By Gavin Gibbon
Incentives include rent waivers, increased cheque payments, rent-free periods and contribution to utilities
Commercial and residential tenants in Dubai are in as strong a position as ever to negotiate new contracts, according to the latest market report from Core Real Estate.
The outbreak of coronavirus continues to cause economic uncertainty, with many employers choosing to reduce hours and, in some instances, salaries.
However, research from Core from Q1 this year suggests that this may provide an opportunity for those in the rental market.
The report said: “We continue to see enquiries and online searches as tenants are either looking to find the current rental value of their property to help them negotiate with their landlords or to relocate and reduce their rental outflow.”
While this may not involve any immediate changes, given the current restrictions placed on movement across the UAE to limit the spread of Covid-19, according to Core, it will give tenants an edge when negotiating new deals.
The report added: “We also foresee in some cases rental incentives to be provided by landlords such as partial rent waivers, higher number of cheque payments, extended rent free periods and contribution to utilities in order to help tenants while also maintaining occupancy of their unit.”
According to the report, Dubai saw almost 5,000 units come to market in the first quarter, bringing the total residential stock in the emirate to 550,000 units.
However, it revealed handovers were down 27 percent year-on-year and project launches dropped 14 percent compared to Q1 2019.
In terms of the office market, while companies have adopted a strict work-from-home policy in the current climate, the Core report revealed a limited number of transactions are still going ahead.
Robert Thomas, head of agency at Core, said: “Of the transactions going ahead, we are seeing extended rent-free periods (two-four months for fitted options and nine-12 months for shell and core options), capital contribution to fit-outs and shorter notice periods with limited or zero penalty on early break clauses being discussed in ongoing negotiations.
“With the current uncertainty, we see landlords being increasingly adaptable, willing to accept lower headline terms in negotiations to ensure leases are executed and long-term revenue is preserved.”
Thomas added that many landlords are giving April as a rent-free month and agreeing to evaluate this on a monthly basis. “We are also seeing some tenants talk about early exit clauses as potential downsizing activity is foreseen with occupancies expected to remain under pressure in the near-term,” he added.