Dubai rents set to fall further across all sectors in 2010

Monday, 25 January 2010 6:54 AM

Real estate rents and prices in Dubai's residential, office and retail sectors will continue to decline in 2010 while vacancies will rise, according to a new report published on Monday.

Jones Lang LaSalle MENA’s Dubai Real Estate Market Overview said the property market in the emirate would continue to become more favourable for tenants.

"This trend is likely to continue into 2010 with increased vacancies and a continued decline in average prices and rentals across the market," the report said. It added that 2010 was likely to be characterised as a year of "selective stability".

"While average vacancies are expected to increase and average prices to fall, this will not be experienced uniformly across all projects or locations, with a flight to quality resulting in an increasingly two tier market emerging during 2010 in which better quality projects and locations will benefit from selective stability," JLL's report said. On Dubai's residential market, Blair Hagkull, managing director of JLL MENA, said: “Prices seem to have stabilised over recent months, despite the existing over-supply situation. Stabilisation of transactional volumes is another positive indicator of investor confidence but the lack of housing finance remains a major challenge in Dubai."

With an additional 24,000 units expected to be completed in 2010 and 25,000 units in 2011, there may be an emerging opportunity for both investors and financers in the Dubai residential market as it has already seen a significant level of pricing adjustment in 2009, he added.

Hagkull said vacancy rates in the Dubai office market were likely to increase from their current level of around 33 percent during 2010.

“The tenant is becoming the ultimate winner as the office market is going through a significant adjustment with more vacancies and cheaper rents on offer. This scenario is encouraging for businesses as it offers multiple options for expansion and relocation as Dubai becomes more competitive office location both locally and regionally," he said.

Dubai retail sector would also see a shift in favour of tenants in 2010, he said, adding that average rentals have declined by around 29 percent from Q4 2008 to Q4 2009 and by 13 percent from Q3 2009 to Q4 2009 on the back of a 15-20 percent decline in retail sales in 2009.

Hagkull said: “This is an interesting time as the dynamics of the Dubai retail market continues to swing in favour of tenants due to falling rents and increased vacancies in some centres.

"In spite of the cut back in future supply levels, we expect to see an increase in shorter leases, break clauses and rent free periods as we go through this tectonic shift in the market. There will be more and more incentives for tenants due to the shift in power from landlords to tenants."

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Posted by: Thakur Wednesday, 27 January 2010 1:50 PM[UAE] - UAE

rents will not fall in the well established/well settled community where there are all facilities like schools/supermarkets in close area, and good security too. Now it will be only good areas like any other mature real esate markets, people will prefer to stay in good locations in those locations rent will be same or increase but not fall

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Posted by: Ananth Tuesday, 26 January 2010 6:43 PM[UAE] - UAE

yes this augures well for both the future of Dubai as well for the people who loves this country.it is not the greed of a few real estates agents or landowners which should decide the fate of this country which has invested heavily on infrasturcture and let those guys suffers for their misdeamenour and greed.Dubai need to grow in terms of population,quality of people and business oppertunities.Let some of the real estate dealers,bankers or greedy middle men not decide its future.Similar to what US President has done by bringing reforms in banking sector and banning hedging and equity trading by bankers ,Dubai should also bring restrictions and accountability on bankers who brought similar situation in Dubai.I remeber almost an year back some of the leading banks like Mashreq,Dubai islamic bank and First Gulf banks were behaving irresponsibly and issued credit card and personal loans with out verifying the credit worthiness of customers.Many of the credit card holders manipulated salary certificate at the bank excecutives advice and usurped more than 70 to 80 % of their income.Now all those bank executives or those customers have left Dubai and the bank is now victimising the honest customers by padding all costs and harrasing them to pay or face legal consequences.Dubai need a stringent law to deal with such rogue banks and people who try to make a mockery of the law.Even the RERA or authorities should not interfere with the rent as let the supply demand equation decide the rent factor and no landlord should be allowed to increase rent for next 3 yrs till stability returns .

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Posted by: Simple Simon Tuesday, 26 January 2010 2:39 PM[UAE]

Speaking from experience I negotiated a 22 percent reduction in my rent in Jum Islands. The rent now being paid is some 50% down on rental values from 2007/8. Begin your negotiations early with the Landlord. Just remember, it costs them money to get a new tenant as well so hold out and dont be bullied. Get firm prices for surrounding areas by visiting available places and talking with the agent/landlord and then weigh up your options. use your window of opportunity to get some savings while the market is on the side of the tenant. Dont be afraid to move either. it is an inconvenience, yes, but for the right savings, totally worthwhile. would you rather give yourself or your kids something special with rent savings, keep it with the landlord that has fleeced you over the past 4 or 5 years.

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Posted by: Property Guru Tuesday, 26 January 2010 11:40 AM[UAE] - UAE

I see this as welcome sign. If there was a single reason for Dubai to become unattractive for many people - that was rent. Reduced rentals would attract more people to the city which would mean better business and life for every one. Landlords who bought properties during 2007-2008 may suffer losses on these level of rents but this is good for economy in general. Both the landlords and tenants should look beyone their personal gains or loss and focus on how more people can get attracted to the city, fill all the additional apartments and make a happy "working" society. lower rents are better than empty properties. Having neighbours is better than living among locked properties.

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Posted by: Brit happy to be here Tuesday, 26 January 2010 9:12 AM[UAE] - UAE

While I don't see much change in the last six months, and believe, I have been looking closely, I am pleased to say that we managed to achieve six cheques for our new rental agreement. Friends of ours negotiated their rent down by 15K, so things are changing, I think we just have to be more willing to fight for the value we deserve. If you don't ask, you won't receive. Peace!

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Dubai rents set to fall further across all sectors in 2010

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