Dubai: New tenants pay higher rents than existing occupants as rental gap widens

Dubai: New tenants pay higher rents than existing occupants as rental gap widens

Dubai is witnessing an emergence of two-tiered rental market as the gap between renewals and new lease rents continues to widen. Prathyusha Gurrapu, head of research and consulting at Cushman and Wakefield Core, said a rising number of tenants in Dubai are becoming property buyers and end-user occupiers as rents continue to see sharper increases compared to sales prices. “Tenants prefer to stay in existing units as rental increases during renewals are considerably lower than new leases and are regulated by the Rera (Real Estate Regulatory Authority) rental calculator. This is creating a two-tiered rental market with a widening gap between renewal and new lease rents,” she said. She further explained that for existing tenants, the Rera cap applies so landlords can’t increase more than the permitted limit. But the new tenant has to pay the market rent which is higher than the nearby buildings. “So the rental market has become two tiers. There is a lot of divergence between existing and new rents.” Gurrapu expects rental rises to continue for new leases in 2024, particularly in established central locations such as Downtown and Business Bay, where high occupancy levels will exert upward pressure on rent. “That said, with a