Dubai: A recent Dubai market view report published by CBRE reported a slow market during the final quarter of 2009 with few signs of an imminent upturn.
The total number of land transactions dropped by 17.7 per cent according to the Dubai Land Department. The fourth quarter of 2009 saw 520 transactions which equated to Dh3.43 billion compared to Dh5.09 billion in 2008.
Office rates continued to ease as demand remained weak. Rental rates in prime business areas, not including the Dubai International Financial Centre (DIFC), ranged from Dh1,950 to Dh2,400 per square metre during the third and fourth quarters of 2009, which is good news for tenants.
Businesses looking to lease out space are offering it at 35-45 per cent lower than their actual lease interest, Matthew Green, associate director of CB Richard Ellis, Middle East, wrote in the report.
During 2009, 0.58 million square metres of new office space entered the market. Around 54 per cent of this was in freehold locations such as DIFC, Dubai Silicon Oasis, Jumeirah Lake Towers and Tecom C.
Around 49 per cent of this total new stock was sold on a strata title basis.
According to Jones Lang LaSalle MENA's Dubai Real Estate Market Overview January 2010, vacancies across the city are likely to increase from their current level of around 33 per cent during 2010.
"The tenant is becoming the ultimate winner as the office market is going through a significant adjustment with more vacancies and cheaper rents on offer. This scenario is encouraging for businesses as it offers multiple options for expansion and relocation as Dubai becomes [a] more competitive office location both locally and regionally," Blair Hagkull, managing director of Jones Lang LaSalle, said.
To combat this, landlords are offering incentives such as rent free periods, inclusion of service charges and multiple cheques, in some cases contributing to fit-out costs. This was mostly for larger spaces and long-term leases of five years or more.
The residential market is showing a similar pattern according to the report. "A high volume of new supply coupled with lower demand continues to affect leasing rates across virtually all major residential district of Dubai," Green said. Rental rates fell by 41 per cent in freehold areas and 40 per cent in non-freehold areas.
"However it should be noted that the fall in the fourth quarter was minimal compared to the three previous quarters in 2009."
- 40% easing in rental rates at non-freehold areas
- 17.7% decline in total number of land transactions
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