Dubai: Sharjah’s landlords with brand new high-end towers to lease are not doing themselves any favours by sticking to their high rental demands. More so, as Sharjah is all set to witness a freehold/long-term leasehold boom and which could convince more residents to buy rather than rent.
“These landlords seem to be fixated on certain prices, and primarily because they want to fill up the apartments, show a high rental income and make it attractive for a buyer to come in acquire the whole building,” said John Stevens, Managing director at Asteco, the property services firm. “This is why they are not willing to accept market reality and struggling to achieve the rents they demand.”
“In Sharjah, when properties are pitched at market rates, they are occupied. It’s a destination with constant demand.”
One reason why some landlords are proving inflexible is because of the stringent tenancy laws in the emirate, where contractual changes on the rent can be made only after three years for a new tenant and two years for an existing tenant. Their rationale is that it is better to secure the high asking rent now rather than have to wait around for three years to revise it. But with the current market conditions, it is quite a risk Sharjah’s landlords are taking. And it could only leave them with poorly occupied towers.
But in Dubai, the situation at the premium end of the rental marketplace is going through a bit of a turnaround. Whether it be the new town houses in Jumeirah, residential compounds from private developers in Barsha North, and high-rises on Shaikh Zayed Road, there is always someone willing to take it up for rent for the right rates. And landlords are willing to meet tenants half-way.
“The Dubai landlord understands the moods of the market and too many of them don’t want to see their units staying empty for months because of the price they charge,” said Stevens. “Where possible, they are reducing rents. Problem will be for landlords to retain tenants going forward when so much more choice becomes available in the market, especially at the high-end.”
Asteco defines the premium rental space for homes going for Dh175,000 a year and more.
Conservative estimates suggest that upwards of 55,000 homes are likely to be delivered by 2020, and quite a few of them will be put out for rent. Unless there is a surge in Dubai’s resident base during this period, it is likely that rents are going to remain in a narrow range on the upside.
For mid- to upper-mid residential leases, demand is very much there.
“We are handling the Duja Tower on Shaikh Zayed Road, and have hit the rent levels originally set,” said Stevens. “And I think we have got traction and exceeded the initial estimates on what was expected to lease out on a monthly basis. And we started leasing just two months ago.”
The G+52-storey Duja Tower features one- to three-bedroom apartments, principally in the Dh90,000-Dh170,000 range.
Are more companies letting their employees take out the leases directly?
“Apart from the airlines, hospital operators, hotels and schools, very few companies are leasing on behalf of their staff,” said John Allen, Valuation & Advisory at Asteco. “I won’t say that in the last 12 months we saw more of this change happening, but we are still seeing names on the residential leases changing from a company to that of the occupants.
“Earlier, corporates took leasing directly because there were limited choices... that’s no longer the case.”
Pockets of demand emerge for high-end residences in Abu Dhabi
The Abu Dhabi master-developer Aldar had back-to-back hits with sales of its mid-market offerings, The Bridges and The Water’s Edge. But freehold demand in Abu Dhabi is not confined to just the mid-market space. There are signs of a return of investor interest for the super-premium after what was an extremely tough going in 2016.
“We had instructions since April on 64 ‘Jawaher’ villas on Saadiyat Island and only 15 of them are left,” said John Stevens of Asteco. “And these are upwards of Dh19 million. There is clearly demand. It is also quite visible at other locations on Saadiyat [which is developed by TDIC] such as the Mamsha apartments, which are from Dh3.5 million.
By Manoj Nair Associate Editor Gulf News 2017. All rights reserved.
“These landlords seem to be fixated on certain prices, and primarily because they want to fill up the apartments, show a high rental income and make it attractive for a buyer to come in acquire the whole building,” said John Stevens, Managing director at Asteco, the property services firm. “This is why they are not willing to accept market reality and struggling to achieve the rents they demand.”
“In Sharjah, when properties are pitched at market rates, they are occupied. It’s a destination with constant demand.”
One reason why some landlords are proving inflexible is because of the stringent tenancy laws in the emirate, where contractual changes on the rent can be made only after three years for a new tenant and two years for an existing tenant. Their rationale is that it is better to secure the high asking rent now rather than have to wait around for three years to revise it. But with the current market conditions, it is quite a risk Sharjah’s landlords are taking. And it could only leave them with poorly occupied towers.
But in Dubai, the situation at the premium end of the rental marketplace is going through a bit of a turnaround. Whether it be the new town houses in Jumeirah, residential compounds from private developers in Barsha North, and high-rises on Shaikh Zayed Road, there is always someone willing to take it up for rent for the right rates. And landlords are willing to meet tenants half-way.
“The Dubai landlord understands the moods of the market and too many of them don’t want to see their units staying empty for months because of the price they charge,” said Stevens. “Where possible, they are reducing rents. Problem will be for landlords to retain tenants going forward when so much more choice becomes available in the market, especially at the high-end.”
Asteco defines the premium rental space for homes going for Dh175,000 a year and more.
Conservative estimates suggest that upwards of 55,000 homes are likely to be delivered by 2020, and quite a few of them will be put out for rent. Unless there is a surge in Dubai’s resident base during this period, it is likely that rents are going to remain in a narrow range on the upside.
For mid- to upper-mid residential leases, demand is very much there.
“We are handling the Duja Tower on Shaikh Zayed Road, and have hit the rent levels originally set,” said Stevens. “And I think we have got traction and exceeded the initial estimates on what was expected to lease out on a monthly basis. And we started leasing just two months ago.”
The G+52-storey Duja Tower features one- to three-bedroom apartments, principally in the Dh90,000-Dh170,000 range.
Are more companies letting their employees take out the leases directly?
“Apart from the airlines, hospital operators, hotels and schools, very few companies are leasing on behalf of their staff,” said John Allen, Valuation & Advisory at Asteco. “I won’t say that in the last 12 months we saw more of this change happening, but we are still seeing names on the residential leases changing from a company to that of the occupants.
“Earlier, corporates took leasing directly because there were limited choices... that’s no longer the case.”
Pockets of demand emerge for high-end residences in Abu Dhabi
The Abu Dhabi master-developer Aldar had back-to-back hits with sales of its mid-market offerings, The Bridges and The Water’s Edge. But freehold demand in Abu Dhabi is not confined to just the mid-market space. There are signs of a return of investor interest for the super-premium after what was an extremely tough going in 2016.
“We had instructions since April on 64 ‘Jawaher’ villas on Saadiyat Island and only 15 of them are left,” said John Stevens of Asteco. “And these are upwards of Dh19 million. There is clearly demand. It is also quite visible at other locations on Saadiyat [which is developed by TDIC] such as the Mamsha apartments, which are from Dh3.5 million.
By Manoj Nair Associate Editor Gulf News 2017. All rights reserved.
