Thursday, August 27, 2009

Dropping rents, growing supplies, make Dubai commercial property sector competitive

The Dubai commercial real estate sector is getting increasingly competitive with falling rents and increasing supplies, which has been making the city more attractive to potential tenants, the study revealed.

The office rents across Dubai continue to decline, although at a lower rate than before, says Jones Lang LaSalle's second quarter report on Dubai office market.

The rental decline noted during the second quarter this year averaged 25 percent, in comparison to a 45 percent decline during the first quarter. The rents for Grade A office space across Dubai (except at the Dubai International Financial Center), is now around Dh.225 per square foot per annum.

This is inline with that recorded during mid-2007 and is equivalent to rental levels in several other major commercial centres in the global market, making Dubai more competitive to move ahead.

A further decline in average rents is likely, with increasing levels of fresh supply, states the report.

Towards the end of 2011, about 25million square feet of additional office space is likely to enter the market, which will increase the vacancy rate and place further downward pressure on average rentals.

The global economic downturn has been a major factor in reducing the demand level, with several tenants having either downsized or delayed their expansion plans, or have adopted the wait and watch approach.

The market has moved in favour of tenants during the past six months, with few attractive deals available in a range of newly completed buildings across Dubai, said Matthew Hammond, the Head at Jones Lang LaSalle.

This has brought about a situation wherein, tenants can take advantage of tomorrow's prices today and negotiate rents below the current levels, he added.

1 comment:

Bayut said...

It’s true that Dubai property market has become a heaven for tenants. Despite of overwhelming commercial and residential development the rents are falling.. especially then rents in Northern Emirates like in Sharjah, Ajman and Ras al Khaimah, have dropped 20% on average from a year ago, while reports say that some areas saw 35% decline.