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Dubai: Landlords with Grade A fitted-out offices in their portfolios in Dubai are sitting pretty — they can be reasonably confident of leasing them at highly favourable rates in a matter of a week or two. Demand for commercial space has been gaining exponentially and, where possible, compensating for the lukewarm value growth for residential property.
Apart from DIFC and Downtown Dubai, the prestige locations when it comes to office addresses, others such as Business Bay and the Tecom clusters too are riding on this demand upturn. Business Bay in particular is favourably placed as more commercial towers get completed and actively sought in the leasing market. Such is the momentum it is even rubbing off on pricing and demand for plots in Business Bay.
These have seen a ‘sharp rise in land values … from between Dh200-Dh250 per square foot (psf) in 2012 to about Dh400 today for well-situated, prime mixed-use or residential plots’, according to a new Cluttons report.
“Business Bay is getting a lot of attention from overseas firms as their first address in Dubai,” said Chandrakant Whabi, CEO of Acrohouse Properties. “A fitted space could go for Dh120 a square foot and over at a prime property, while at Dh100-Dh110 for a less prominent address in the same location.
“In general, Grade A offices that are currently vacant could be snapped up within an average of two weeks on being listed.”
According to the Cluttons report, the most expensive office locations remain DIFC and Downtown, where leases average between Dh220-Dh280 a square foot. (Emirates Towers’ offices are pricier still, with rentals at Dh300 a square foot.) “Across business sectors, the office market remains very active in all segments,” said Steve Morgan, Chief Executive of Cluttons, M. E. “We have been recording a steady rise in take up by both existing and new occupiers, with the banking and financial services, real estate and aviation sectors being among the most notable.
“Following the usual summer slowdown, the market has regained its strength.”
The older commercial locations in Dubai are feeling a different kind of upturn. Small and mid-sized businesses are homing on office locations within Deira and Barsha, with rents at key properties in Deira and Barsha showing “the most significant rises in the city this year, (by 20 per cent and 18 per cent respectively), topping out at Dh120 per square feet and Dh100 psf respectively’.
‘The SME sector remains upbeat about prospects, which we expect to filter through in the form of sustained demand for more secondary and tertiary space’, according to the Cluttons report. ‘To an extent, the market is already benefiting from this’.
As with offices, so is the case with demand for warehouses in Dubai.
Those at Dubai Investments Park shot up 20 per cent in the last 12 months, ‘reflecting the strength of demand from occupiers to secure space, which is viewed as an integrated industrial estate due to the schools and residential elements present’, said the Cluttons report. ‘In some instances, basic sheds have seen rents double to over Dh40 psf’.
Much the same trends are repeated elsewhere. “At Dubai Industrial City, average rents have seen a 45 per cent rise over the past 12 months, while at Dubai World Central itself, annual land rental values currently hover between Dh2.80-Dh4.20 psf, highlighting the growing importance of this increasingly significant corner of Dubai,” said Faisal Durrani at Cluttons. “With Al Quoz continuing to evolve as a trendy area, the rising rents are leaving some light industrial occupiers to consider other options elsewhere.”