Dubai’s residential sector will continue to outperform offices as stronger demand fundamentals are sustained by solid population growth, a new research by CBRE shows. The commercial office market in Dubai will remain under pressure in 2012 with several new projects that are scheduled for completion over the next 12 months further aggravating the supply-demand mismatch, the report said. Around 750,000sqm of new stock could enter the market during the period, provided that construction delays are kept to a minimum, the CBRE report said. “New supply will emanate predominantly from secondary and tertiary locations including Business Bay, Jumeirah Lakes Towers and Dubai Investment Park, which are already experiencing very low lease and occupancy rates,” it said. However, lease rates in the central business district are expected to remain quite stable during 2012. The market will see landlord incentives increase as new supply is completed and competition to secure tenancies intensifies. “Secondary and tertiary markets will see further elevation of vacancy rates and some modest declines in rents.” In the residential segment, developments with completed infrastructure and community facilities will again attract the majority of interest, particularly within the emirate’s more popular “lifestyle” projects. The report said Dubai’s real estate market showed mixed signals in 2011. “Although pockets of stability and even growth were to be found these are still the exception rather than the rule. Oversupply issues remain prevalent with demand fundamentals being outpaced by the completion of new stock,” it said. CBRE said the UAE remained on solid tracks in its economic recovery as the economy grew by around four per cent during 2011. This followed growth of 1.4 per cent in 2010 and the 1.6 per cent contraction in 2009. During 2012 the UAE is again expected to reach four per cent growth, with Dubai likely to post similar performance. “More life was evident within the emirate’s residential sector as increased activity over the quarter was highlighted in Dubai Land Department data. The total number of residential sales during the fourth quarter, 2011 reached 2,605 as compared to just 1,589 transactions in the third quarter. This represented a 64 per cent increase quarter on quarter. During the same period, around 300,000 square metres of residential accommodation was sold at an average rate of Dh9,500 per square metre. This represents a five per cent growth year-on-year.” In value terms, the overall increase in residential sector was less striking at just six per cent growth, with total transactions increased from Dh2.7 billion in the third quarter to Dh2.85 billion in fourth quarter. Compared to the fourth quarter 2010, the increased value of transactions was significant, rising 67 per cent from Dh1.7 billion to Dh2.85 billion. In 2011, Dubai’s residential market continued to show signs of increased stability, although apartments, which fell two per cent during the quarter, dragged down average lease rates. “However, villa rates remained unchanged reflecting the relative strength of that segment,” it said. “The two per cent fall in apartment rents was primarily attributed to continued deflationary pressures within secondary locations such as International City, Dubai Silicon Oasis and Dubailand Residences. The majority of other areas experienced little movement, although some prime locations posted modest growth.” Average apartment lease rates fell by eight per cent during 2011, compared to 17 per cent in 2010. Much of the decline during the year was actually for studio units, which fell by 11 per cent year on year. “The smallest fall was the five per cent recorded for three bedroom units. Lease rates in older residential districts remained unchanged during the quarter as the opening of the [Dubai Metro’s] Green Line helped to stabilise rents.”