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Tenants on the lookout for new premises needn’t limit their search to clusters in New Dubai alone — there are new homes getting delivered in substantial numbers elsewhere in the city as well.
According to JLL’s latest update, Wasl Oasis II — a 13-building project in Muhaisanah, near Sharjah’s border — has added 690 units to the tally during the third quarter. The period also saw the “largest completion of villas”, with 400 units delivered at Rahat Villas, the second phase of the Mudon project in Dubailand.
In all, based on JLL estimates 5,400 homes were delivered during the third quarter — and the highest quarterly completion rate since the fourth quarter of 2012 (when 6,200 units were handed over). If so, this is despite developers taking a slower approach towards project completions and thus prevent the risk of too much supply entering the market at the same time.
As of now, all of the new supply hasn’t had much of an impact on rental rates. JLL’s latest update says rentals remained unchanged during the third quarter. With Q3-16’s 5,400 units and another 11,000 scheduled for the fourth quarter, it is still conjecture whether this would start tilting the balance towards a drop in rentals. (The fourth quarter releases could include the 2,500 town houses and apartments at the Akoya development by Damac in Dubailand.)
If there is no change on home lease rates, Dubai’s rental market situation would remain at a disconnect with trends in sales prices.
But “with only minimal change reported in prices and rents during Q3, it appears the residential market has now reached the bottom of its current cycle,” JLL reports. “While we expect prices and rents to recover in 2017, the pace of this recovery is expected to be limited by economic uncertainties and the volume of potential supply.”
On a year-on-year basis, JLL’s estimates suggest an average rental decline for apartments by 4 per cent as of Q3-16. “The pace of decline also seems to be moderating in the villa segment (where prices and rents fell by a marginal (1 per cent) over the quarter.”
On the office realty side, the third quarter saw delivery of 51,000 square metres of gross leasable area, with 64 per cent being single-owned projects in Tecom such as The Butterfly and Al Sajwani buildings. The rest were “strata-titled space in Business Bay, which has been the most active precinct for completions so far in 2016.”
Also, during this period, projects that started life marked for office premises saw conversions into residential use. These include the Le Presidium, Nova and Moon towers — together occupying 55,550 square metres.
“An additional 152,000 square metres of GLA is scheduled to be delivered in Q4, almost three times that delivered during Q3,” the report states. “Business Bay continues to be the focus for completions, with projects also expected to complete in Silicon Oasis, the Greens and Tecom.”
Tenants are also looking for smaller units. “This reflects occupiers’ caution in the face of more challenging economic conditions in both Dubai and across the broader region.” said Craig Plumb, Head of Research, JLL MENA. “While there remains strong demand for smaller units, it is taking far longer to negotiate larger deals as companies remain uncertain about their staffing and space requirements.”
Developers/owners are changing tack accordingly. The Index Tower in DIFC divided four of its floors into smaller units, offering suits of 50-, 150- and 300 square metres on a fully-fitted ready-to-lease basis. “The exercise has proven to be successful, with most of these floors now leased,” said Plumb.
Source: Manoj Nair, Associate Editor, gulfnews.com