Dubai: Rents in some of Dubai’s busiest residential clusters are under intense pressure, with some landlords willing to cut their demand by 5-7 per cent. For tenants, the best way to access lower rents is seek out locations that have seen more new supply getting delivered or buildings with higher than average vacancy levels.
“Anecdotal evidence suggests that numerous residential buildings — even within the prime areas such as Downtown and Marina — are seeing increased vacancies, and as such, tenants have been able to renegotiate their rents downwards,” states the latest Dubai real estate update from JLL.
The majority of completions during Q3-17 were apartments, with a further 3,300 units delivered. Villas and townhouses contributed 660 and 75 units respectively, the consultancy reports.
The completions include the Duja Tower on Trade Centre First, which added 679 units, and The Polo Residence in Meydan with 598 units. District 1 and Lila in Arabian Ranches 2 contributed 267 and 219 units, respectively.
Up to 80,000 units could be delivered before the end of 2019, going by all the timelines set by ongoing projects and those launched recently. “This renewed sentiment does however raise the prospect of a potential over supply on the back of sales achieved through more attractive payment terms,” said Craig Plumb, Head of Research - MENA at JLL.
Thankfully for developers, sale prices for both villas and apartments remained “largely stable over the quarter”.
Total value of transactions of existing residential properties (excluding land) is on the rise. This includes Dh2.7 billion worth of sales of existing residential units recorded in August, with 20 per cent of this occurring in Dubai Marina and a similar tally from the Business Bay/Burj Khalifa area.
A bit of the give-and-take approach is also visible in the retail space, with shopping centre owners “more willing to negotiate” with existing tenants. “We have therefore seen a further decline in average rental levels during Q3,” the report notes. “Super-regional and regional malls have recorded declines of between 3-5 per cent in headline rents on a quarterly basis, which may understate the extent of effective declines.
“Smaller neighbourhood and community malls have generally recorded greater declines than in the larger centres.
“Vacancy levels have generally increased over the past year and this trend has continued during Q3, placing further pressure on rentals. Rents are expected to remain under pressure over the next 12 months given the large volume of potential new supply due to enter the market.”