Friday, August 21, 2009

Office rents stabilizes, residential mortgages revive in UAE

Office rents in Dubai Silicon Oasis, Deira and Bur Dubai may have bottomed out, as these areas have not witnessed any major rent reduction during the past month, reveal property analysts.

According to Porush Jhunjhunwala, Manager - Commercial Leasing at Better Homes, a real estate firm, there has been only a marginal reduction of one to two percent during July-August, and this indicates that office rents in these areas have possibly bottomed-out.

However, areas such as Jumeirah Lake Towers, Al Quoz, Ghusais and Tecom are likely to see another 5 to 10 percent correction before rents begin to stabilize there, he said.

David Macadom, Director-Sales and Leasing Commercial at Better Homes, said that the current office vacancy for leasing availability is nearly 15.5 percent. Commercial lease rates have dropped from 40 to 60 percent, based on the area and size of office premises, grade of building, accessibility to the locality, parking facilities and location of the building.

According to Macadam, the office leasing transactions are now leveling off in the range Dh.80 to Dh.150 per square foot per year. There are no declines below these rates.

According to the latest data from Better Homes, the Dubai Silicon Oasis has seen the maximum reduction in office rents (nearly 65 percent), compared to January this year.

The current office rental rates are in the area of Barsha and Dubai International Airport are in the range of Dh.50 to Dh.70 per square feet, with a decline of more than 55 percent in office space.

Office rent rates at Barsha are in the range Dh.80 to Dh.120 per square feet, while in the Dubai International Airport locality, rents range from Dh.90 to Dh.120 per square feet.

The areas that have seen a 55 percent decline since the beginning of the year are Deira (Dh75-110/sq ft), Garhoud (Dh80-110/sq ft), Sheikh Zayed Road (Dh110-170/sq ft) and Umm Hurair (Dh90-120/sq ft), while Karama (Dh90-120/sq ft) and Qusais (Dh80-110/sq ft) have seen a dip of more than 50 percent.

Areas such as Bur Dubai (Dh90-115/sq ft) are down by 50 per cent, Dubai Investment Park (Dh70-85/sq ft) and Jumeirah Lake Towers (Dh55-120/sq ft) are down by 47 to 48 percent from their January levels. This is followed by Downtown Burj Dubai (Dh170-200/sq ft), with 46 per cent reduction and Al Quoz (Dh75-90/sq ft) with 41 per cent drop.

The least affected locality is the Dubai Health care City (Dh.115-145/sq ft), down by more than 35 percent.

In the meanwhile, banks and lending agencies in the UAE are recording healthy growth in residential real estate mortgages, which indicate that prices may be reaching levels that are once again of interest by the end-users seeking to purchase properties.

The HSBC-UAE has witnessed a 25 percent growth in mortgage lending value during the second quarter this year, compared to that during the first quarter.

"As price expectations between buyers and sellers are converging, more transactions are happening both for property sales and mortgages," said Venkatesh Srikantan, Regional Head - Assets and Liabilities, HSBC Middle East.

There is an increase in demand from end-users who had missed the earlier property booms and are happy to purchase property at those price levels, Srikantan said.

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