DUBAI: Dubai’s battered real estate market got more bad news Wednesday when a leading property company said it saw little hope of a rebound after office leasing rates plunged more than half in a year.
The bleak assessment by CB Richard Ellis is the latest indication that the Middle East commercial hub’s once hot property market faces an uncertain future even as new properties such as the more than half-mile-high Burj Khalifa, the world’s tallest skyscraper, continue to open their doors. Figures released by the firm show that the office space filling Dubai’s numerous high rises and purpose-built business parks has been hit even harder by the emirate’s property slump than residential units.
“The real estate market remained sluggish during the final quarter of 2009 with few signs to suggest any imminent upturn in fortunes,” the Los Angeles-based commercial property giant said in its report.
Office leasing rates tumbled 57 percent in the fourth quarter from their level the previous year, according to the property company. It estimates some brand new office buildings stand more than 30 percent empty.
To cope with the glut, landlords have begun offering tenants rent-free periods and more flexible payment terms, among other perks. The situation is likely to get worse before it improves as more buildings open up, said J.P. Grobbelaar, director of research and advisory for real estate consultancy Colliers International in Dubai. He said the supply of office space is expected to double over the next two to three years.
“These are buildings that are currently under construction. We’re talking about buildings coming out of the ground,” he said. “We just don’t see where the demand for that sort of supply is going to come from, not unless the economy grows hugely.” As recently as the second half of 2008, prime office space in Dubai was packed nearly to capacity, Grobbelaar said. Foreign companies poured into the city to take advantage of its growth as the financial and logistics center of the booming oil-rich Persian Gulf. Now those companies are cutting back on staff or going out of business because of the economic downturn.
“There’s just not enough people to occupy the space,” he said.
CB Richard Ellis’ figures show residential property prices also fell sharply, with rental rates down about 40 percent over the previous year. That largely matches findings released by Colliers last month. It said home prices in the city-state edged up 1 percent over the previous quarter, but remained 42 percent below their level a year earlier.
That puts prices at roughly their same level as they were at the middle of 2007.
