Office rents are cheaper than residential in JLT

If Landmark Advisory's November lease guide is to be believed, then office rents in Jumeirah Lake Towers (JLT) have witnessed the most significant fluctuations with the lower rental limit falling by almost 50 per cent to just Dh25 per square foot.

Simple calculation reveals: A 1,000 square feet office can be rented for Dh25,000 per annum compared to advertised rentals for one bed (980 square feet) renting for between Dh45,000 and 50,000.

Jesse Downs, Director of Research and Advisory, Landmark Advisory, said: "These trends are a direct result of the supply pipeline dynamics in each community. In JLT, the majority of supply pipeline has now been handed over, causing the steep declines."

Business Bay, however, has weathered the storm well with declines of seven per cent only, Landmark said.

"The majority of the supply pipeline is still under development in Business Bay. We, therefore, expect rents to continue their downward trajectory with significant declines anticipated in the coming years. Naturally, there are also other factors that will impact rents in each area such as location, infrastructure, and licensing costs and procedures."

According to Landmark, commercial rents have continued to decline since June with the freehold market having borne the brunt of the decline.

Residential rents will decline in Dubai despite Abu Dhabi commuter demand.

"We estimate that average vacancy rates in Dubai are currently 15 to 18 per cent, but will increase to 19 to 24 per cent by 2012. Even considering the Abu Dhabi commuter demand, it is clear that average rents in Dubai will continue on a downward trajectory," said Downs.

The latest guide found apartment rents to have fallen all over Dubai with very few exceptions. The biggest declines occurred in areas such as Dubai Marina, JLT and The Views, primarily caused by the handover of new buildings. The lower limit for a high quality two-bed in Dubai Marina has declined by 27 per cent since June, whereas a comparable unit in Downtown has only declined by six per cent in the same period.

Landmark predicts lease rates will continue to decline, especially in areas, which suffer from maintenance and infrastructure issues.

"Landlords of newly handed-over units are willing to severely undercut market rates to achieve occupancy. While some may claim this is an anomaly, these properties are setting the new market rates. While rents will continue to fall across Dubai, these new pricing strategies have particularly significant implications for the areas with the most substantial supply pipelines," she added.

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