Sliding rents in Dubai set to hit bottom in 2011

Budget hotels, community malls and stabilising rents to dominate UAE real estate in 2011

Rents continue to fall in Dubai but market indicators suggest they are approaching bottom, JLL said

Rents continue to fall in Dubai but market indicators suggest they are approaching bottom, JLL said

Stabilising rents, smaller community malls and a fledgling recover in the hotel sector will be key themes in the UAE’s real estate market in 2011, Jones Lang LaSalle said.

In a report, the real estate consultancy said declining rental levels will continue to dominate the UAE’s rental sector, but said Dubai’s market was approaching bottom.

“In Dubai, rents continue to fall, but the rate of decline is shrinking and there are strong indications that many segments are approaching the bottom. In contrast, rents in Abu Dhabi are expected to continue to decline in the year ahead,” the report said.

Sales transactions will remain subdued in 2011, analysts said, in part because of a shortage of investment-grade properties at realistic prices.

Outside of the residential real estate market, commercial properties are forecast to perform well this year with the hospitality industry earmarked as the first to recover.

“The UAE’s hospitality sector will see a departure from the grandiosity of previous projects, often driven by publicity and ego, and a return to fundamentals,” the report said.

JLL forecast a stronger focus on budget hotels and a rebranding of some of the older hotel properties in the UAE.

A similar change is expected within the retail sector, which will see an additional 140,000 sq m of space come online in 2011. Changing market dynamics will prompt a shift away from mega malls and to smaller community-focused shopping centres, the report said.

“The market for super-regional malls, driven by tourism and built as entertainment driven destinations, is now saturated. In terms of new development and repositioning of existing projects, the next opportunity is community-oriented retail centres, with a focus on meeting the needs of residents within the catchment neighbourhood.”

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

Posted by: lee

Didn't i read the same story about end of 2009, fist quarter 2010, second quarter 2010.................................??

Posted by: Kat

All smoke and mirrors

Posted by: Saleem

@Red , you are forgetting that rents in Abudhabi are still ridiculously high. A one bed apt with shared pool , private parking in new building in Abudhabi would set you back 120 k to 140k depending on size. However a better quality 1 bed apartment in Dubai Marina would cost you around 60k a year. So do your math. Even if 25000 or even 50,000 apartments come online in Abudhabi , people would not relocate unless rents come down drastically. Which again means rents softening in Abudhabi. Suppose Dubai market falls further and you can let 1 bed for 40k in Dubai Marina, people would still move from Abudhabi to Dubai. It would always be quality and affordability and not number of units hitting in market in Dubai or Abudhabi.

Posted by: Red Snappa

I thought there was increasing pressure for people who are employed by companies in Abu Dhabi to live in Abu Dhabi and as rents go down there, vacancies rise in Dubai. At least at the Marina/Jebel Ali end of town. Was it not Jones Lang LaSalle who recently estimated a further 25,000 residential units to be delivered in 2011 into a market that already has a 40 per cent vacancy rate. So if several thousand relocate to Abu Dhabi but that's counteracted by a few thousand relocating from the Northern Emirates the market still can't reach the bottom. Plus purchasers of many of the new apartments may elect to live in them and vacate existing tenancies.

Therefore the number of rental properties available and empty must logically go up and rents continue downward hroughout the year.

All comments are subject to approval before appearing

Further reading

Features & Analysis
Trading bricks: The growing popularity of real estate investment trusts in the Gulf

Trading bricks: The growing popularity of real estate investment trusts in the Gulf

Investor interest in real estate investment trusts (REITs) has...

Abu Dhabi real estate: Down, but not out

Abu Dhabi real estate: Down, but not out

While there has been evidence of rents in the richest emirate...

Forgotten fees: the challenge of investing in Dubai property

Forgotten fees: the challenge of investing in Dubai property

Investors attracted to low service charges at some Dubai residential...

Most Discussed