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The demand for commercial property in Dubai is yet to be affected by the slide in oil prices. According to the recent report on market trends prepared by real estate consultancy firm CBRE, the growth of small and medium enterprises (SMEs) especially in the free zones has helped fuel the demand and driven up the rental rates of office space.
The diverse nature of the emirate's economy, which is not wholly dependent on oil, has helped cushion Dubai against a dip in demand.
CBRE estimates around 0.42 million square metres of new office space entered the market during 2014. The total office stock as of Q1 2015 measured 8.1 million square metres with approximately 40,000-square-metre space added at the Dubai Design District.
The average annual rent of office space during Q1 of 2015 at Central Business District (CBD) showed no change from the last quarter, staying at Dh1,885 per square metre. The area along Shaikh Zayed Road, between the Dubai World Trade Centre (DWTC) and Burj Khalifa including the Dubai International Financial Centre (DIFC), is considered as Dubai's CBD. The year-on-year (YOY) increase in the rents in these prime office areas has been a marginal 3 per cent. However, the annual secondary rents now average Dh1,170 per square metre showing a YOY rise of 7 per cent.
The relative ease of starting and running a business is also creating a huge demand of office space in free zone locations like Dubai Internet City and Jumeirah Lakes Towers. Experts also predict a growing preference of bigger companies to rent single-owned office space especially if they require large premises. This is because strata-owned properties have several landlords and as tenants, it is difficult to deal with different landlords within the same property.
• Falling oil prices currently do not have an effect on office market
• Small and medium enterprises leading demand for office space
• A large number of companies are opting for free zone locations
Source: S. Dhar, Special to Properties
The writer is a freelancer