Monday, Feb 20, 2017

Dubai: For more of Sharjah’s tenants, rental declines are starting to happen.

What started off in a small way during the fourth quarter has picked up pace in recent weeks as lease renewals come up for negotiation. And the good news for residents is likely to continue.

“Rates are expected to decline further in 2017 as a continuous supply of affordable property in Dubai will limit demand in the Northern Emirates; Sharjah and Ajman are expected to witness a more notable downward pressure on rates compared with Ras Al Khaimah and Umm Al Quwain,” states a new update from Asteco.

Historically, property market trends in Sharjah have lagged those in Dubai by a few months.

And many of Dubai’s freehold communities went through marginal rental drops last year, which is now being mirrored in Sharjah.

Tenants who want to seek a new location — either for lower rents or a better quality of build — are also coming across more options than was the case in earlier years.

According to John Stevens, managing director of Asteco, further declines are possible if the supply of affordable property in Dubai continues to stifle demand in the Northern Emirates.

Through last year, apartment rents in Sharjah fell 3 per cent on average, with a typical two-bedroom apartment at around Dh31,000. Another factor had a hand in the shifting Sharjah rental dynamic. The Sharjah Municipality decided in the third quarter of 2016 to increase the rent attestation fees from 2 per cent to 4 per cent of the annual rent, “which resulted in a reduced number of tenant relocations and upgrades within the emirate”.

“However, to arrest the slide landlords in Sharjah have offered rent-free periods and more flexible payment plans (six to 12 cheques) in order to retain existing tenants and attract new ones,” said Stevens. “For example, the newly completed Sahara Tower offered rent-free periods in order to increase occupancy levels.”

Apartment rentals in Ras Al Khaimah also dipped, but by a marginal 1 per cent on average. (But there was a 2 per cent increase within masterplanned communities such as Al Hamra Village and Mina Al Arab, which “outperformed mature apartment units due to enhanced product offerings”.)

“With the handover of more than 1,400 apartment units on Al Marjan Island, rental income elsewhere in other master-developments are expected to come under downward pressure, as better quality options will become available to tenants, at similar rental costs when handed over,” Stevens said.

And in Ajman, apartment rents are down 2 per cent year-on-year, with a standard one-bedroom renting at Dh31,000. But those in Umm Al Quwain were unchanged from 2015 levels.

Sharjah’s commercial realty in flat mode

Sharjah’s office leasing market trends were relatively flat right through 2016 due to a lack of demand. “Rental rates in the newly handed over Al Marzouqi Tower decreased from Dh65 per square foot to Dh55,” states the Asteco report.

“This was in addition to rent-free periods of up to three months offered by the landlord to encourage take-up. The Sharjah commercial market is expected to remain stable or, in some areas, show marginal rate declines during 2017 due to new supply combined with lacklustre demand for office space.”

— M.N.

Staff Report

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