Dubai office rents collapse 50% in 9 months

Thursday, 30 July 2009 12:16 AM

RENTS COLLAPSE: Dubai office market sees 50% retreat in 9 months. (Getty Images)

Dubai office rents have collapsed 50 percent in the last nine months as business activity fell, with residential rates also tumbling 40 percent, a new report said on Thursday.

Further drops in commercial and residential rents are likely as Dubai’s property market faces a three to six month period of continued negative growth, CB Richard Ellis (CBRE) said in its quarterly UAE Property Insight report.

Abu Dhabi also saw office rents fall 30 to 40 percent in the last nine months.

But the global property consultancy said price drops are slowing and predicted the market could bottom out by the end of the year.

Office stock rose 22 percent year-on-year to the end of June helping push rents down in secondary locations like Al Barsha from AED3,230m² in Q3 2008 to 1,615m² - a 50 percent drop.

Commercial property supply continued to outstrip demand. Occupiers are now focusing on smaller sized units ranging from 95-230²m, compared to 400m² before the downturn.

Prime rents, however, mainly in DIFC (Dubai International Financial Centre), were stable in the first half of 2009, CBRE said.

High levels of office space will hit the market this year in Business Bay and TECOM, the report added.

CBRE said the expatriate workforce exodus had caused residential rents to plunge as well, with vacant apartments emerging in the older districts of Dubai such as Deira and Karama.

Newer residential areas of non-freehold locations like Al Barsha were the worst hit, it said, with a one bedroom apartment available to lease for AED60,000, down from a high of AED100,000 in Q2 2008 - a 40 percent decline. Lease and occupancy rates would come under pressure in new residential developments of Dubai Silicon Oasis and the International Media Production Zone, the report added.

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Posted by: Property Guru Thursday, 6 August 2009 4:46 PM[UAE] - UAE

Due to unexpected flow of money in real estate, Dubai (and probably other countries too) started to believe that this is for lifetime and it is going to be like this for ever. The sense of justification and balanced approach were shelved like useless discussions. In this process, Dubai became out priced and uncompetitive to star and run a business. Unfriendly free zone policies of Dubai free zones are also sending more business for RAK and other sensible free zones. It should be seen when the authorities wake up to stay competitive and allow reasonalbe growth for individuals, businesses and in the end the whole country.

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Posted by: mart Saturday, 1 August 2009 4:06 PM[UAE]

in dxb policy makers do not consider 'real economy' workers (plumbers, electricians, barbers etc) as important workers. these are not considered 'professionals'. as in other economies. these are needed for a balanced ecnonomy

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Posted by: Tillerman Friday, 31 July 2009 8:25 AM[UAE] - Canada

In response to what Khaled wrote: I stopped counting the number of stories similar to yours. ALL of my friends and/or business associates, (with LLC companies, or changed from FZ to something else) had had some form of financial grief or difficulty from their local sponsors. Some were in the extreme situations like yours, basically DEMANDING a payoff "or else..." If i recall, aren't these tactics similar to racketeering? you know... the protection racket, or extortion?

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Posted by: Jonathan Thursday, 30 July 2009 2:37 PM[UAE]

Either landords and FZ areas are plain stupid or in denial. They have never known times to be so harsh and as such, have no idea to deal with it. The current prices need to come down or will force business to close having a direct impact on the economy. Is there anyone out there in a senior govt postion aware of this let alone doing anything about it or is it going to be a typical knee jerk reaction??

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Posted by: khalid Thursday, 30 July 2009 12:27 PM[UAE] - UK

As a ex expat who has returned back to the UK I would urge anyone looking to move out of a freezone to think very carefully in their selection of a "local partner" as is required by law. I had a business which thankfully i sold just as the market was starting to collapse, the problem for me was our local partner decided that somehow he should be paid off (basically trying to blackmail us ) BEFORE he would sign for our company to be transferred. This type of greed is common place and getting trumped up charges to releive you of your business & assets is also a favourite for the lazy good for nothing leeches. Forewarned is to be be forearmed. Good luck to all.

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