Dubai, United Arab Emirates, 17 October 2018: The UAE cabinet announced a new federal budget of AED 60.3 billion in September, paving the way for a significant increase in government spending that will in turn benefit the Dubai real estate market, JLL said in its Q3 report, the release of which was announced via a Press communiqué.

The proposed budget provides funding for a series of new policies, aimed at stimulating economic growth and investment in the non-oil dependent sectors in 2019, which will positively affect the real estate sector in the medium term, the report said.

One of the new policies shaping the real estate sector is the relaxation of regulatory requirements relating to free zones and the establishment of more ‘dual licensed’ projects where Free Zone and onshore licensed companies can co-exist, the report said. This is partially a response to the growing demand for flexible office space (available on leases of less than one year), an emerging global trend that will disrupt the office market in the future, the report further said.

Craig Plumb, Head of Research, JLL, MENA

Craig Plumb, Head of Research, JLL, MENA, said: “The implementation of new policies and the relaxation of regulatory restrictions, in line with the Vision 2021 goal of further diversifying the Dubai economy, will provide a boost to the real estate market in 2019. Earlier this year, UAE approved a new investment law that could allow 100% foreign ownership of companies in specific sectors of the economy to operate outside of free zones by the end of 2018. Once implemented, this law will boost Foreign Direct Investment (FDI) and increase demand from overseas businesses, particularly for projects outside of the existing Free Zones.”

Hotel performance remains under pressure, as occupancy levels and room rates have softened further in Q3, the report said. However, JLL’s Q3 report notes that Dubai welcomed 8.1 million visitors over the first 8 months of the year, with major source markets including Western Europe (21%), the GCC (19%) and South Asia (18%). Despite the softening in performance, Dubai remains one of the strongest performing hotel markets globally, ahead of other major global cities such as London, Tokyo and Sydney, the report added.

The report said the retail sector remains the most challenged sector of the Dubai market in the face of increased supply and the growth of online retailing. The report further said more malls are now offering leasing incentives and even ‘turnover only’ leases, to retain existing and attract new tenants. The report added that while the longer-term prospects for the retail sector remain positive, this sector is likely to decline further in the face of very high supply levels over the next 2 years.