Dubai landlords have been told to buck up their building management, as rents in the emirate were tipped to plunge even further this year.
As real estate consultant Jones Lang LaSalle (JLLS) rolled out its forecast for the sector for 2011, its regional director of management consulting Jesse Downs, told 7DAYS that in a renter’s market a “major issue for tenants is the quality”.
“That is not just down to the build quality it is also determined by the management quality,” she said. “A lot of the stock in Dubai is new and we have seen some examples of where poorly managed buildings have suffered greatly.
“The actual quality of asset management will be a critical point.”
Craig Plumb, regional head of research, said the firm believes Dubai rents will continue to decline this year and that it “would expect [rents] to probably reach a bottom in 2012.”
He said one of the legacies of the global financial crisis in the Dubai rental market was shoddy maintenance standards.
“There has been a lot of pressure to get service charges down but maybe that is not right thing to do because that will affect the quality of the [building] management,” added Plumb.
Both experts said landlords will be forced to fork out for better services and possibly outsource the work to professional companies. The quality of Dubai’s rental accommodation overtakes over-supply as the key threat to the rental earnings of landlord this year. The number of residential units that will enter the Dubai market this year is set to fall to 25,000 from a peak of 36,000 last year – with a similar trend in hotels and retail (see above chart).
Quality is just as important in the office sector. Downs said Standard Chartered bank recently elected to build its own office in Dubai, rather than take advantage of the current, ample supply.
“That is an excellent example of the importance of quality. You have a market that is oversupplied… and yet a large international bank is choosing to build its own building. That says that the quality and profile of property is not available out there.”