UAE. Cluttons, the real estate specialist that has enjoyed a dedicated presence in the Middle East since 1976 today issues its Dubai market reports for Q4 2010 covering the residential, commercial and industrial sectors within the Emirate.
The report highlights that investors’ confidence is restored again in the real estate market in Dubai within specific locations and developments, with the re-emergence of key lenders including Tamweel, one of Dubai’s largest Islamic mortgage lenders, onto the marketplace offering attractive rates to credit-worthy clients wishing to purchase quality stock.
Residential sector - Pricing Analysis:
• Average rental rates have fallen by 3.3% for apartments and 3.2% for villas
• Sale prices have dropped 2.4% for apartments and 5.1% for villas
Residential sector - Market Summary:
As supply continues to increase, drops in values will be unavoidable. Accordingly we are continuing to see the “flight to quality” in both the sales and rental markets as the more desirable locations become increasingly affordable.
“Lifestyle projects” such as The Old Town, Dubai Marina, Palm Jumeirah, The Meadows and The Greens are continuing to prove more resilient in both the sales and leasing market. The findings of the report state that buyers now have the financial option to upgrade to better quality units in more desirable locations. These improvements on efficiency and quality can only enhance the reputation of the real estate market in Dubai.
Effective management is key; landlords with well located residential units are encouraged to acquire as much control as possible over service charges and use a reputable property management company.
Commercial sector - Pricing Analysis:
• Commercial rents have fallen on average 9% over the past quarter
Commercial sector - Market Summary:
The ongoing construction and completion of commercial projects within Jumeirah Lake Towers (JLT), Tecom C, Business Bay and Silicon Oasis throughout 2010 has placed downward pressure on rents within most areas of the city. Established office districts, such as DIFC, Deira, Bur Dubai and Sheikh Zayed Road have been able to maintain healthier levels.
In contrast to previous quarters, Cluttons is starting to see a slow migration of large multinational firms such as Swiss pharmaceutical giant, Merck Serono, into the Emirate. This is an encouraging sign, as Dubai’s affordability starts to make an impact. The key to medium term success is focusing on quality property maintenance and fostering the tenant-client relationship through a flexible approach to leasing.
The fall in office rents will continue unabated as long as new supply continues to be introduced.
Landlords who have faired the best throughout 2010 have been those who have been willing to be flexible when negotiating new leases and lease renewals. As well as offering lower rents, the negotiation of longer lease lengths, break options and flexible lease terms are now the mechanisms that must be considered when securing a tenant.
Industrial & Logistics sector - Pricing Analysis:
• Rents for better buildings are 25-30 AED per square foot
• Rents for old stock has dropped below 20 AED per square foot
Industrial & Logistics - Market Summary:
Even though rents are not increasing, confidence is returning for quality logistics facilities thatwill support sustained, long term demand in areas such as Jebel Ali (JAFZA) and Dubai World Central (DWC). A two tier rental market has emerged, with a clear divide between quality buildings that international companies will consider, and older buildings out of prime areas that are becoming increasingly difficult to trade.
The investment market has become more aggressive, with funds that are focusing on the UAE logistics sector now paying below 10% initial yield for good buildings with long leases.
Confidence is also returning to the market, underlined by the Dubai government’s endorsement of DWC when it allowed the first freight service through Al Maktoum airport.
For further information, please visit www.cluttons.com