Which is more profitable for an investor: purchasing vacant premises or a ready-made business in the UAE?

Which is more profitable for an investor: purchasing vacant premises or a ready-made business in the UAE?

Nowadays, any wealthy person has multiple opportunities to make money. The most reliable way of keeping and growing your capital is an investment in real estate. Commercial property in Dubai deserves particular attention.

Potential investors love this city for its ultra-modern infrastructure, advantageous location, and wide range of amenities that attract tourists and expatriates. Investors who choose the right strategy and invest in a promising property can see high returns (10 – 15% per annum) in a short time.

Entrepreneurs investing in Dubai’s commercial property usually select one of the following two options:

  • Vacant premises they can subsequently rent out.
  • Premises with tenants already in place.

Each option has several pros and cons. Let’s discuss these further.

Content:

Vacant commercial properties

Purchasing a vacant commercial property won’t satisfy every entrepreneur, as they would have to spend considerable time and money to find a suitable tenant and manage the property. This strategy also entails high risks. Property owners aren’t always able to find anyone looking to rent, especially now, at a time when the COVID-19 pandemic and the consequent recession are still lingering, and the global political and economic situation continues to decline due to the military conflict in Ukraine, amongst other factors.

A vacant commercial property is rarely interesting to anybody for the above reasons. Investors are mostly hunting for properties with long-term lease agreements already in place, making it possible to forecast the return on investment in the mid-term.

Which is more profitable for an investor: purchasing vacant premises or a ready-made business in the UAE?

Ready-made rental business

Purchasing a commercial property with a long-term lease agreement is a profitable strategy in Dubai that generates high returns of up to 15% per annum. The key advantage of this option is that the entrepreneur doesn’t have to spend additional time and effort finding tenants and signing a contract. The owner starts seeing a profit immediately after the purchase.

Managing a ready-made business does not require its owners to stay near the purchased property at all times and personally solve each emerging problem. Tenants usually interact with management companies that send their staff to do maintenance, take care of utility bills, and pay for operation services.

This strategy is not failproof and may also entail several problems, e.g. the number of fraudsters and untrustworthy owners of commercial property is growing as rapidly as the popularity of ready-made businesses. These people sell properties with lease agreements approaching the expiration date, provide inaccurate information about the return on investment, or even forge documents. To prevent such problems, all relevant documentation must be carefully studied and on-site research must be conducted.

Which is more profitable for an investor: purchasing vacant premises or a ready-made business in the UAE?

What types of commercial property are in demand among Dubai investors?

Dubai’s commercial property market is vast and features numerous options for investment and business, from fully furnished office premises to manufacturing factories and plants. Let us look at what properties are the most popular among investors.

Office premises

The value of office premises in Dubai depends on their location, floor area, finish, and furnishing. The most popular locations for this type of commercial property are Business Bay, Jumeirah Lake Towers, Deira, Bur Dubai, and Sheikh Zayed Road. Prices of local offices start at AED 250,000 per unit.

Co-working spaces

Co-working is becoming increasingly popular among startups, entrepreneurs, and freelancers in Dubai, as it requires minimum capital investment. These commercial properties make it possible to design the workspace as a collective office, offering a more comfortable and cooperative environment for workers. The lower rent (shared among co-workers) is an advantage that attracts the greatest number of tenants. The most popular districts for purchasing co-working spaces are Business Bay, Jumeirah Lake Towers, Sheikh Zayed Road, and Dubai Media City.

Retail outlets

Another profitable investment in Dubai’s commercial property market is purchasing retail spaces that are in demand in every city district and community. Both new and existing properties are available. The most popular locations for retail outlets are Jumeirah Lake Towers, Business Bay, International City, Dubai Marina, Meydan, Downtown Dubai, and Dubai Silicon Oasis.

Warehouses

Purchasing a warehouse is a great investment that can yield high annual returns. This type of commercial property has become particularly popular due to the COVID-19 pandemic, as the majority of the population stopped going shopping and switched to delivery services. Many retail and production companies need accessible warehouses, so you should research the distance to central highways, ports, and airports when purchasing this kind of real estate.

The most popular districts for buying a warehouse are Jebel Ali, Al Quoz, Dubai Investments Park, Dubai Industrial Park, TechnoPark, Al Qusais, and Al Warsan.

Showrooms

Showrooms are used to present all kinds of products, including construction materials, heavy machinery, and cutting-edge electronic devices. These properties are in high demand among companies that would like to enhance interaction with their buyers. The most popular locations to purchase this type of commercial property are Ras Al Khor, Al Barsha, Business Bay, and Al Quoz.

Commercial villas

Commercial three to seven-bedroom villas are becoming increasingly popular in Dubai. These luxurious properties may be used both as offices and as shops. Some entrepreneurs even open kindergartens, clinics, restaurants, and showrooms on these premises. Commercial villas often feature parking spaces, a swimming pool, a private garden, and other amenities. The best districts to purchase these properties are Umm Suqeim, MBR City, Jumeirah, Deira, Al Wasl, and Al Safa.

Manufacturing plants

Dubai is the largest manufacturing hub in the UAE. Industries like metallurgy, machine-building, perfume, cosmetic production, and others are thriving here. The development of manufacturing is one of the most important drivers of the city’s prosperity. The government grants relief from customs duties and taxes along with other subsidies to those who invest in the Dubai industry. Most factories and plants are located in the Dubai Investments Park, Dubai Industrial Park, and Al Qusais.

Which is more profitable for an investor: purchasing vacant premises or a ready-made business in the UAE?

Buying real estate in Dubai

To avoid fraudsters and untrustworthy sellers, buyers must exercise maximum caution and be aware of the current market situation. The best solution is to contact competent experts with profound knowledge and many years of professional experience, such as the team on the Emirates.Estate website, one of the largest aggregators of UAE real estate.

Our catalog features not only a wide selection of the best houses and apartments in Dubai but also highly liquid commercial properties that will yield a high return on investment. Please go to the official website Emirates.Estate to view up-to-date listings and contact our consultants.

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