Dubai Commercial Property Looks Set For Only A Small Decline In 2009

With residential Dubai real estate prices taking al large tumble in 2008, and expected to bottom out in 2009, one might also expect commercial real estate in Dubai to be undergoing similar problems. After all both markets have seen large price increases and attracted large premiums between property investors. However information is now coming out to suggest that freehold commercial property prices remained static in Q4 2008 despite the large drops being experienced in freehold residential property during the same period. So what spared commercial property the same fate as residential and retail property? And what is the likely outcome for Dubai commercial real estate in 2009 when the residential market is expected to bottom out? While the current state of the market makes it difficult to address future developments with absolute certainly, there are fundamental differences between commercial and residential freehold property that are worth considering.

First and foremost is that the supply and demand situation for commercial property is much different to the one being experienced in the residential property sector at the current time. With some of the largest commercial projects meeting with delays, the market that was already experiencing a shortage, has not seen the expected influx of new offices that developments such as Business Bay were expected to bring. As a result commercial property was spared the drops seen elsewhere. The renting fundamentals also differ between the two markets but interestingly enough both residential and commercial rental prices have followed a similar pattern, remaining stable in Q4 but both are expected to drop slightly in 1Q 2009. But what of commercial property prices in 2009? It may have managed to avoid the effects of the current economic problems in 2008, but this year will see more commercial Dubai properties entering the market.

As a result of the new offices finally reaching completion, despite there still being a supply demand gap, commercial property prices look set to see a small decline in 2009. But when compared to what is happening over with freehold residential property, commercial property looks pretty strong. 2009 will bring many challenges, but presently commercial property looks like it will avoid any large correction.

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