ABU DHABI // Institutional property funds are being deterred from investing in regional office markets because of an excess of short-term leases, property consultancy Jones Lang LaSalle said yesterday. Property developers and owners must focus on creating assets attractive to tenants and long-term property investors to ensure the regional markets recover. "The ability of different markets to attract long-term regional and global investors will be of critical importance to their stabilisation and recovery," the report said.
The key is to lower prices and aim for longer leases, it said. Many property owners are still using a "wait and hold" strategy which has led to pricing higher than market expectations. Even where pricing is in line with expectations, owners are seeking short-term leases. The Dubai market will probably begin to stabilise next year and see recovery in 2011. There are likely to be further price declines this year, the firm said.
Office vacancies have risen to about 25 per cent while average hotel vacancies have increased to 35 per cent, the report said. An oversupply of housing will also affect prices until the end of the year. Abu Dhabi, Dubai, Cairo and Casablanca are "best-positioned" within the region to create conditions which could bring more long-term investment into their markets, Jones Lang LaSalle said. "They are considered to offer the right combination of investment competitiveness, real estate market conditions and asset specific ingredients to attract long-term investors," the report said.