| 29 Jul 2010 |
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UAE: New security provision to restrict tenant movement
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DUBAI -- Landlords in Dubai are seeking greater security provision in their rent agreements as they grapple with the issue of increased tenant movements amid drastic drop in rents and occupancy rates, property research company CB Richard Ellis (CBRE) said on Wednesday.
To discourage tenants from moving mid-lease, landlords are adding penalty clauses to the rent agreement. They can implement the clauses in the event such contracts are broken during the agreed lease period, CBRE said in its latest market report.
According to the report, the last two quarters of 2010 will see a huge number of new residential units entering the Dubai market leading to a further fall in rents.
In the third quarter, however, the real estate market is expected to remain relatively passive due to the impact of the summer slowdown and Holy Month of Ramadan, the latest market review by the company said.
"With a huge number of ready-to-move-in properties available in the market, some relaxation of lending conditions could act as a positive catalyst for the transactional side of the market," Mathew Green, head of research at CBRE Middle East said.
Residential lease rate in the second quarter remained little changed as some short term stability was found. "However, analysis of the year-on-year figures indicated a decline of 33 per cent for certain areas. The highest drop was noted for one bedroom units with fall of 37 per cent in the second quarter," he said in the report.
"The lowest drop has been within the three bedroom category, a 29 per cent drop. Among the non-freehold locations, Al Barsha was found to have suffered the most severe drop in lease rate with a decline of 44 per cent over the market peak," CBRE report said.
The highest drop in the freehold category has been within the Jumeirah Lakes Towers and the Greens, which have seen rentals dipping by 40 per cent and 36 per cent respectively.
Office rents in Dubai dropped by as much as 17 per cent in the second quarter as new supply put pressure on landlords, the report said.
About 240,000 square meters of commercial space became available in areas such as Al Barsha, Tecom and Jumeirah Lakes Towers, said Green.
Last month, CBRE said average retail rates in Dubai dropped 45 per cent year-on-year and are now one of the lowest in Europe, the Middle East and Africa.
Retail rental rates in Dubai averaged around $679.60 per square metre per annum in the second quarter of 2010.
The report found that while rents remained unchanged during the most recent quarter, they have fallen 45 per cent since the same period last year, and are down 56 per cent since the peak of the boom years.
CBRE surveyed 49 cities across Europe, the Middle East and Africa and Dubai experienced the largest decline in annual rents, making it now the sixth cheapest city in the report for retail space.
By Issac John
© Khaleej Times 2010
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