Increased supply has put downward pressure on residental apartment rents in many areas of Dubai including high-profile localities such as Palm Jumeirah and Dubai Marina, even as villa lease rates remain stable, said a report by Landmark Advisory.

In its April lease guide, Landmark Advisory said the risk in both the residential and commercial property markets continue to be the new supply forecast to enter the market during the next three years, which further encourages value-seeking behaviour among potential tenants.

Places such as Palm Jumeirah and Dubai Marina are witnessing an increase in supply following new product deliveries with lower limits.

According to Landmark Advisory, the rents of two-bed room apartments on the Palm Jumeirah have fallen four per cent from Dh120,000 ($32,669) to Dh115,000 ($31,307) per annum while in the Dubai Marina they have fallen six per cent from Dh90,000 to Dh85,000 per annum.

This is a typical trend observed in both recently-handed over buildings and lower quality buildings, the guide added.

“Lease rates in most areas, in both the residential and commercial markets, will fall in the coming months, especially for lower quality buildings in the least developed and integrated communities,' explained Jesse Downs, director of Research & Advisory Services, Landmark Advisory.

'However, certain residential units in key locations within established high quality developments will remain stable; this applies to specific villa developments and select apartment buildings,' she noted.

In this guide, Landmark introduced office rents, which have been gradually declining through 2009.

'Although office lease rates may have appeared relatively unchanged in the first quarter, recently rents have been gradually declining as landlords become more flexible in negotiations,' she pointed out.

According to Jesse, the commercial market is witnessing increased supply from new developments like Business Bay where 6 million sq ft of office space is due for completion this year.

'However, the majority of the new space in Business Bay is expected to be handed over in the fourth quarter due to infrastructure delays,” she revealed.

 “From our research we expect lease rates to decline further in most areas, especially for buildings with multiple owners,” she added.

Landmark Advisory observed a recent increased in enquiries from companies considering relocating their operations to Dubai. These enquiries are coming not only from other emirates, but from companies across the region looking to expand into or relocate offices to Dubai.

“While this is still a nascent trend, it is one that we predict will gather momentum over the next 3-4 years as commercial sale prices and leasing rates bottom out,” Jesse noted.

“In addition to improved affordability, the existing infrastructure, ease of recruiting, and higher retention rates will attract relocation demand in the coming years,” she added.  

According to Landmark Advisory, villa lease rates ranges have remained relatively stable with certain areas like Arabian Ranches, Victory Heights, and parts of the Lakes experiencing lower limit declines.