UAE: Tenants increasingly shift to higher quality buildings, pushing up rents for new properties – News

The average rent for a one-bedroom apartment is between Dh35,000 and Dh40,000 per annum, while newer apartments can command an additional premium of 20 percent or more, experts say

Tenants in the UAE are increasingly turning to better quality properties, with rents rising in new builds and Grade A buildings, driven by a continued influx of high-net-worth individuals.

On the other hand, rents in older and inferior buildings are facing challenges with increasing vacancies, especially in the Emirate of Sharjah.

Rents continued to rise in parts of the country last year amid a shortage of units in the ultra-luxury category amid an influx of expats into the country in the post-pandemic period. However, rents are now stabilizing after rising sharply over the past few years.

Real estate consultancy Savills said leasing activity in Abu Dhabi remained stable. “However, the majority of inquiry levels are observed from tenants moving to better quality units.”

In the apartment category, Saadiyat Island saw the largest rental increase at 36.8%, followed by Al Reem Island (11.1%) and Al Reef (3.3%). Al Raha Beach rents remain steady. In the villa/townhouse segment, Saadiyat Island again led the way with 36.8% rental growth, followed by Al Reef (7.7%) and Al Raha Garden (6.9%). Rents are stable in Hydra Village and Gold Gardens.

JLL, another real estate consultancy, had expected to deliver 2,000 apartments in the capital in 2022.

Savills expects a significant amount of residential supply in Sharjah to be delivered in 2023 and beyond.

“This could have a negative impact on older properties on the secondary market. In prime Grade A assets, rental values ​​are likely to remain largely stable. However, older properties of lower quality Inventory will start to see rising vacancy rates and rent adjustments,” Savills analysts said in a 2023 report.

In Sharjah, Al Sharq, Al Qasimiya and Al Khan recorded the largest rental increases of 25%, 22.2% and 16.7% respectively. Al Majaz and Muweileh rents rose by 9.4%.

“The gap between quality high-end projects and the rest of the market is growing. The high-end market is in high demand, with an occupancy rate estimated to be over 90%. Due to the strong level of demand, quality stocks command a premium to the rest of the market. The average rent for a one-bedroom apartment is around 35,000 per annum between Dh40,000 and newer developments can charge an additional premium of 20 per cent or more,” Savills said.