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Dubai office rents collapse 50% in 9 months
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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Comments 1-9 of 9
Posted by Property Guru, Dubai, UAE on 6 August 2009 at 16:46 UAE time
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.
Posted by mart, london on 1 August 2009 at 16:06 UAE time
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
Posted by Tillerman, Vancouver, Canada on 31 July 2009 at 08:25 UAE time
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?
Posted by Jonathan, UK on 30 July 2009 at 14:37 UAE time
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??
Posted by khalid, London, UK on 30 July 2009 at 12:27 UAE time
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.
Posted by John on 30 July 2009 at 11:20 UAE time
I think I should cancel my Trade License registered at DIC and move out of all these stupid free zones. They do not understand what is happing around and still talking big. They charge AED 200 per Sq Ft for their buildings. The private builders inside TECOME are the worst of all. They still keep on asking AED 250 per Sq Ft. Only because your trade license is from them, you are exploited at the maximum extend at this very bad time.
Posted by Dr Paul Goodwill Ambassador to my Auntie Margaret, Dubai, UAE on 30 July 2009 at 10:47 UAE time
With market rents falling heavily across the board, Dubai Internet City, Media City and other free zones are under huge pressure to reduce rents to remain competitive. There might be a premium for these locations, but at the moment TECOM offices are available for 100-150 AED, whereas DIC is 200. That kind of differential will suck the life out of DIC/DMC if rents don't adjust.
DIC justified the huge rent increases in the last couple of years on the basis of the 'rapid economic growth' in Dubai and the 'market reality'. Failure to acknowledge that these influences are now in sharp reverse and reduce rents will see a flood of companies moving to cheaper TECOM offices.
Posted by Bobby Cherian, Bahrain, Bahrain on 30 July 2009 at 10:45 UAE time
when you see the salary levels of blue collar workers and other employees serving at lower levels, do you think AED 60,000 per annum justifies being rentals just for a mere one bedroom appartment?
I studied in the United Kingdom few years ago and found that such rentals are okay in a country like UK where people working in hypermarkets into replenishing shelves earn GBP 2000, that equals AED 16000.
Does an employee replenishing hypermarket shelves in UAE earn AED 16,000 or anywhere near? Paying unreal rents of such magnitude would require 3 or 4 of such people to share the accomodation and live a compromised life as it has been happening more often in UAE.
I'm not even talking about labourers as it would be difficult to imagine their state.
Dubai rentals were always a bubble and the estate developers always operated in error like riding a tiger and not knowing how to get down in fear of being eaten up. It's one of the terrible bubbles that formed and was bound to break even without any financial crisis.
It still needs to come down a lot for the real economy to thrive.
(In real economy, you simply cannot chase out labours, plumbers, electricians, barbers, bakers, butchers, cleaners, etc to live in different areas. They are part of the economy and they are very importantly required to co-exist)
Posted by Ramesh, Dubai, UAE on 30 July 2009 at 08:14 UAE time
It happens everywhere any part of the world when market crashes, expats leave and there is too much availability as a result of this......lot of options for the expats who are staying when others have been forced to leave.
Rents can go still further down like it used to be in year 2000 all around tolet boards
Deira studio baraha 11000 pa
Bur Dxb studio 13000 pa
karama studio 14000 pa
sharjah studio 7000 pa
ajman studio 5000 pa
With lesser expats moving into the uae and more and more forced to leave with no practical viable options left for them....it will take 2 years for rents to stabilize till then they will fall and fall without any support.