Although getting the right tenant for any space can be challenging, once you do so, there are significant advantages to having commercial tenants in Dubai in comparison to residential tenants. For one, if you look at a Dubai leasing guide, you will see that leases for residential spaces are regulated very highly by the government, given the fact that people’s homes are involved. However, commercial contracts are not subject to such intense regulation. This opens up numerous possibilities for you to negotiate a deal with commercial tenants in Dubai and also gives tenants more options than they would have with a typical residential leasing contract.
Another way in which commercial leases are different is that commercial tenants in Dubai do not live there, but are only running a business out of your space. Further, it is hard to move a business once it is established in a particular location. So, if commercial tenants are happy, there is little possibility for them to move. However, when it comes to residential tenants, they are more likely to move if situations such as a job change, marriage or kids arise.
Perhaps one of the greatest advantages in having commercial tenants in Dubai over residential tenants is the longer term of lease. Take a look at a general Dubai leasing guide and you will see that for the most part, residential leases are for a period of one year. However, commercial leases may have a longer leasing period to make it beneficial for the landlord and the tenant. For tenants, a long lease locks in overhead expenses over a longer time period, making it a win-win situation for both parties.
Additionally, rents of Dubai residential properties are quite straight forward as such leases are protected by the rent cap. However, this may not always apply to Dubai commercial leases, so it is possible for the rent to rise significantly over time. In fact, the more established a business is in a particular location, the more commercial tenants in Dubai may be willing to pay to keep the space.
Not just this; in residential spaces, it is the responsibility of the landlord to ensure that the property is in good condition for the tenant to move into. So, there is generally not much work done by the tenant. However in commercial units, since the tenants are running a business and need to tailor the space to fit their company brand and needs, there is a lot of work that the tenant will have to do to the space. Termed ‘fit out’, this can include everything from painting, shelving, flooring and lighting to extensive renovations. These expenses are generally borne by the tenant. Aside from further investment from commercial tenants in Dubai for the space, since they have paid money for fit out, they are likely to be financially anchored to the space and may not want to leave anytime soon.
However, the best reason to invest in commercial real estate over single family home properties is the potential for much higher rental returns. If you are looking to invest in Dubai commercial real estate, knowing where to start is key. Get in touch with us, we have decades of experience behind us.