Dubai: Dubai’s high-end apartment rentals are facing extreme duress, with the number of enquiries recording a marked decline in March. Landlords with units in upscale high-rises in Downtown, Business Bay and those on Shaikh Zayed Road are reacting by dropping rents or being forced to leave their units vacant for longer, according to a new update from Asteco.
In the rest of the rental market, it was a more stable situation and landlords were less prone to lowering their demands. That the pressures are building up most at the high-end has much to do with increased instances of job redundancies in senior management levels in key sectors. It has also meant that tenant take-up rates for new villas and townhouses in Jumeirah have been much slower than the norm in 2012-15.
“On SZ Road where rents for a two-bed might have been Dh160,000-Dh190,00, landlords are being forced to bring it down if they need to retain the tenant,” said Julia Knibbs, Associate Director – Research & Consultancy at Asteco Property Management. “A similar trend is happening in Business Bay, though maybe not to a similar extent. Wherever a tenancy contract is deemed is deemed as too expensive, tenants are demanding a downgrade. And in most instances they are getting it.”
It will also make for an interesting situation in the second-half of the year, when the 19 premium residential buildings at the City Walk development in Al Wasl will come to market. A one-bedroom unit could have a leasing band of Dh115,000-Dh130,000. The demand they manage to generate could also impact rental rates in neighbouring clusters such as Business Bay and Downtown.
In the first-half of the year, there wasn’t much by way of new supply, both in freehold and non-freehold areas. From August, the City Walk residences will come online, but this apart, second-half is unlikely to see the tempo of deliveries rising. For significant residential supply to come through, tenants will have to wait until next year.
Apart from super-premium apartments, rents have seen a softening at locations where there had been significant gains in recent years and are now being brought back to more realistic levels. “JLT [Jumeirah Lake Towers] is passing through this phase after two years of rental increases brought on by improvements in community infrastructure and services,” said Knibbs. “But JLT has since recorded a 12 per cent decline year-on-year. Whilst the community is attractive overall, the quality of most residential towers are below the tenant’s expectations considering the high rental levels.”
And in the year to date, there hasn’t been much by way of relocations taking place from Dubai to the northern emirates. The handovers are taking place at several towers in Sharjah, but there has been a drop in the number of new project announcements. Quite likely, developers there are taking a breather from launches until such time the market sees a rebound and a sustained one at that.
“There’s a bit of concern over the rents, which have dropped in some respects. But these haven’t moved significantly to the extent that they constitute a crash,” said Knibbs.
It’s a more sedate situation in villas
- According to Asteco’s estimates, a limited supply mean rentals of villas were relatively stable compared with the last quarter of 2015. Average rates continue to be 5 per cent lower compared with the same period last year.
- The most notable increases were in communities handed over in the last 12 months and where improvements such as landscaping works, addition of retail elements and other facilities were implemented. “As fewer units were vacant, landlords were able to achieve their asking rate. This was the case in Mudon and Sustainable City for instance, where rates were up by 6 per cent and 2 per cent since last quarter, respectively.”
- Leasing activity in Jumeirah and Umm Suqeim has increased “after landlords reduced their asking prices in the previous quarter. As a result, units that had been vacant for a long time are now occupied.”