By Shane McGinley www.arabianbusiness.com
Delay-hit Business Bay is struggling to attract tenants as an upsurge in construction activity across Dubai squeezes rental rates and occupancy levels, consultancy firm CB Richard Ellis said.
“Despite a prominent location adjacent to the existing central business district (CBD), Business Bay faces a battle to reverse huge vacancy rates,” the firm said in a report Sunday.
Rental rates for one-bedroom apartments in the development average around AED55,000 ($14,974) per annum, or around 36 percent lower than those in the nearby Downtown Dubai district, which average around AED75,000 ($20,419).
“Tenants have proved unwilling to contend with ongoing infrastructure issues and facility shortages,” analysts wrote.
Average residential rates in Dubai declined 17 percent over the last 12 months, with the biggest fall seen in studio apartments, the report said.
In the commercial sector, landlords are struggling with a glut of supply. Office space in the emirate was estimated at 5.7 million sq m at the close of the first quarter, reflecting an annual increase of 17 percent.
“With increasing competition in the market some landlords are now offering all-inclusive deals covering rent and service charges, whilst some even cover chiller costs and DEWA charges,” the report said.
Lease rates within the CBD, but outside DIFC, are down three percent on the year, the report said.
The CEO of H&H Investment and Development, which launched its AED300m 014 property in Business Bay last month, said the district will need another three years before it is completed as low occupancy rates deter new tenants.
Around a quarter of units in the 014 Tower are occupied but a number of tenants who bought space in development in 2006 have not moved in, despite the handover of office space.
“The location they are in right now gave them such a favourable rate it is actually cheaper to rent than to fit out a new office so we said we will wait for a couple of years,” Lufti said.
The 64 million sq ft Business Bay is set to become home to about 191,000 people across 240 towers when completed.