Improving economic performance owing to key drivers, that is, tourism, trade, transportation and real estate – in Dubai, followed by Abu Dhabi attracts businesses to expand, recruit and upgrade their existing technology. This brings in a rise in commercial activity adding workload, thereby leading to a rise in workforce demand, which then results in office space demand.
In Q1 2014, demand accounted for almost 40% of enquiries – technology (14%), general trading (12%), engineering and construction (7%), leisure and hospitality (6%), real estate (6%), and oil and gas (4%).
Also, the Expo 2020 bid win created the possibility of 227,000 jobs being generated through multinationals and startups, some of which appear to be glued to the space located around the Expo 2020 site.
The office sector kicked off well in terms of the number of leasing transactions both annually and quarterly in Q1 2014. Nevertheless, the value of transactions were not high since high-value leasing contracts came to a closure prior to the end of 2013. Despite a large number of active enquiries, most deals in the first quarter were comparatively small, usually between 400 sq.m. and 1,000 sq.m. Currently, office locations that are performing well include DIFC, Downtown Dubai and Tecom A&B.
According to Jones Lang LaSalle (JLL), the occupier demand continues to be focused on good quality space, thus, average rents in prime locations are expected to increase in 2014 with improved interest in secondary office locations. Projects along Shaikh Zayed Road, in Business Bay and Al Barsha are considered good choices, aiding in stabilizing rents.
On the other hand, the Abu Dhabi office market seems to be in over-supply standing at 3.1 million sq.m. However, with large-scale demand continuing from government entities, state-owned enterprises, and even private sector firms against an additional projected 78,000 sq.m. of office GLA, prime rentals in the capital are considered stable.
• Increased business activity leads to commercial space demand
• Rent increasing gradually based on demand, occupancy level
• Dubai and Abu Dhabi have projects to fulfill space demands
Source: Arva Shikari, Special to Properties
The writer is a freelancer