Dubai apartment rents fall by up to 22% since April

Apartments rents in Dubai have fallen by as much as 22 percent since April, with even the most sought after locations seeing declines, Landmark Advisory said on Monday.

Its report on the Dubai market for June showed that lower limits for a one bedroom apartment on the Palm Jumeirah were six percent down on the previous quarter.

One bedroom properties in JLT have dropped by 10 percent while in lower quality areas such as International City, upper limits for both studios and one-bed apartments decreased on average by 22 percent.

Well established areas with a limited supply pipeline are also experiencing additional rent declines, Landmark added.

Downtown Dubai has seen further drops in rent due to continued supply entering the market in neighbouring areas, like Business Bay and Sheikh Zayed Road, its report added.

“While these areas are not of comparable quality to Downtown Dubai, the impact on this increased supply is evident, lower limits for two beds in Downtown Dubai are falling five percent, at the same time that lower limits in Business Bay and Sheikh Zayed Road have fallen by 12 and 6 percent respectively since the beginning of May,” said Jesse Downs, director of Research & Advisory Services.

“Unlike the trends in April 2010, where the rental declines were primarily restricted to lower and medium quality buildings, high quality buildings in good locations are also seeing rental drops,” she added.

“While the falls are still marginal when compared to the drops in lower quality buildings, this is still a significant trend.”

According to Landmark's June guide, villa lease ranges have been much more stable then apartment rates.

However, some areas are still experiencing declines with Arabian Ranches, Victory Heights, Jumeirah Islands, The Springs, Dubai Silicon Oasis, sections of the Lakes and parts of Palm Jumeirah all seeing lower limit declines.

Downs added: “While some villa rents did fall, they did not fall in every area and rents for certain high quality villas have remained stable. Since this segment is particularly sensitive to demand fluctuations, rents for specific high end villa developments may experience short term fluctuations.”

According to Downs, the biggest problem facing the market is the impending supply pipeline.

“Tenants are increasingly seeking more value for their rental dirham and are able to leverage alternative options to negotiate very attractive deals. This is pushing up bid-ask spreads and illustrates that landlords are conceding in negotiations with ever more discerning and value-seeking tenants.

"More significantly, this is a trend now observed in high quality units in prestigious locations, which is a segment that has experienced relatively minimal volatility in late 2009 and the first quarter of 2010 due to relocation trends.”

In terms of commercial units, Landmark said rents have declined since April and were expected to fall further.

Downs said: “The commercial market is witnessing a prolonged period of oversupply, and with new developments in Business Bay, and JLT expected for completion in 2010 and beyond, lease rates are expected to decline further across Dubai.”

In terms of specific areas, DIFC lease rates lower limit has decreased by 17 percent, commercial units in Business Bay have decreased six percent and Dubai Silicon Oasis has decreased 20 percent, she said.