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According to JLL MENA’s Dubai Real Estate Market Overview - January 2010:
JLL MENA, the world's leading real estate investment and advisory firm, today released its latest
‘Dubai Real Estate Market Overview – January 2010’ covering the Dubai
retail market segments. JLL MENA is a pre-eminent name in the global real estate industry with 180 offices worldwide and has worked in 25 countries in the MENA region on projects worth US$ 200 billion and on transactions in excess of US$ 1.2 billion.
Dubai Office Market:
office market is becoming increasingly favourable for tenants as it is witnessing a significant demand-supply mismatch along with falling rentals and increased vacancies. While demand levels are increasing, as both existing and new tenants seek to consolidate and take advantage of better quality space becoming available on more competitive terms, there is not likely to be enough demand to meet the high level of new supply entering the market in 2010.
Average vacancies across the City are therefore likely to increase from their current level of around 33% during 2010; much of this space is contained in strata titled buildings in non-core locations. Many international and regional tenants will not consider such space and an increasingly two tier market is therefore likely to emerge. Vacancies in single ownership buildings in the most sought after Central Business District locations are currently less than 10%, resulting in selective shortages in meeting certain tenant requirements. Vacancies in this sector are likely to remain limited and this is in many ways a more telling statistic given the polarisation of demand.
“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 more competitive office location both locally and regionally.
Attractive deals can be found throughout the city’s prime and peripheral areas as rental rates and capital values are hovering at pre-2007 levels. This is an opportune time for tenants as average annual Grade A rentals have fallen to around AED 220 per sq ft” says
Blair Hagkull, Managing Director of JLL MENA.
Dubai Residential Market:
Average prices and rentals in the Dubai
residential sector are expected to show more stability in 2010 as the rate of decline has slowed in the past few months. While conditions may stabilise in some locations and sectors, the overall market is likely to see a continued decline in average prices and rentals in 2010. The performance of different locations will be more driven by local demand and supply issues.
“Prices seem to have stabilised over recent months, despite the existing over-supply situation. Stabilisation of transactional volumes is another positive indicator of investor confidence but the lack of housing finance remains a major challenge in Dubai. An improved lending scenario is one of the key factors for a sustainable recovery as the value of mortgages as a percentage of total sales value has dropped significantly during 2009.
With an additional 24,000 units expected to be completed in 2010 and 25,000 units in 2011, there may be an emerging opportunity for both investors and financers in the Dubai residential market as it has already seen a significant level of pricing adjustment in 2009.” says
Dubai Retail Market:
Rental adjustments were comparatively less in the Dubai
retail market than the office or residential sectors but the market is still moving in favour of tenants in 2010. Average rentals have declined by around 29% from Q4 2008 to Q4 2009 and by 13% from Q3 2009 to Q4 2009 on the back of a 15-20% decline in retail sales in 2009.
Several planned projects have experienced delays, which in turn has affected the future supply pipeline. This lower level of future supply relative to planned completions in the office and residential sectors, is providing the retail market with something of a breathing space.
“This is an interesting time as the dynamics of the Dubai retail market continues to swing in favour of tenants due to falling rents and increased vacancies in some centres. In spite of the cut back in future supply levels, we expect to see an increase in shorter leases, break clauses and rent free periods as we go through this tectonic shift in the market. There will be more and more incentives for tenants due to the shift in power from landlords to tenants.
We are also seeing the emergence of a two-tier retail market as occupancy rates in super regional and regional malls remain above 90% as opposed to older shopping centres.” added
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