The 'flight to quality' trend continues in the UAE

Read on the 'flight to quality' trend which continuesImage Credit: Supplied

The commercial real estate sector in the country has been on an upswing in recent months, especially following the Expo 2020 hosting bid win. However, this has been an ongoing trend that is only now showing signs of slowing, and the ''flight to quality'' trend still remains popular within the office market.

The trend refers to the noticeable migration of businesses from their existing offices to more modern and upmarket venues across the UAE. With consistent oversupply of commercial property across the country, businesses are able to afford more luxurious or geographically desirable properties on similar or lesser rents than their original leases. This trend of businesses moving to more modern or luxurious locations has several knock-on effects on the real estate market as a whole across the emirates.

Throughout 2013, the demand for office space in Dubai increased predominantly in top locations because of this trend; thus, oversupply in the market remained high, reaching nine per cent at the end of 2013. As a result, many developers delayed the delivery of projects totaling 8 million square meters of Grade A and B office space, according to a report.

However, the office occupancy rates have shown signs of improvement within the first quarter of 2014. Jones Lang LaSalle said in its Q1 2014 report, ''Vacancy rates within the central business district (CBD) have decreased to 26 per cent, with a number of deals closing as corporates have sought new space.''

Therefore, this ''flight to quality'' trend is still very much in play in Dubai with popular locations such as DIFC, Downtown Dubai and Tecom A and B being the best performing locations of the year so far.

Abu Dhabi is also seeing the trend in all upscale properties, including residential and retail as well as commercial. These types of properties are assured a consistent demand and value gains according to JLL, but they are also responsible for a tiered market developing as a result.

Handy Hints:

• Abu Dhabi sees a ''flight to quality'' in all its upscale properties

• Demand for office space increased in DIFC and Downtown Dubai

• CBD has witnessed a decrease in vacancy rates in office space

Get to know the Key Business Districts in Dubai

Source: Nicholas Baker, Special to Properties

The writer is a freelancer

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