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NEW PROPERTY RENTS RISE AS TENANTS MOVE TOWARDS HIGHER QUALITY BUILDINGS 

UAE: Tenants increasingly move to higher quality buildings, push up rents in new properties

In the UAE, tenants are increasingly opting for high-quality properties, resulting in higher rents for new and Grade A buildings. This trend is being driven by the continued arrival of wealthy individuals. Conversely, older and lower-quality buildings are facing rising vacancies, particularly in Sharjah. While rents rose in some areas last year due to a shortage of ultra-luxury units, the market has now stabilized after a period of significant increases. Leasing activity in Abu Dhabi remained stable, but there was greater demand for better-quality units.

Saadiyat Island experienced the highest increase in apartment rents at 36.8%, followed by Al Reem Island (11.1%) and Al Reef (3.3%). Al Raha Beach rents remained constant. In the villas/townhouses segment, Saadiyat Island also recorded the highest increase in rents at 36.8%, followed by Al Reef (7.7%) and Al Raha Garden (6.9%). Hydra Village and Gold Gardens saw no change in rents. JLL predicted the delivery of 2,000 units in the capital in 2022, and Savills anticipates a significant increase in residential supply in Sharjah from 2023 onwards.
According to Savills, this increase in supply may negatively impact older properties in the secondary market. Rental values for Grade A assets are likely to remain stable, while poor-quality older stocks are likely to experience rising vacancy levels and rental corrections. Sharjah saw the largest increase in rentals in Al Sharq (25%), Al Qasimiya (22.2%), and Al Khan (16.7%). Al Majaz and Muweileh experienced a 9.4% increase in rents.

Savills noted a growing separation between high-quality, high-end projects and the rest of the market, with occupancy levels in the former estimated to be over 90%. This strong demand allows high-quality stocks to command a premium over the rest of the market, with average rents for a 1-bed apartment ranging from Dh35,000 to 40,000 per annum. Newer developments can command an additional premium of 20% or more.

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