Commercial tenants hold all the aces in Dubai
Dubai commercial property market continues to favour tenants as commercial landlords across all areas of the emirate are becoming more flexible on rental values, according to a report from Cushman and Wakefield Middle East (C&W), part of the world’s largest privately held commercial real estate services firm.
“With more than 16 million square feet of new supply entering the Dubai office market in 2010, the balance of favour is not going to shift back to landlords any time soon. The tenant is king for the foreseeable future,” said Mike Atwell, Middle East Head of Operations, C&W.
C&W’s Marketbeat Q3 2010 report provides a comprehensive summary of key economic indicators, as well as a full breakdown of the office, retail and hospitality sectors for each of the top eight markets in the region – Bahrain, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Turkey and the UAE.
KEY FINDINGS FROM DUBAI MARKET
OFFICE
• Outlook is of an overall downward trend going forward despite a slowdown in the pace of rent reductions.
• Landlords are becoming more flexible with rents as companies interested in buying or leasing office space balk at unrealistic asking prices.
• An estimated 16 to 20 million sq ft will enter the market this year, keeping vacancy rates above 50 per cent in secondary locations and around 12-15 per cent in primary central business districts.
• Strong demand for high-quality properties.
• Tenants are increasingly looking to secure long-term fixed leases in order to take advantage of the current situation.
• Average headline rents in prime locations are currently standing at Dh220-350 per sq ft per annum, with the exception of the DIFC where rents are still around Dh300-350.
RETAIL
• Flagship malls such as Mall of the Emirates, Dubai Mall and Deira City Centre have become more tenant-orientated by offering more favourable lease terms.
• Third quarter headline rents flat year on year.
• The average retail rent currently stands at Dh220-240 per sq ft per annum, with flagship destination malls commanding a 35-45 per cent premium.
• Gross leasable area likely to remain stable at approximately 26 million sq ft, cushioning rents from falling further while maintaining current occupancy rates.
HOSPITALITY
• Dubai has the highest occupancy levels of all eight countries surveyed, rising 5.5 per cent year on year driven by a 8.3 per cent drop in average daily rates (ADR).
• Although Dubai has the third highest revenue per available room (RevPAR) for the year to date at $157, that still represents a decline of 3.2 per cent.