Wednesday, June 16, 2010

Lease guide for Dubai as released by Landmark Advisory

One of the leading real estate consultancy companies in the region, Landmark Advisory, has released its June lease guide for Dubai. The guide combines transactional data with mystery shopping and broker surveys and are prepared by analysts at Landmark Advisory.

The Dubai lease guide published in 2010 indicates that lease rates have fallen for both residential and commercial units across Dubai, irrespective of the quality and location. Although the lower quality units in not so well-known areas are experiencing strongest decline, more significant trend is the continued rent decline for quality units in prestigious locations. The decline is largely due to increased supply, a trend, which would continue as 100,000 new units are expected to hit the market during next two years.

"Tenants are seeking better value for their rental dirham and are trying to leverage alternate options to negotiate good deals. This in turn, is compelling landlords to settle for lesser rents", says Jesse Downs, Director of Research & Advisory Services.

Rentals in Dubai has been strengthened by tenants relocating from neighbouring emirates such as Abu Dhabi, with landlords in Dubai benefiting from tenants moving into Dubai to take advantage of lifestyle and lower rental rates.

Ms. Downs pointed out that the imminent delivery of Marina Square in Abu Dhabi will prompt potential commuters to rent an apartment in Abu Dhabi, which will no-doubt hurt rental demand in Dubai. Moreover, rents in Abu Dhabi are also declining and will continue that way, particularly until first quarter of 2011.

Residential rents in prestigious locations in Dubai are declining. Lower limits for a single bedroom on the Palm Jumeirah have dropped by 6%, while single bedroom apartments in JLT have fallen further 10% since publishing previous lease guide.

In lower quality areas such as International City, lower limits have dropped 12%, while upper limits for both studios and single bedroom apartments have decreased by 22% on an average. Even well-established localities with limited supply pipeline are also experiencing rent declines.
At the commercial front, rents have declined, and are likely to decline further, Landmark Advisory said. Landlords are attracting new tenants by offering low lease rates, long-term leases, and high incentives in the form of rent-free periods or increased cheque options.

According to Downs, location and incentives are set to play a major role in drawing tenants going forward. The commercial market is witnessing prolonged oversupply period, and with new developments in Business Bay and JLT, it is expected for completion in 2010 and beyond.

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