\nDemand is likely to be the main driver of real estate performance across all sectors in Dubai in 2010, according to the latest analysis.\n<\/p>\n
\nThe Dubai office market is becoming increasingly favorable for tenants as it is witnessing a significant demand-supply mismatch along with falling rentals and increased vacancies, says a new report from consultants Jones Lang LaSalle.\n<\/p>\n
\nWhile 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,\u2019 says the Dubai Real Estate Market Overview January 2010.\n<\/p>\n
\nAverage vacancies across the City are therefore likely to increase from their current level of around 33% during 2010. One reason is that much of this space is contained in non-core locations that international and regional tenants will not consider. So a two tier market is therefore likely to emerge, the report points out.\n<\/p>\n
\nVacancies 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.\n<\/p>\n
\n\u2018The 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,\u2019 said Blair Hagkull, Managing Director of Jones Lang LaSalle Mena.\n<\/p>\n
\nAttractive deals can be found throughout the city\u2019s prime and peripheral areas as rental rates and capital values are hovering at pre-2007 levels,\u2019 he added.\n<\/p>\n
\nThe report also indicates that 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. But, 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.\n<\/p>\n
\n\u2018Prices 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,\u2019 explained Hagkull.\n<\/p>\n
\n\u2018With 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,\u2019 he added.\n<\/p>\n
\nRental 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 the fourth quarter of 2008 to the same period in 2009 and by 13% from the third quarter and the fourth quarter of 2009 on the back of a 15 to 20% decline in retail sales in 2009, the report also reveals.\n<\/p>\n
\nSeveral 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,\u2019 it adds.\n<\/p>\n
\n\u2018This is an interesting time as the dynamics of the Dubai retail market continues to swing in favor 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,\u2019 said Hagkull.<\/p>\n","protected":false},"excerpt":{"rendered":"
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