It is not just likely to happen in the residential housing market in Dubai, but commercial space owners are also contemplating offering freebies to ensure occupancy.
Owners of commercial space will have to take a flexible approach by offering fit-outs to rent-free periods to protect rate and occupancy levels, according to Core, UAE associate of Savills.
“Given regional uncertainty arising from hydrocarbon price movements, landlords will need to be particularly flexible in 2016 to protect both rate and occupancy levels,” the first quarter 2016 report said.
“With Expo 2020-related businesses increasingly seeking office space and supply growth in Dubai moderating, it is likely that the market’s internal dynamics will drive stabilisation through 2016 and a bounce in oil prices, when it comes, will support further growth thereafter,” it added.
Office sales market witnessed a drop in prices across all locations with secondary districts such as Business Bay, Tecom C and Jumeirah Lakes Towers (JLT) seeing a higher year on year decline at 9 per cent, 13 per cent and 17 per cent respectively.
Rents, however, fell 4 per cent in Downtown Dubai and three per cent in Dubai International Financial Centre (DIFC) as they outperformed secondary locations, which indicates strong investor demand exists for quality Grade A commercial products that are well managed, with sufficient parking and lifts, large floor plates and high profi¬le tenants.
= New supply in Business Bay
The report states that total office supply will grow by seven per cent this year with the majority of supply coming in Business Bay.
“The growth in supply is likely to be most significant in Business Bay over the next few years as the area seeks to establish itself as one of Dubai’s premier business districts. Given the rapid growth in supply, office sector sales prices in this area remain under slight downward pressure, at least for the moment,” the report said.
By the end of 2015, office market supply reached an estimated 8.4 million square metres of which around 2.4 million square metres (28 per cent) was located in DIFC, Downtown Dubai, Sheikh Zayed Road, Dubai Internet City and Dubai Media City.
The bulk of supply - 4.2 million square metres (51 per cent) – was in the “secondary” office locations such as Business Bay, Deira, Bur Dubai, Dubai Healthcare City, Tecom C and JLT.
“2015 was an interesting transition year where, on the back of overall softening demand for office space in the UAE, prime properties significantly outperformed the average market in terms of rental rates and occupancy levels,” Core UAE Chief Executive David Godchaux said.
“We expect this trend to continue over the next few years with relatively strong underlying demand for quality office space that is currently not being fully met. This has resulted in a widening gap on rate and occupancies between prime and Grade B offices,” he added.
= No commission, multiple cheques
Emirates 24|7 did report in January 2016 that landlords were offering freebies such as zero commission to multiple cheque payments.
A number of online and print listings scanned by this website showed landlords in Bur Dubai, Karama and Deira were waiving off commission.
In February 2016, Asteco, real estate consultancy, said residential rents would fall in 2016 and 2017 if “all housing units are delivered on time.”
“Rental performance in 2016 will be highly dependent on the timely delivery of supply. Assuming the anticipated supply is handed over on time, rental rates are likely to come under pressure over the course of not only 2016, but also 2017 onwards,” the consultancy said.
However, JLL, a property consultancy, has said that the UAE was unlikely to see oversupply of housing units and commercial space in 2016, but admit that rentals will “soften in the short term.”