In the last decade, Dubai has emerged as the biggest hub for business. Global investors are lining up for an opportunity to invest in the city and take the advantage of its tax-free environment. Dubai has also witnessed a huge increase in tourism with millions of tourists experiencing the feel of its modern infrastructure, luxury, and exotic food & beverages every year. This rise in Foreign Direct Investment (FDI) in Dubai and surge in tourism has boosted the demand from tenants in the residential & commercial property sectors.
According to the annual transaction report of the Dubai Land Department (DLD), despite the pandemic and global economic slowdown, the real estate market in Dubai continued to be attractive to local and global investors in 2020. The sector recorded 51,414 transactions representing a value of over Dh175 billion, according to the annual transaction report issued by the Dubai Land Department (DLD). It is of paramount importance for both commercial & residential sector head honchos to understand the tenant behaviors and the key trends that are going to impact the sector.
Here are the type of properties and options which will attract residential & commercial real estate tenants in the coming years –
Every year, millions of tourists and business travelers visit Dubai for a shorter period of time. To avoid getting into a contract or paying advance rent for three months, or facing challenges with cohabitation, etc., tenants will prioritize alternative accommodations which are available on short-term rentals for everyone including – singles, families, couples, partners, and corporate groups.
Another factor that makes short-term rental accommodations a preferred choice for the tenants is they are fully furnished. Thus, there is no need for them to spend money on buying furniture or other daily routine items such as – air conditioners, refrigerators, ovens, etc. Thus, short-term rentals are a cost-effective option for them.
Short-term rental accommodations have more space compared to hotels which offer more privacy to the expats & holidaymakers. They also have a private garden, kitchen, and a personal door which make expats feel like they are at home. Furthermore, short-term rental accommodations are usually based in the downtowns which makes it easier for tourists to travel to the major attractions of the city.
The rising demand for short-term rentals among tourists & expats has also attracted the attention of global investors. There has been a significant rise in investments in short-term rentals as they are more profitable due to lower operational costs, fewer restrictions, and no contracts involved.
The rents across Dubai declined between 9% and 17% in 2020. Thus, thousands of Dubai homeowners converted their properties into short-term rentals to generate good & quick income. While landlords are accepting more cheques, tenants are still using the option of paying in one or two cheques to drive the price down further.
Another reason behind the rising popularity of short-term rentals is job uncertainty and rising layoffs due to the situation created by Covid-19. Several residents have expressed an interest in short-term lettings as they face uncertainty about their job and their future and are giving themselves a little time to decide by renting monthly as opposed to signing a lease contract for a year.
Properties with Garden & Pool are in High Demand:
Tenants are now prioritizing the properties with a garden, pool, and balcony. According to Lynnette Abad, Director at Property Finder – a real estate website with a wide range of residential and commercial properties for sale and rent, stated – “Our website recorded significant month-on-month growth in people using keywords such as – pool, garden, and balcony. If you look at rental contracts that have closed over the last few months, you have more in the villa townhouse sector than you do in the apartment sector, when you compare it to previous years.”
The buyers are prioritizing homes that are equipped with all sorts of amenities for recreation as they will be spending more time at home due to an increase in work from home culture amid covid-19.
Tenants Prefer to Move to Suburbs due to Cost & Safety:
There has been a rise in the trend of tenants moving into suburbs or in the outskirts of Dubai due to cost & safety. The amount of rent tenants pay for a flat in Dubai Marina or Jumeirah Lake Towers (JLT) is quite higher than the rent for a three-bedroom townhouse in the outskirt areas. It was noticed in 2020 that a large number of tenants moved to suburbs such as – Mudon, Dubailand, and Dubai South in search of better living at a much lower cost.
Furthermore, downtowns have a very high density of population due to the presence of high-end commercial & residential properties. Therefore, from both cost & safety standpoint, it makes more sense for the tenants to move to suburbs. In 2020, there was a huge increase in the tenant inquiries for the properties with outside space with real estate agents reporting an uptick in villa inquiries since May 2020.
Increase in Cheque Payments:
There has been a rising trend among tenants to make cheque payments and lockdowns exercised to curb the growth of coronavirus have given a further boost to this trend. The majority of property owners are understanding the benefits and the need of offering an option of cheque payments to the tenants. As per Allsopp & Allsopp report, 2021, the real estate brokerage firm has witnessed a significant rise in the trend of tenants paying their rents using cheques.
According to Lewis Allsopp, CEO of Allsopp & Allsopp “Pre-Covid-19, we were seeing more of a trend to increase cheque payments and the lockdown accelerated that. Some owners are now asking for fewer cheques again but overall more owners are appreciating that they need to offer increased cheque payments – gone are the days that companies pay for rent in one cheque. In 2021 so far we have seen one cheque rental payments decrease by 28.3% compared to the beginning of 2020.” The brokerage firm reported an emerging trend of short-term, month-by-month rental inquiries as a result of job losses or financial strains.
Rise in the requirements for Office Space:
In 2020, Dubai’s office market witnessed a total of 194,000 sq. m of office gross leasable area (GLA) delivered, majorly at prime locations such as – Dubai International Financial Centre (DIFC) and Downtown Dubai, increasing the total stock to 8.9 million sq. m.
In Abu Dhabi, a 40,600 sq. m of office stock was added, bringing the total supply to 3.8 million sq. m. To sell this massive office space at a fair cost, the office space developers continue to remain tenant-friendly with landlords coming up with beguiling offers and lease terms. The office sector is getting ready for the post-Covid-19 office environment, which will consist of collaborative spaces, masks, sanitizers, lower seating densities, more meeting rooms, and at least 8m to 12m space between the workstations to maintain social distancing.
Surge in the Demand for Leisure Properties from the Corporate Tenants:
There are numerous listings in Dubai that are specifically developed to meet the requirements of the corporate sector. Moreover, they are also available for short-term lets. Despite the unfavorable economic climate, accommodation for leisure outpaced corporate demand in 2020.
Villas are becoming popular due to the rising demand for luxury accommodation available on short-term lets and at lower annual rates. To earn good revenues in the current phase of slowdown, landlords prefer to lease villas for the short-term. Villas are the best bet for landlords as tenants are willing to pay a higher amount to rent them on short-term rentals.