Boston, MA -- (SBWIRE) -- 11/20/2013 -- Sentiment towards the real estate market across the UAE has been improving significantly over recent quarters, with the consensus being that 2013 will mark a turnaround in a sector previously blighted by oversupply, instability and the hangover of a burst property bubble. Economic activity across the UAE is likely to remain relatively robust as consumption and investment patterns are holding up well in 2013. This economic growth will strengthen both property fundamentals and capital markets in the UAE, resulting in a more favourable outlook for tenant retentions, rental growth, development activity, financing and asset values.

Nevertheless, the UAE's various real estate sectors are developing in different directions and at varying rates, with Dubai outperforming both its Emirati and regional peers. While undergoing improvements, the commercial market in general continues to suffer from oversupply and is forecast to undergo limited growth in the short term. However, BMI believes the market reached its nadir in 2012 and that positive sentiment growing around the sector (as shown by our data) will see its first few shoots rise above the surface in 2013, providing economic fundamentals remain on course. The troubles in the office sector will be the hardest to shake.

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With a focus on the three principal emirates of Dubai, Abu Dhabi and Sharjah, the report covers market performance in terms of rental rates and yields. Examining the commercial office, retail, industrial and construction segments in the context of an increasingly positive macroeconomic climate, we believe 2013 will see the tide turning on a market that has spent the last few years suffering from over-supply and the legacy of the property bubble.

Key Points

- Deleveraging will remain a prominent theme well into 2013, as corporations continue to focus on repairing their balance sheets. This will limit activity in the non-hydrocarbon economy.
- In light of improving indicators in Q113, we are maintaining our 2013 construction industry real growth forecast of 4.8% year-on-year (y-o-y). Despite a significant revision of official data by the UAE authorities, in which they revised growth down in 2011 and have shown a rate of just 0.1% y-o-y in 2012, we believe the market is showing good signs of growth in 2013. We have, however, revised down our long-term growth outlook for the market, which now stands at 4.1% between 2013 and 2022, in light of our belief that the recovery is on track, but that fears over a repeat scenario of white elephant infrastructure projects and a property bubble will keep growth subdued.

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