Real estate firms in Dubai are unveiling incentives such as rent-free periods and reduced rates in a bid to lure tenants in an oversupplied marketplace, a property analyst said Sunday.
Offers such as flexible payments are a sign developers will take a hit on revenue in return for increased occupancy, said James Gauduchon, head of marketing for UAE-based Better Homes.
“Rent free periods are great for developers and landlords as it allows them to lease units without discounting heavily,” he told Arabian Business. “There’s something in it for tenants too, so long as the actual rental value is competitive; otherwise it can make the tenant feel like the offer is a gimmick.”
Rents across Dubai have plummeted since the onset of the global financial crisis while a flood of new supply has left an estimated 40 percent of buildings empty.
Gauduchon said landlords will increasingly turning to extras to attract tenants and alleviate the burden of service fees.
“If it’s a new building, it’s a strategy to build up immediate occupancy levels, [but] if it’s on a building that has been marketed for an ongoing period, then it may be considered as a desperate attempt to increase occupancy,” he said.
State-backed Dubai Properties Group is currently offering two months rent-free to tenants in certain properties. Jones Lang LaSalle said in January that retail landlords were offering break clauses and sales-related rents in an attempt to boost occupancy.
Oversupply has continued to squeeze real estate prices in Dubai with rents in areas such as Discovery Gardens and International City falling by as much as 8.9 percent, Cluttons said in a report last month.
Higher-end locations, such as Dubai Marina, Old Town and the Palm Jumeirah, saw declines of 3.7 percent during the first quarter of this year.
“It’s inevitable that hard-to-sell locations need to be backed up with compelling offers to convince tenants to move in,” Gauduchon said. “We know that there’s a lot of success in running special offers, be it reduced prices, flexibility or free rent periods.”