The new face of Dubai will be empty offices and apartments with no one in them, says shock report
Imagine Dubai 2011, shiny new towers dominate the skyline, the sun glinting off the newly cleaned windows, but there will literally be no one at home, a new report predicts.
So many offices and apartments are due to come on market in the next two years that unless the current population decline is reversed and 150,000 jobs can be created then they are going to lie empty, according to analysts.
In a shocking report from Japanese bank Nomura they predict that some 20 million square feet of commercial space will be completed in Dubai by 2011 along with 10 million square feet in Abu Dhabi.
‘We estimate around 100,000 white-collar jobs at least would need to be created in Dubai and 50,000 in Abu Dhabi alone to satisfy oncoming supply.
This is in an environment where jobs are being cut,’ said Chet Riley, a Dubai-based analyst at Nomura.
The warning comes as Dubai’s expatriate population shrinks as people return to their home countries after losing their jobs.
Nomura is not the only organisation to be predicting a dwindling population.
The emirate could experience as much as a 10% decline in population this year, according to the real estate firm Jones Lang LaSalle.
And the UAE’s overall population could contract by 5.5% according to Egyptian based bank EFG Hermes.
The latest report from Nomura estimates that around 25% of Dubai’s office space is currently empty with around 5% in Abu Dhabi.
The vacancy rate is expected to rise over the next two years as projects that are already under construction reach completion.
Brokers predict that half of Dubai’s offices may be empty by 2011 as new supply doubles existing stock.
Nomura also expects around 65,000 new residential units to enter the Dubai market and 15,000 in Abu Dhabi.
The 11 executive towers in Dubai’s Business Bay development will by itself contribute 2,150 units to the glut.
The analyst also predicted a further 10% decline in rents.
Another recent report indicates that 70,000 surplus new homes could be delivered next year.
Dubai based property consultancy Landmark Advisory, said this would account for about 20% of the total supply in the emirate.
Meanwhile, developers are struggling with a rising number of defaults from investors who hold property worth less than the mortgage as more unsold homes are completed and prices decline.
Nomura estimates the default rate could be as high as 60% on new developments in Dubai and about half that in Abu Dhabi.
‘Two years ago, developers were initiating fanciful developments at the peak of the market, which they are now delivering into the trough.
This has increased the likelihood of defaults and smaller developers do not have the luxury of consolidating development pipelines,’ added Riley.