Dubai rents to continue dropping, but not for long
There has been talk of rents falling in Dubai for a while now, but many tenants say that they haven’t felt the benefit of the decline. According to CBRE (the world's leading commercial property and real estate services adviser) the average rent in Dubai reduced by one percent in the first quarter of 2017. The small but significant decline is due to an increase in supply of properties.
And that’s just the overall decline. According to the 2017 Q1 report by Core Savilles, some areas have seen a much greater drop. The report shows that The Views and Discovery Gardens had the biggest reduction with seven percent, followed by The Greens which dropped five percent.
David Godchaux, CEO of Core Savills explained that the reduction is partly due to lack of demand.
“Looking at the rental market, the total pool of tenants has decreased over the last 2 years due to macroeconomic employment deterrents while new occupier demand has not fully covered the gap,” he said. “Of this occupier demand, a segment of tenants who could afford to shift to ownership in the backdrop of relatively lower acquisition prices and higher yields, have done so - reducing the existing pool of renters even more., The market continues to bring new supply at unchanged pace from the past few years, adding downward pressure on rentals.”
He added, “For this reason, we do not expect a recovery in rental levels in 2017 across most of the residential sub-markets and are firm on our previous forecast - a trend further illustrated by the widespread rental drops across 19 of the 20 residential districts that we track.”
But that doesn’t mean that this decline will continue. According Codchaux says that he expects to see rents pick up in 2018, due to improvements in the employment market in the run up to Expo 2020.
And it seems that the employment uptick has already started. According to the latest Middle East Jobs Index from recruitment agency Robert Walters, there has been a three percent rise in the number of job postings from the end of 2016 to the end of March this year. Jobs areas that have seen the strongest growth in the last quarter include procurement and supply chain jobs, and sales and marketing.