Thursday, April 29, 2010

Residential, commercial sectors at risk owing to high supply

The greatest risk associated with the residential and commercial real estate markets in Dubai, is the increase in supply predicted during the next three years, which would further contribute to value-seeking attitude among potential tenants, reports Landmark Advisory in their April 2010 Dubai lease guide.

The report states that the lease rates in majority of areas in both residential and commercial markets will drop during the coming months, particularly, for low-quality buildings in less developed and integrated communities.

However, few residential units in major locations with high-quality developments will continue to remain stable, and this is applicable to specific villa developments and select apartment buildings, said Ms. Jesse Downs, Director-Research & Advisory Services at Landmark Advisory.

The lease guide stipulates that office rents that have been gradually declining last year, is mainly because landlords have been more flexible in their negotiations. The commercial market has been witnessing increase in supply in areas such as Business Bay, with about 6mn sq ft of office space due for completion this year. However, majority of spaces in Business Bay are due for handover this year.

The lease rates are likely to decline further in several areas for buildings with multiple owners, Jesse said.

Landmark Advisor has also reported to have noticed increased queries from companies, seeking re-location into Dubai. However, the queries are mostly from companies in other emirates, seeking to expand into Dubai.

Although this is an emerging trend, it is hoped to gather pace in the next few years, with the increase in commercial sale prices, while the leasing rates are bottoming out. Apart from this, better affordability, existing infrastructure, ease in recruitment, and high retention rates will further attract relocation demand in the coming years, Jesse says.

As for residential apartments, high supply has led to fall in rentals in several areas, including well-established locations. Palm Jumeirah and Dubai Marina have witnessed rise in supply, following delivery of new products. This has led to fall in rentals in these areas, and this trend has been observed in both new handover buildings and low-quality buildings.

However, the Landmark Advisory reports that villa lease rates have remained comparatively stable during the period, although few areas such as Victory Heights, Arabian Ranches, and parts of the Lakes experienced low limit declines.

3 comments:

Dubai Blog said...

Dubai real estate market is an elastic market where economic conditions more fluctuate due to a little slump in international economy. These conditions are due to the difference in demand and supply of property. The report shows that the lease rates of commercial and residential sector will fall further in future. As a whole it seems that Dubai real estate market is in trouble because of over supply.

Dubai Real Estate said...

Leasing rates are decreasing rapidly that is noticeable for government and other higher authorities. There is no hard and fast rule for construction categories. According to the experts there is much work require in this field to fix the problems.

Money Management Directory said...

The lease rates of Dubai residential units are recorded a decline. Dubai real estate market is likely to suffer other collapse in prices due to the difference in demand and supply.This uncertainty condition in real estate market can clasp the economy of Dubai.