By Shane McGinley
CB Richard Ellis report finds Dubai rents among lowest in Europe, Mideast and Africa, down 56% from peak.
Average retail rates in Dubai have dropped 45 percent year-on-year and are now one of the lowest in Europe, the Middle East and Africa, according to a report published on Wednesday.
However, rents in the emirate remained stable in the second quarter of this year, the latest Rent and Yield Index compiled by global real estate consultants CB Richard Ellis (CBRE) found.
It also said that retail rental rates in Dubai averaged around $679.60 per square metre per annum in the second quarter of the year.
The report found that while rents remained unchanged during the most recent quarter, they have fallen 45 percent since the same period last year are down 56 percent since the peak of the boom years.
CBRE surveyed 49 cities across Europe, the Middle East and Africa and Dubai experienced the largest decline in annual rents, making its now the sixth cheapest city in the report for retail space.
Prices are now considerably cheaper than global retail hubs, such as London’s West End ($9,617.60 per sq m pa), Milan ($4,771.62 per sq m pa) and Paris ($8,124.62 per sq m pa).
The average change in quarterly rents across the 49 cities was -0.4 percent. The biggest quarterly drop occurred in Dublin (-19.23 percent), followed by Sofia (-11.11 percent) and Athens (-ten percent), while The Hague was the stand alone winner and increased sixteen percent.
In terms of prime yields, Dubai averages around nine percent. While this is the ninth highest on the list, yields have remained stable in the last quarter and year-on-year.
The average yield across the cities surveyed was 5.25 percent, with the best yields currently seen in Moscow (twelve percent), Johannesburg (eleven percent), Bucharest (eleven percent), Durban (ten percent) and Cape Town (9.5 percent).
The drop in rental levels has meant the UAE in general is still an attractive location for potential expansion by international retail brands, according to a report last month by AT Kearney.
The Global Retail Development Index said the UAE was among the top ten most attractive markets for global retailers.
“The UAE has been a hot spot for several years and is now entering the next level of maturity. Retailers are looking to build on their stronghold in the UAE to diversify their portfolio across the region,” said Dan Starta, partner and managing director of AT Kearney Middle East.
However, a report published earlier this month by Jones Lang Lasalle found that vacancies across the emirate’s major malls are increasing. The JLL report found that average vacancies across regional malls had increased to between eight to ten percent.
It added that expansion plans by retailers were either being "revised downwards or cancelled altogether". The report said no new major mall supply was expected to be released until 2013 when the first phase of the Mall of Arabia in Dubailand is scheduled to open.
It's a simple rule of supply & demand in ratail spaces in Dubai. There is a Mega Mall around each corner and a shrinking market. The rents in some places are still way too high and one cannot just compare them with metropolitan cities in Europe. Soon we will see retail space owners chasing retailers to take their empty units just to keep the Malls alive. Same like with living space in some urban areas...
Sorry but this is similar to what Jones Lang Lasalle said a few weeks ago. This is simply not true. If anyone goes to speak to Dubai Mall, Mall of the Emirates, Bur Juman, Mirdif City Centre and other big malls the rents have NOT decreased. Why not? Because as soon as they do all the current tenants will scream to re-negotiate. I know 3 companies trying to re-negotiate with Mirdif City Centre because it has been slow since the 2nd month. Mall management has said no. I would like CBRE to be specific but I doubt they will because what they are saying is simply not true.
The Dubai rental rates contained in the report are actually not mall rents, hence the lower lease levels.
Shopping malls make up the majority of popular retail space in Dubai so I hope CBRE is not making such a bold statement because of declines in rents in such retail "hot spots" as Karama and International City? CBRE can easily clear up the confusion they have started by giving clear examples of where rents have decreased by 45%.....
How do these Real Estate Consultancies write there reports? Lying on the beach while sipping a beverage? Wake up to reality my friends and do some legwork and homework. Unless you are talking about street retail and 'shwarma' shops, the rent has NOT dropped in organised retail yet. (It will for sure though) The major malls still quote what they were quoting a year ago and no new malls have gone through the leasing process for close to a year, so what are you talking about!!!!
well karama is actually a good retail spot, simply because of the high density of residents. You still have to pay keymoney in certain areas. but the general retail price dropped. Malls might be unaffected due to their projected ROI but community centres took quite a hit. I was quoted 400.000 last year for a 20sqm space i a community centre it's now about 150.000. I would however appreciate a more detailed report because those vague information are hardly called research, now are they
The report is not a specific Dubai report, and is instead a EMEA rental and yields 'summary'. Hence there is no major report to accompany the figures. Unfortunately the media have failed to include the fact that it is 'high street retail' that is being discussed. Hence the rate quoted is AED 220 psf and not AED 400 psf.