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Mall rents: have they dropped?
Mall rents in the Emirates have remained constant in spite of the dramatic drops in commercial and residential rental values.
August 1, 2009 2:30 by Dana El Baltaji
Thanks to the UAE property sector’s fall from grace this year, journalists in the Emirates have had plenty to write about. We’ve spoken to angry investors, deluded developers and overloaded Rera officials, and we’ve also been inundated with research notes quantifying the drop in office and residential unit prices in the UAE.
What we haven’t looked at, however, is whether the fall in office and residential rental values, which some studies claim is as high as 50 percent, has affected the rents in malls throughout the UAE.
Before anyone can answer that question, however, Mark Morris Jones, director of Retail at CB Richard Ellis, insists people need to define the word ‘rent’:
“There is a lot of confusion out there about what is meant by falling rent prices. The reality is that when rental values have dropped, has your rent dropped? No,” he said.
“Potentially, your rent could still increase to come to market value. When people say that rents have dropped, what they probably mean is rental value, not the actual rents that people pay.”
The rents people pay are bound by the contracts tenants sign and the laws of the country, while rental values are determined by market conditions. Due to an increase in residential and office units throughout Dubai, however, tenants have been able to renegotiate their contracts to reflect market values.
The same can’t be said for retailers in malls.
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2 Comments
Personally local consumer demand is still high, but due to financial crisis we saw signifact drop in international tourist which will affect sales figure for shops across the UAE. Eventually shop owners will need to reconsider prices they charge for their products as Dubai is getting expensive as I was in a shop in Dubai mall and heard two tourists complaining about the prices in Dubai and how it is more expensive than London. So in order to sustain their sales shop owners will need to re nogotiate their rents with mall owners. For me I drather buy my luxury stuff from the UK first because it is cheaper and we tourists get tax refund.
Shop owners will negotiate the rent with landlords but it matters landlords if they are willing to reduce their rent. They would rather let the tenant vacate then reducing their rent as of today.
However when landlords will find out that many shops will be vancant (and we have started to notice it in many malls even in the Best/Biggest malls in Dubai), then landlords will decide to negotiate, but it will be too late. Who will ever come back after leaving and who will start again from scratch in this crisis, except some shop repetitions that are already in all malls. We will end up by having all malls occupied by shops owned by 3 companies.