The property market in the UAE has become more attractive to tenants as average rental rates softened in the third quarter, according to real estate consultancy JLL.
Residential rents in both Dubai and Abu Dhabi are close to bottoming out, a JLL report released on Sunday said.
House rents in Dubai are 12 per cent cheaper in the third quarter while the emirate's residential sales prices are 9 per cent lower annually.
Nearly 12,000 residential units were handed over in Dubai in the third quarter and the consultancy estimates another 26,000 units are set to be delivered in fourth quarter. A total of 600 units were handed over in Abu Dhabi between July and September, while 3,000 units are expected to be delivered in the fourth quarter.
A separate survey by property company Core found that rents in some Dubai communities – including Jumeirah Village Circle, Dubai Sports City and Dubailand – reduced by as much as 20 per cent from the previous year between July and September.
Abu Dhabi house rents were between 3 per cent and 4 per cent lower for apartments and villas respectively on an annual basis. Sales prices for apartments slid 5 per cent, while villa sales were 1 per cent cheaper over the same period, as per JLL data.
Developers are expected to continue to offer incentives such as fee waivers, discounts, rent-to-own schemes, as well as partnerships with banks to attract investors and end-users, the report added.
Dubai’s office market saw new stock additions in the third quarter, with 190,000 sq m of gross leasable area delivered in DIFC, Downtown Dubai and Mohammed bin Rashid City, the JLL report said. ICD Brookfield Place in DIFC, home to the first Leed platinum commercial tower in the region, was the most notable completion of the year. Abu Dhabi saw no additional commercial stock during this period.
Following "increased mobility during the quarter, there has been a considerable increase in the level of new leasing enquiries in the office sector", said Dana Salbak, head of research, JLL Mena.
“Existing tenants also continue to either consolidate operations, seek more attractive lease terms, and, in some instances, look to relocate to quality space.”
With an additional 36,000 sq m and 47,000 sq m of GLA scheduled to be delivered in the last quarter in Dubai and Abu Dhabi respectively, office landlords are offering various incentives to either attract new tenants or retain existing ones.
Majority of commercial occupiers in Dubai are seeking fitted spaces and have limited appetite to invest in shell and core spaces, the JLL report said.
The retail sector in both Dubai and Abu Dhabi saw an increase in revenue share-based agreements and retailers engaging with landlords to restructure deals and seek additional rent free-periods.
“Although the reopening of malls has brought a gradual recovery in sales compared to the last quarter, consumers continue to focus on essential goods rather than leisure items when it comes to spending,” the JLL report added.
Dubai's retail stock rose by around 25,000 sq m during the third quarter while Abu Dhabi saw no new deliveries.
Additional retail space of 286,000 sq m in Dubai and 7,000 sq m in Abu Dhabi will be added in the last quarter of the year, estimated JLL.
The UAE’s hotel sector is witnessing demand from domestic tourists, who increasingly prefer beachfront hotels and private villas. JLL forecasted that the lower market segment and business hotels are expected to take time to recover.
Approximately 2,000 keys were added to Dubai’s hotel stock over the quarter, bringing the total to 131,000 keys. Abu Dhabi’s hotel supply remained stable at 30,100 keys. In terms of future supply, Dubai and Abu Dhabi have 9,000 and 200 keys scheduled for delivery in the fourth quarter, respectively.