Dubai: The steep decline in rents across Dubai is actually getting in the way of more home buyers entering the market.
"For most people who have already purchased property, they have seen values soften in the last couple of years," said Murray Strang, head of Dubai office at Savills. "This does not create a strong momentum for new entrants in the market, who would rather prefer to wait awhile before buying property."
But that represents a plus for the rental market... and landlords in Dubai can heave some relief after a tiring two years. Even as new residential supply comes on-line, there are far more prospective tenants looking at leasing options.
“Whether it’s existing renters looking to re-negotiate current agreements or seeking alternative options to gain better value, coupled with new entrants, there has definitely been increased leasing activity," said Strang.
Savills has issued a new report talks about the increase in the number of first-time renters. Close to 30-35 per cent of total enquiries received for vacant units in Dubai and around 15 per cent in Abu Dhabi were from individuals who had recently moved to these cities or are planning to relocate in the near future.
“Given the downward pressure on residential capital values over the last three or four years, a greater share of new entrants to the market are opting to rent initially before committing long-term investment towards property," said Strang.
No plugging this pipeline
About 75,000 residential units are projected to complete in Dubai in the next 12-24 months, and close to 14,000 homes are to be handed over in Abu Dubai. With the addition of these projects onto existing supply, the market will continue to remain favourable towards tenants.
They may continue to benefit from current incentives such as rent-free periods, furnished apartments, and multiple cheque payments in a subdued rental marketplace. “It will be exciting to see how the publicity that Expo 2020 Dubai triggers into investment beyond that period," the report notes.
Watch out for these trends
There is more to real estate in Dubai than residential options. Savills reckons that vertical farming, cloud kitchens, e-commerce, start-ups and co-working requirements will influence the property landscape.
There is a marked increase in enquiry and take-up of medium- to large warehouse accommodation by vertical farm operators and cloud kitchen service providers, mostly at Dubai Investments Park (DIP) and Al Quoz, respectively.
The cloud kitchen concept has multiple vendors and cuisines prepared at a single site for delivery purposes. This off-site location allows vendors to save costs and offer highly competitive prices and delivery times to an ever-increasing customer base, said Strang.
"While a prime restaurant space would cost anything ranging between Dh150-Dh200 per square foot, a backend space in a warehouse could cost between Dh25-Dh50, depending upon the location."
Co-working and co-living
Global co-working operators are evaluating options to expand their presence in the country. For instance, WeWork opened its first co-working space at Abu Dhabi Global Market (ADGM) at a time when the capital is actively promoting the start-up ecosystem. Co-living projects are currently being experimented by Emaar.