Jumeirah Village emerging as attractive destination for investors

With some serious problems related to the master plan and infrastructure having resolved, Jumeirah Village is finally emerging as a viable destination for investors. Also boosting its chances is the fact that Dubai Metro will be serving the development from the north and south via the Blue and Purple lines.

These favorable trends have seen the master development recording the highest gains in commercial sales prices – 50 per cent plus – during the first quarter of the year compared with the fourth quarter of 2007, according to the latest findings from the real estate companies. New projects are being launched in a fairly significant premium compared with the earlier ones.

However, average prices on a square foot basis are still the lowest compared to other developments; this is due to Jumeirah Village being located away from major existing and upcoming business hubs.

Meanwhile, prices are firming up for the commercial offerings in Business Bay and DIFC, with quarter-on-quarter gains of more than 40 and 20 per cent respectively. Sale prices in Business Bay have increased significantly as construction progresses at a fast pace and the first set of towers nearing completion this year, as well as its prominent location next to Shaikh Zayed Road and Downtown Burj Dubai.

The primary drivers behind the price gains continue to be high demand, limited supply and delay in construction.

The situation in the office rental market remains just as tight having increased by 22 percent on average in the first quarter compared with the same period in 2007. It is then no surprise that this is well above the latest annual rent cap of 7 per cent.

This discrepancy is largely due to new projects being released with higher rental rates than existing ones in the market.

At the same time, the sequential q-on-q increase has been less than substantial at 8 per cent on average. Muraqqabat and Satwa recorded the highest increases with 19 and 10 per cent respectively. The factors behind the increase in Muraqqabat include the easy access via the recently extended Garhoud Bridge, the close proximity to major government departments and the upcoming main terminal (Union Square) of the Dubai Metro.

Satwa is increasingly seen as the extension of Shaikh Zayed Road, which is reflected in the significant sales price increases. Bur Dubai, the banking district of Dubai, has recorded consistently high demand for office space and which is reflected in the rent increase.

At the same time, many areas have not recorded significant increases due to high occupancy rates, lack of movement of tenants, the long waiting lists and delays in construction. Rents in Jumeirah Lake Towers have seen changes as many tenants were unaware whether they had to register with DMCC as JLT is considered a free zone.

With clearer regulations now in place, investors expect rents to increase in JLT as many buildings are nearing completion this year.