31 March 2017

Dubai: Commercial Intention

Since the inception of freehold in 2002 and the expansion of free-zone areas the supply in the commercial real estate space has risen by more than 650%; from 1.3 Million to 9.6 Million Square Meter (in monitored areas). Whilst this growth rate is expected to moderate, the absolute numbers are expected to ratchet higher at a similar trajectory with the development of new business districts such as Dubai South.

A realization of the supply analysis in the commercial segment reveals that the completion rate in 2015 and 2016 has been below 50%, a similar trend is also witnessed in the residential segment. In 2014, the realized supply exceeded what was estimated by analysts, indicating yet again the flaw in analyst estimates (that did not account for the backlog of projects coming to completion). This is a trend that is expected to continue in the years ahead.

In 2002, 94% of the commercial supply in monitored areas were under the DED jurisdiction. However, by the end of 2016 both jurisdictions contribute equally to the supply.

An analysis of the upcoming supply by jurisdiction reveals that 83% is allocated towards the DED jurisdiction and the balance towards free zones. However, we expect this ratio to shift towards new free zones as new developments are in the pipeline.

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