Dubai, UAE
Total value of real estate projects planned or underway in the GCC currently stands at US$1.36 trillion, according to a report by CB Richard Ellis, a global real estate advisory.
Of this, Saudi Arabia accounted for 64.5 percent of this total, equating to around $877 billion worth of projects. This is followed by the UAE, where its $293 billion worth of projects accounts for 21.6 percent of the total are at various stages of development.
The gross domestic products (GDP) growth, however, is expected to decline in 2023 to 2.7 percent from 6.3 percent growth recorded last year, the report says.
“Both the hydrocarbon and non-hydrocarbon sectors have seen strong rates of recovery over the course of the last year, with economic growth in the GCC region noticeably outpacing the global average during 2022. Over this period, economic growth in GCC countries recorded an average growth rate of 6.3 percent,” it said. “As we move into 2023, GDP growth in GCC countries is expected to reach 2.7 percent.
Residential markets in the region will likely see somewhat fragmented performance in 2023, supply gluts in certain markets will drive down performance, whereas lack of supply in key business hubs such as Dubai and Riyadh is likely to mean these markets outperform.”
In 2022, the UAE was the only market to record price growth and transaction volume growth across all cities and sectors. In Dubai, whilst we do expect transaction volumes to soften year-on-year, we expect that prices will continue to increase, across both the apartment and villa segments of the market, albeit at a slower rate. In Abu Dhabi, we are forecasting growth in both the volume of transactions and the rate of price growth over the course of the coming year, it said.
Performance in the GCC’s office market was relatively upbeat over the course of 2022. In Bahrain, the prime and Grade A markets saw rates remain stable. Despite new developments scheduled to be delivered this year, CBRE anticipates the occupancy rate, which currently stands at 74 percent, ticking up and rental rates to remain stable. Occupier activity in Saudi Arabia will continue to be centred towards Riyadh, where the average occupancy rate sits at 99 percent.
“With a lack of existing supply and strong pre-leasing activity taking place in new projects which are not scheduled for delivery in the immediate future, we expect that rental rates will continue to increase in 2023. In the UAE, Abu Dhabi’s office market will start to see increased levels of activity, which, alongside constrained levels of new supply, will underpin further rental growth. In Dubai, the current occupancy rate stands at 88 percent, up from 78.8 percent a year earlier. With a limited amount of new quality supply scheduled to be delivered over the course of next year, we expect that rental rates will continue to increase in all segments of the market,” the report says.
Taimur Khan, Head of Research – MENA at CBRE in Dubai, comments: “GCC economies and real estate markets, on the whole, are expected to continue to see performance levels remain relatively strong over the coming year, despite the weaker global economic backdrop. In the region’s key office markets, Dubai and Riyadh, with available supply being constrained, we expect rental rates to continue to grow. In other markets, a combination of subdued demand and excess supply will mean rental growth is likely to remain anaemic. Residential markets in the region will likely see somewhat fragmented performance in 2023, supply gluts in certain markets will drive down performance, whereas lack of supply in key business hubs such as Dubai and Riyadh is likely to mean these markets will outperform.”
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