| 07 Oct 2009 |
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Dubai's Property Prices Not Expected to Rise in the Short-term
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DUBAI -- Commercial property prices in Dubai are not expected to rise in the short-term as new supply will enter the market amid lacklustre demand, said real estate advisory company Investment Boutique.
Apart from prices and rentals going down significantly in the residential sector since the fourth-quarter of 2008, rentals and yields in the office segment are expected to fall further.
Investment Boutique estimated office supply to reach 37.5 million square feet by the end of 2009, 44 million square feet in 2010, and 48.5 million square feet by 2011.
It said this increased supply is expected to increase vacancy rates to 11 per cent in 2009, 28 per cent in 2010 and 31 per cent in 2011. "While these vacancy levels seem high, we have already started seeing reports saying that these vacancy levels have reached over 25 per cent in some buildings and business parks." The downward spiral in the office sector will continue until prices and rents reach their bottom and the economy as a whole starts to pick up pace, Investment Boutique said in a a statement on Sunday.
Companies looking to relocate in more affordable and quality work spaces will be deluged with more flexible rental terms as landlords jostle to attract long-term tenants.
"The year 2009 has been a tenant's dream with bargaining power rising by leaps and bounds. Companies on the lookout for space are looking for lower price points with additional facilities, while current leases are being negotiated." Investment Boutique added that continued job losses and uncertainty about the economic crisis, are expected to continue to adversely impact the demand for office space this year.
Jones Lang LaSalle, another real estate advisory firm, said that while investor confidence in Dubai real estate is improving, property prices and rentals will remain weak for the remainder of the year, as significant supply coming into the market will douse attempts to raise prices. However, the pace of decline is easing as sentiment among both investors and occupiers turns more positive, it said.
"There is a real feeling that the worst of the crises is behind us and that markets will stabilise somewhat during 2010," Jones Lang LaSalle said in ?a report.
Jones Lang Lasalle said that the significant re-pricing that occurred in 2009 is also likely to stimulate renewed demand once the downcycle stage is hurdled, as Dubai, despite its recent economic setbacks, continues to be one of the most competitive cities in the region. It agreed with Investment Boutique that the office space market is facing more price pressures.
"Although the market is starting to witness tentative signs of improvement, with tenant activity beginning to pick up and rental decrease slowing down, the office market faces an uncertain time as a result of the future supply of new stock. This is likely to increase the already high vacancy rate and put additional pressure on rents."
© Khaleej Times 2009
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