Tough market conditions continue to weigh on Dubai’s real estate market with affordability becoming a key theme across the office, residential, retail and hotel sectors according to JLL’s Q1 2018 Dubai Real Estate Market Overview Report.

For the office sector, tenants remain cost conscious and continue to seek smaller office units, while residential developers have offered smaller units at competitive prices in areas known for more affordable housing, such as Dubai South, Dubailand and Jumeirah Village Circle (JVC). “Dubai’s real estate market has adjusted to more negative market sentiment in the first quarter of 2018, resulting in developers focusing more on affordable options across all segments of real estate. With rents continuing to fall across the office and residential sectors, building owners and landlords are increasingly looking to incentivise in order to retain current tenants and have done so by setting more competitive prices and more attractive lease terms ,” said Craig Plumb, Head of Research, JLL MENA.

The retail market also continues to experience a downturn in performance with retail rents across the board declining in the first quarter of 2018. A number of retail brands have vacating underperforming stores and landlords are offering further incentives to retain existing tenants. F&B, which was previously regarded as the strongest sector of the market underpinning the performance of shopping malls, is also facing challenges.

For hotels, operators are expanding the price sensitive midscale segment to meet growing demand. While average daily rates continue to decline, JLL expects hotels in the higher end of the market will start to show signs of rate stabilisation.