Dubai villa rentals increase 3pc in Q1
Dubai, May 15, 2012
The residential villa market in Dubai experienced positive rental rate growth for the first time since 2008/2009, with average lease rates increasing by 3 per cent in Q1 this year from the previous quarter, a report said.
However, rates remained down by around 1 per cent year-on-year, said CBRE MarketView for Dubai Q1 2012.
Meanwhile office lease rates within the CBD area were again largely unchanged, a trend now spanning five straight quarters.
The report said rental rate levels for freehold villa properties grew by around 3 per cent in Q1,2012, whilst growth in units in leasehold areas was significantly less, at around 1 per cent.
The highest increase in lease rates took place in the two-bedroom sector at 5 per cent, followed by five and six bedroom units which both increased by around 3 per cent, it said.
Areas offering an established community environment, combined with quality amenities and facilities continue to see the most impressive levels of growth and also remain in relatively short supply, the report said.
Developments such as Emirates Living and the Palm Jumeirah have shown positive growth over the last three quarters. Overall lease rates in Emirates Living have increased by 6 per cent year-on-year, with a two bedroom villa in the Springs which was achieving a lease rate of Dh70,000 to Dh85,000/unit/annum in Q1,2011, currently being offered in the range of Dh85,000 to Dh100,000/unit/annum - depending on the location and quality of the villa.
For apartments, the highest increase in Q1 2012, was for one bedroom units, which grew by 2 per cent during the quarter, whilst three bedroom units grew by 1 per cent. Within the emirate’s freehold areas, the highest increase in lease rates took place in the Greens at 7 per cent, followed by Downtown Dubai where rates grew by 6 per cent, the report said.
Emerging residential locations such as International Media Production Zone, Dubai Sports City, Dubai Silicon Oasis, Dubai Investment Park and Jumeirah Village continue to see deflationary pressures on lease and occupancy rates due to lack of facilities, amenities and developed infrastructure.
By the end of Q1,2012, 1,000 residential apartments had been completed at Dubai Sports City (DSC) in both strata title and single owned towers. Of these units, 25 per cent are single owned while 75 per cent are owned on a strata title basis.
Lease rates in DSC range between Dh30,000-36,000/pa and Dh40,000-55,000/pa for one and two bedroom units respectively, unchanged from the previous quarter.
On a year on year basis, apartment lease rates in emerging locations have fallen by around 7 per cent.
Office lease rates in CBD currently range between Dh1,080 to Dh1,940/sq m/pa inclusive of service charges, the report said.
Prime commercial areas around the CBD and DIFC continue to see increasing occupancy levels compared to secondary and tertiary locations, a trend that will force further declines in lease rates and rising vacancies in the less desirable office areas, it said.
The majority of recorded demand during the quarter emanated from existing tenants looking for relocation, consolidation or expansion with only limited demand from incoming occupiers, the report said.
Meanwhile, Dubai office space supply remains on a sharp upward track as projects launched during the peak of the market have added to the levels of stock. Total office space inventory has now reached close to seven million square metres, an annual growth rate of 18 per cent since Q1,2008.
The report said the positive economic growth forecast for 2012 will provide a stimulus for an improvement in the overall business environment which could have a knock on impact for the commercial office sector. However, with new stock entering the market, lease rates are likely to remain broadly unchanged, with current rents below 2005 levels.
Dubai’s CBD is expected to see further improvement in occupancy levels due to limited new stock, the availability of fitted office space, increasingly competitive lease rates and landlord incentives. Stock in the CBD is expected to grow by around 66,000 sq m during the year, of which around 30 per cent is already committed for occupation.
Secondary and tertiary locations will again struggle in terms of occupancy and lease rates as supply is comfortably exceeding demand in these areas, the report said.
The residential sector will see area-specific strengthening of lease, sales and occupancy rates as pipeline supply in developed locations has become increasingly scarce. The market for established villa locations such as Emirates Living, Arabian Ranches and Palm Jumeirah will remain strong during 2012 with limited new inventory expected in these locations. However, new supply will enter from emerging areas such as Jumeirah Park, Al Furjan and Jumeirah Golf Estates, which will result in an expanding villa inventory over the next 12 to 15 months, CBRE said. - TradeArabia News Service
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