Developers are expected to continue offering a range of incentives such as fee waivers, discounts, rent-to-own, as well as partnerships with banks to attract new investors and end-users looking to take advantage of the lower prices, according to JLL's latest UAE Real Estate Market Performance.
"Looking ahead, the residential market is expected to remain under pressure in the short term in light of various macro uncertainties, namely high unemployment rates and a slowdown in population growth. This is in addition to subdued investor sentiment on a global level," said the report.
"With the ease of lock down measures and increased mobility during the quarter, there has been a considerable increase in the level of new leasing inquiries in the office sector. Existing tenants also continue to either consolidate operations, seek more attractive lease terms, and, in some instances, look to relocate to quality space - a trend we are seeing across sectors in the country," said Dana Salbak, head of Research, JLL Mena.
Dubai's office market saw its first new stock additions of the year, with a total of 190,000 sq m of office GLA (gross leasable area) delivered in the DIFC, Downtown Dubai and MBR City, bringing the total stock to 8.9 million sq m of GLA. The most notable of these completions is the ICD Brookfield Place in the DIFC.
In Abu Dhabi, no additional stock was delivered, keeping the total supply at 3.8 million sq m GLA. An additional 36,000 sq m and 47,000 sq m of GLA is scheduled to be delivered over the last quarter in Dubai and Abu Dhabi respectively, including office buildings in Dubai Production City and a Grade A building in Abu Dhabi.
"The ease of lockdown measures and increased mobility during the quarter has brought about a considerable increase in the level of new leasing enquiries in Dubai. Meanwhile existing tenants continue to either consolidate operations, seek more attractive lease terms, and in some instances look to relocate to quality space," JLL said in its report.
Taimur Khan, Associate Partner - Strategic Consultancy & Research at Knight Frank, said, the trends of consolidation of space and flight to quality are likely to continue. "Occupiers are, where possible, looking to take advantage of weaker market conditions to upgrade occupational space whilst being mindful of increasing total spend. Finally, landlords are expected to remain flexible in order to retain and attract occupiers. Incentives to achieve this include but are not limited to flexible payment terms, CAPEX contributions and rent free periods."
According to Knight Frank, prime office rents in Dubai fell by an average 6.5 per cent the first nine months of 2020, according to the latest market update by Knight Frank Middle East.
In Dubai, rental rates recorded an all-time low in third quarter of 2020, with declines of 12 per cent year-on-year, surpassing the lowest point of 2010/2011 on the rental index. Additionally, sale prices continued to decline, falling 9.0 per cent year-on-year, JLL report said.
Abu Dhabi's residential market also recorded some softening, albeit to a slower extent than Dubai. Rental rates declined 3.0 per cent and 4.0 per cent for apartments and villas respectively on an annual basis. Similarly, sale prices also noted declines of 5.0 per cent and 1.0 per cent for apartments and villas respectively over the same period.
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