Thursday, April 05, 2012

The rent-free periods trend to continue in Dubai leasing market

It has been learnt that leasing firms and owners in certain localities in Dubai, particularly the low to mid range residential units, are offering some concessions to tenants in a rather tough market.

For instance, a tenant renting a double bedroom apartment in Sheikh Zayed Road revealed that the lease contract that was signed last week, came with an additional two month rent free period.

Al Nahda 2, Fizza Properties, is offering a 12-plus-one month free deal, while Sultan Real Estate has been offering a similar deal on double bedroom unit for Dh.38,000 near the Dubai Airport Freezone Metro Station.

One of the biggest real estate agents in Dubai, Better Homes, has been offering two month free rental in Shorooq Mirdiff, its family-oriented project, with rents for a single bedroom costing Dh.40,000 annually.
The Managing Director of Better Homes, Ryan Mahoney, mentioned that tenants are being offering a 14-month rent period at the price of 12 months.

However, Mahoney said that the case may not be true in all parts of Dubai, as one part of Dubai is operating in the opposite direction of another. In fact, there is shortage of residential space in localities such as Marina, Palm Jumeirah and Al Barsha.

When it comes to commercial leasing, the rent-free tenant incentives seem to be a standard offer across majority of commercial tenants. In fact, all of the main central business districts in Dubai, including Jumeirah Lakes Towers, Business Bay, Bur Dubai, and parts of Sheikh Zayed Road, are all offering incentives to tenants, with the exception of DIFC, which is seeing decline in rental values.

The Regional Director for Middle East of Colliers International, Ian Albert, said that the rent-free schemes come as good news for commercial tenants. This is being done largely due to oversupply of units.

Apart from rent-free periods, some owners’ have been offering stepped rentals, wherein attractive rents are being offering during the first year, which goes up incrementally on subsequent years, and capital contribution, with the owner assisting fitting out the office space. Such a policy works for companies that wish to retain their capital for core operations, Albert said.

The Senior Property Consultant with Landmark Properties, Jade Maras, has who has been working in the field of real estate business in Dubai over the past eight years, said that the trend of rent-free incentive periods, is not applicable to certain residential areas such as Skycourts, Silicon Oasis, and parts of SZR. Moreover, in prime residential localities such as the DIFC, Old Town, and Palm, the rents are well established.

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