UAE Cost of Living report: Businesses profit from fall in rents (page 1 of 2)

'Conversely, with the recent contraction in business demand, office rents in Dubai are thought to have fallen by 45% in the first quarter of this year, and a further 25% in the second quarter.'

Sale prices in Dubai's various office districts have fallen since their highs. Comparing August 2009 with Q4 2007, the report notes that prices in Jumeirah Lakes Towers have gone down by 28%, Business Bay by 15% and Dubai Silicon Oasis by 17%. Conversely prices in Tecom areas have risen by an average of 25% since 2007, buoyed by massive increases in 2008.

Fall in Dubai office rents

Rents in Dubai's office market are predicted to fall even further, as a report by Jones Lang Lasalle suggests that a further 25 million square feet of additional space is expected to come online by Q4 2011.

Office rents in Abu Dhabi are still higher than Dubai, pushed by the lack of availability, although a report on the sector in Q2 2009 by CB Richard Ellis, shows that these have also dropped by 30% to 40% since Q3 2008.

The average rent per square metre in Dubai districts ranges from Dhs1,453 in Business Bay and Dhs1,366 in Jumeirah Lakes Towers to Dhs1,865 in Tecom and Dhs2,153 in Dubai Media City. 'This year, at Dhs200 per square foot, Dubai Media City, Dubai Knowledge Village and Dubai Internet City - all governed by Tecom, currently command the highest rental price of all the developments we have studied, both in and outside free zones,' the report notes.

'This is more than twice the price of Business Bay and 33% higher than Dubai International Financial Centre (DIFC) - the most expensive at the time of last year's report. Reports also suggest that lack of demand has caused lease rates in some of the newer free zones to fall by more than 70%.'

In Abu Dhabi, average rents vary from Dhs1,900 per square metre in Al Khalidiyah and Dhs1,873 in Mussafah to Dhs2,325 in Airport Street and Dhs2,578 in Al Muroor.

Fallout from the downturn

Companies facing financial difficulties in the UAE have had to struggle when attempting to close or deal with narrowed lines of credit. 'A lack of adequate insolvency or bankruptcy laws has meant that going into liquidation is anything but straightforward.

As a result, the reported cases of abandoned cars and apology notes at Dubai International Airport have become both notorious and widespread. Dubai Municipality, quoted in one report, recently suggested that the number of abandoned vehicles increased by 20% in the first seven months of 2009,' the Cost of Living study highlights.

In a bid to encourage international investment Dubai and Abu Dhabi are rumoured to be considering abolishing the 51% local ownership law, giving foreign groups 100% ownership. In addition, on a national level, federal authorities have abolished the Dhs150,000 needed to launch a small business in the UAE.

Impact on individuals

Individuals looking to bring their families have also come under increased pressure as a recent government announcement has stipulated that the minimum wage for expats eligible to bring their families to the UAE has increased to Dhs10,000 from Dhs6,000.

The fall in the UAE's previously rocketing inflation rate has further meant that consumer confidence remains low as residents concentrate on saving their earnings.