see an uptick in sales transactions with the highest-ever secondary and off-plan market transactions recorded both by volumes and values transacted. It is interesting to note that 2023 saw a 47% higher number of off-plan transactions compared to secondary market transactions. As there are very limited post-handover payment plans, these high off-plan transactions indicate a higher level of demand from investors.
Ultra-Prime Properties witnessed a massive surge with 1,422 residential properties sold above AED 20 million in Dubai in 2023 compared to 822 in 2022. Furthermore, 40 transactions concluded above the AED 100 Million in Dubai in 2023 compared to 24 transactions in 2022.
Prathyusha says, “With growing UHNI demand for luxury properties, particularly waterfront properties and branded residences, we foresee this segment to remain strong as global wealth continues to gravitate to Dubai.”
Sales Prices: City-wide villa sales prices have risen 22% year-on-year, while apartments are closely following with a 20% year-on-year increase.
Prathyusha says “Affordability is a growing concern for the low to mid-market segment. Although we don’t foresee the sharp rises witnessed in 2023 to continue in 2024, we believe the market will see rises at sustainable levels. With very limited post-handover payment plans now seen in the off-plan market, and the potential lowering of the interest rates later in 2024, these are expected to support the secondary sales market and help moderate sales price increases.”
Residential Rents: City-wide villa rents have risen 16% year-on-year, while apartments saw a sharper rise at 19% year-on-year. Rising rents continue to cause significant upheaval as tenants grapple with rental escalations. We are seeing tenants preferring to stay in existing units as rental increases during renewals are regulated by the RERA rental index. This is causing a growing divergence in the rental market with new rents significantly higher than renewed rents.
RESIDENTIAL MARKET FORECAST 2024
- Transaction volumes to continue witnessing a steady increase.
- Sales prices to witness a gradual, yet, continued rise in the range of 8-12% year-on-year.
- Rental rises are expected to continue in 2024, particularly for central locations in the range of 10-12%.
- The ultra-prime market to continue outperforming the market, with a rising number of branded residences and ultra-prime project launches catering to underlying demand
OFFICE MARKET
Robert Thomas, Head of Agency at Cushman & Wakefield Core says “Occupancy levels have edged upwards with city-wide occupancy now at 89% compared to 87% in 2022, with city-wide Grade A occupancy levels hovering at 92%.”
“The overarching theme in the office market is that of demand outstripping supply. We have seen a sharp rise in inquiries and lease registrations over 2023 compared to 2022 due to strong demand from both new market entrants and existing occupiers looking to expand. Unlike other global cities, most firms in Dubai are now completely back in the office or have employees work a greater number of days in the office in a hybrid model, we are witnessing a rise in office demand.”
Office Supply: Over 810,000 sq. ft. of office space was handed over in 2023 bringing the total Dubai office stock to 108 million sq. ft. Major office handovers in 2023 included Uptown Tower in Jumeirah Lake Towers, One Za’abeel in Za’abeel and Innovation Hub in DIFC. In 2024, we foresee over 1.65 million sq. ft. of gross leasing area to be handed over featuring developments such as Wasl Tower, Millenium Downtown (refurbished Crowne Plaza), Expo Phase 2, the next phases of Innovation Hub and Dubai CommerCity.
Robert says “Most of the upcoming office supply pipeline is already pre-leased, therefore offering limited availability upon delivery. Many single landlords (with a land portfolio) and freezones are looking to activate new office projects or upgrade existing office stock. However, as it would be at least a two-three-year construction cycle, we expect to have an office supply crunch in the near term, therefore creating further upward pressure on rents and occupancy levels.’’
Office Rents: The market’s robust demand for office space, coupled with high occupancy levels, has resulted in the city-wide office rent increasing by 21% year-on-year. The sharpest yearly rises were seen in Downtown Dubai at 45% followed by a 36% increase in Business Bay.
Intensified demand for flex space: There is a rising inclination among both global occupiers and local enterprises towards flexible office spaces. This preference stems from a desire for adaptability and the convenience of easily scaling up or down. These entities are willing to pay a premium for such flexibility to avoid operational costs and expedite occupational timelines. Most of the global and homegrown business centres in Grade A buildings are at near capacity and we are also witnessing growing demand from flex-space operators looking to open newer locations to cater to this surge.
Robert says “While there is a strong demand for office spaces in Dubai, we must acknowledge the global job losses in the tech and banking sectors. This could slow down international expansions and might result in some companies downsizing and putting secondary market office spaces back on the market in Dubai, albeit slightly easing the supply crunch.”
Landlords with aging office stock are compelled to explore refurbishment initiatives for underperforming assets, aiming to optimize rental returns and align with market trends. A notable trend is emerging where certain single landlords are embarking on comprehensive building-wide refurbishments to upgrade their facilities.
OFFICE MARKET FORECAST 2024
- Office demand to continue outstripping supply
- Office rents to increase in the range of 10-15% over 2024
- Occupancy levels to continue expecting upward pressures with Grade A office occupancy expected to be near 95%
- Developers and freezones are expected to initiate the next phases of office projects
- Re-purposing existing retail assets and upgrading older office stock to address rising demand
For further information or media queries, please contact:
Prathyusha Gurrapu, Director – Head of Research & Consulting, prathyusha.gurrapu@cushwake.ae
Fiona Johnston, Associate Director – Marketing, fiona.johnston@cushwake.ae
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more.
An independently owned and operated affiliate of Cushman & Wakefield, operating in the UAE since 2008. For additional information, visit www.cushwake.ae.
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© Press Release 2024