Residential rental rates in Dubai dropped 41 percent in the last year, according to new report from CB Richard Ellis. Office leasing rates fell 57 percent from the previous, as the Emirates’ building boom flooded the market with new product.

The report is ominous news for investors, who might have hoped that rents would hold steady until valuations began to increase again. Prices in Dubai fell 47 percent in 2009, according to a recent report from Knight Frank.

Although a recent report from Colliers International suggested the market may be “stabilizing,” CB Richard Ellis sees little data to suggest the Dubai market will bounce back any time soon.

In 2010, lease rates in both commercial and residential will continue to “soften,” CBRE predicts. In a competitive landscape, commercial landlords are increasingly offering incentives such as free rent and cuts in service charges to woo tenants.

The residential market is likely to see “a further small contraction during the course of the next year as a substantial volume of new residential accommodation reaches the final stages of construction,” the report says.

While CBRE doesn’t expect to see the type of declines reported in 2009, there are “few signs to suggest any imminent upturn in fortunes."