By Andy Sambidge
UPDATE 1: Landmark Advisory says declines seen in even the most sought after locations.
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.
Those rents corrections will continue till 2012 & all for the benefit of beloved Dubai! The sooner we hit the bottom earlier we will see the recover!
What else you expect. When there is an over supply to the tune of above 100%, reduction of 22% is not justifiable...still far to go..
I don't want to ever go back to sharjah and live in traffic.
Rents are still too high in Dubai. If you look at most other European rental rates for example, Dubai is still well above what it should be. Further drops will sting landlords, but ultimately with more correction, we will eventually find people with more money in their pockets, and more reasons to spend it in Dubai, which will inturn aid all involved.
I would urge RERA to seriousely look into freezing its activities as a step to help those remaining companies to survive the crises.. we need everyone to help put Dubai back on its feet. Please forget personal gain for the time being we really have to plant a seed of confidence in the market again so we can harvest the fruits of integration and solidarity for the coming years.. RERA please please consider before we all leave our beloved city
The spike experienced by the Real Estate business in Dubai was due to greed, but was portrayed as a supply-demand mismatch. Landlords squeezed the maximum out of tenants when the rents wre obscenely high. But now when the rents are going down, every body is up in arms asking for a freeze...landlords complain that the Government should intervene. But no one complained when there was a gold rush...All one can say is landlords must pay for their greed!!
I agree, rental levels in Dubai are still far too high, need to decline another 30-50% to become somewaht acceptable compared with other cities in the world. Also, it is absolutely ridiculous that tenants are expected to pay 12 months or even 3 months in advance - much has been said about this. Similarly, agents' commission of 5% is twice as much as you pay in many parts of the world. And finally, stop stating BUA which is misleading. The valuable size of an apartment is the net usable area, nothing else. For future developments, no matter whether low-cost or luxury, it would be good to engage qualified engineers who know about quality of building materials and functional layouts.