The average rentals continued to fall across the residential, office and retail sector in Dubai during the fourth quarter due to a steady over-supply, according to real estate experts Jones Lang LaSalle (JLL).
The year-on-year decline was eight per cent from Q4 2009 to Q4 2010. The low to mid-end apartment rents continued to plunge with the most pronounced drops in areas lacking completed infrastructure in Q4, the JLL said in its ‘Dubai Real Estate Market Overview’ report.
The rents for lower end apartments in international City and the lower-end apartments within Dubai Marina decreased significantly whereas higher-end apartments in Burj Khalifa Downtown have remained relatively stable, it pointed out.
The report also stated that Dubai’s real estate market problems were getting far from over as more residential units were set to hit the market.
“With a further 25,000 units expected to be completed in 2011, the total residential stock at the end of 2011 will hit a whopping 335,000 units,” the JLL report said.
A total of 36,000 units had been completed in 2010, of which 7,800 units were finished in the fourth quarter bringing the total current residential stock to 309,300 units.
Most residential projects schedule for 2011 seem to be on track, and some projects that were on hold, such as Nakheel’s projects in Jumeirah Park, Dubai Waterfront, Jumeirah Heights and Jumeirah Village are scheduled to restart sometime in 2011, the report added.
With this fresh supply, apartments will constitute 79 per cent of total residential stock by the end of 2011, the report pointed out.
According to JLL, the prospects for 2011 will be dependent upon increased liquidity entering the mortgage market.
The investment market has seen an improvement in sentiment over the final months of 2010, with increased appetite for high quality, securely leased institutional grade assets, the report said.
The market remains constrained by the reluctance of owners to release such product, which has continued to constrain transaction levels, it added.
The office market too continues to experience falling rentals, which is stimulating more major deals to occur. The DIFC has recognised the new market realities and has announced new fixed rents effective from January 1, 2011.
While this will result in savings for some occupiers who had committed to higher rentals over the past two years, the major advantage will be in terms of improving transparency.
Retail malls continue to experience vacancies of 15 to 30 per cent as retailers have taken advantage of more competition among centres to close poorer performing stores.
This has resulted in landlords becoming increasingly realistic in rent negotiations, with many offering tenants more attractive and flexible terms, based on sales turnovers, the report added.
TradeArabia News Service