Dubai rents down 1% in Q3; villa rates fall 11%

Dubai - Tighter government regulations, higher inflation, fall in oil prices and a stronger dollar have made Dubai property expensive for both local and overseas investors.

The Dubai residential market saw a marginal decline of one per cent in rents in the third quarter of 2015, said a report issued by consultancy JLL.
The sales market continued its downward trend, with villa prices declining by 11 per cent over the year to August. The general sales index dropped 10 per cent Y-o-Y in August.
Tighter government regulations, higher inflation, fall in oil prices and a stronger dollar have made Dubai property expensive for both local and overseas investors. This has resulted in a decline in the volume of transactions and a consequent drop in prices.
"Prices are expected to continue softening over the remainder of the year and into 2016, before the emirate witnesses another growth cycle in the years leading up to Expo 2020," said Craig Plumb, head of research at JLL Mena.
Office sector
Meanwhile, in the commercial sector, demand stays robust for Grade A space in the Central Busines District. Buildings in Dubai International Financial Centre (DIFC) enjoy high occupancy and, therefore, high rents too. Grade B stock in secondary locations have high vacancy rates and rents have declined marginally as a result.
According to JLL, Q3 saw the delivery of around 283,000 sq m of office gross leasable area (GLA), of which 53 per cent are strata-owned buildings located in Business Bay. An additional 948,000 sq m of GLA is scheduled to be delivered by 2017.
"However we remain cautious on the delivery of these projects within this timeframe. Already, some towers have been delayed, while others like Symphony Tower and Platinum Tower in Business Bay [initially scheduled for delivery in 2016] have been converted to hotel apartments," Plumb said.
He added: "One notable trend is tenants are now migrating between free zones as licensing requirements are relaxed. The limited supply of new office space in Tecom has resulted in many tenants moving to the nearby JLT free zone."
How hotels fared
The hotel market continued to witness a slowdown in performance in Q3. This was driven by a decrease in tourists arriving from Russia, South Asia, Far East Asia and Africa.
Annual rent growth across all mall types continued to slow down in the face of sluggish retail sales. Landlords are adapting to this new reality by adjusting rents to retain tenants. "We expect rents to drop over the next quarter and into 2016," added Plumb.
- deepthi@khaleejtimes.com

• Dubai