Dubai commercial real estate investment is in an all-time high. Being a tax-free city (for now), foreign investment is easy and highly profitable. As it encourages people from other countries to buy/invest properties in Dubai real estate. Dubai economy is progressing at a fast rate, each year becoming better than the last.
Even throughout the recent financial recession, Dubai real estate held strong, and the world’s business capital continued to flourish despite the odds. The most sought after commercial properties in Dubai are commercial plots, labor houses, shops, warehouses, shopping centers, hospitals and clinics. Over the years, the growth has been massive for warehouses and labor houses as people have been pouring in from different parts of the world.
Dubai commercial real estate is stable now, but you can expect some changes to happen in the future in the wake of the planned introduction of VAT on January 1, 2018. However, this is not going to be a huge problem for international occupiers as they are pretty used to the taxes in their home country.
The rise in oil prices over the last four years made a significant impact in the prices, especially in the years 2013 and 2014, with the rents rising 11 and 13% significantly. In the DIFC area alone, the average rent is close to DH230 per square feet, while at Downtown registered at DH175 and DH125 at Sheik Zayed Road.
In certain parts of Dubai, the rental rate was DH70 in 2012 and by 2014, it had spiked to 24% (DH110) by 2014. The surprising fact is that construction work is still going on in these areas, and roadways still have to be developed.Areas that are gong to see a huge development in the future are Bay View Tower, Bay Gate, Bay Square, the Binary, Prime Tower, Iris and Westbury Square.
Foreign nationals can buy commercial properties in free zone areas, but they need to be aware of areas that are not available for purchase as well. For example, Jebel Ali free zone is not available to foreigners.
Practices and approaches
There has been a shift from the traditional Central Business Districts (DED) to newer areas. But that doesn’t mean that the demand for the CEDs has been reduced or there has been reduce in the rent rate. It just means that new companies and those wanting to expand are moving to the newer areas. Dubai International Financial Center (DIFC) and Downtown Dubai are the two most expensive areas in Dubai for commercial real estate. As for Business Bay, the rental rates have remained substantial for the past 3 years, and the rise has been steady with no alarming spikes.
It is also easy to get a mortgage for buying commercial properties. The banks do not impose too much rules and they give higher mortgage amounts to buy expensive commercial properties when compared to residential properties.
As office rents are rising, you can make a good steady income from investing Dubai commercial real estate. In fact, the income stream would be slightly higher than residential properties.
It is easy to maintain and lease out commercial properties. And the rules are quite different from residential properties because due to the duty of the tenants to look after the repairs and maintenance of commercial properties. This makes it easier for international investors to buy properties in Dubai.