UAE commercial landlords offer tenant incentives as demand falls

Demand for commercial property among both investors and occupiers continued to weaken in the second quarter of 2017 said the RICS. (Reuters)

LONDON: Commercial property landlords in the UAE have been forced to offer tenants better incentives to stay as occupier demand fell for the seventh consecutive quarter.
The claim, made in the latest quarterly report from the Royal Institution of Chartered Surveyors (RICS), represents the latest dampener on hopes that the market may be about to turn the corner.
Occupier demand fell across office, industrial and retail property as the amount of leasable space continued to rise.
“The excess supply combined with deteriorating demand prompted landlords to increase inducements further during the second quarter,” the report said.
Near-term rent expectations remained downbeat for the ninth consecutive quarter while 12-month rent expectations also edged lower with respondents expecting a fall of more than 2 percent over the coming year.
RICS also said that the trend in foreign enquiries relating to taking commercial property was also in negative territory.
Most respondents to the survey thought the market was in mid-downturn, while 21 percent said it was near the bottom.
According to estimates from property broker JLL, the Dubai office market saw the delivery of about 33,000 square meters of office space in the second quarter of the year.
A further 190,000 square meters is expected to be completed in the second half of 2017.
The broker said that no major office completions took place in Abu Dhabi during the second quarter with the total stock of office space remaining at 3.5 million square meters.
Job losses have hit some corporate occupiers in both UAE cities, as the weak oil price and subdued consumer sentiment hurts demand for commercial space.
The retail sector has also come under pressure because the strong dollar, to which the dirham is pegged, has made purchases expensive for some holidaymakers.
Still, the RICS said that the supply of properties for sale is rising at a slower pace across all sectors and that projections are marginally positive for prime retail assets in the country.
The Investment Sentiment Index moved to a reading of -14 from -35.
That shows that even though overall conditions are deteriorating, the negative trend is diminishing gradually, RICS said.
However prime office locations as Dubai International Financial Center and Dubai Media City remain in high demand with tenants.
Globally, commercial property sentiment remains in positive territory according to the RICS Global Commercial Property Monitor.
Both the headline occupier sentiment and investment indices were positive in 23 of the 32 countries tracked.