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Dubai rents to fall on more supply: study

DUBAI - Rents of residential properties in Dubai are set to fall further this year on increased supply, while Abu Dhabi residents will see more trade-off between location and rental rates, according to a latest research report.

“Increased supply from residential sector to see further drop in lease rates. However, the effect would be higher on villas than apartments,” said a study released on Monday by CB Richard Eliis, or CBRE, a property advisory business.

The advisory firm expects 31,194 new homes in 2010, 29,388 in 2011 and 21,870 in 2012 in Dubai, according to its Real Estate Market Update report.

Around 3.42 million square metres of new office space is expected to come between 2010 and 2012, from 4.7 million square meters now, CBRE said.

“Major tranche of this space is expected to emerge from Business Bay followed by Jumeirah Lakes Towers development,” the report said.

The report further said that transaction market would see some activity at the back drop of positive news from the government as well as drop in mortgage rates by banks.

Last month Colliers International, a leading global real estate services firm, said residential segment of Dubai property market is already oversupplied by around 20 per cent, would fall further with the addition of 41,000 homes between now and the end of the year.

Total office space will rise to about 6.4 million square metres by the end of next year, from about 3.6 million square metres at the end of 2009, according to Colliers estimates.

Abu Dhabi

The report said around 390,000 square metres of Grade A office market stock is expected to enter the market by 2011 while vacancy rates are seen between 8 and 10 per cent in 2011, up from two per cent in 2009.

“Whether the market has reached the bottom already or is gearing towards stability is yet to be seen,” CBRE said in its report.

Increase in overall supply levels will ease up rents and increase bargaining capacity of tenants and occupiers, CBRE said, adding: “Those products with higher specifications will enjoy comparative advantage against its competitors.”

Residents will see more trade-off between location and rental rates, but drawbacks for these locations do exist in the form of limited access to public transportation systems and proximity to facilities and key services, according to the study.

abdulbasit@khaleejtimes.com