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- What are the latest trends and prices in the office rental market across the emirates?
Despite Abu Dhabi being the capital, the Dubai office sector is better developed due to a large supply of prime office space, in both free zone and non-free zone areas, highly sought after by large corporations and multinationals. The Abu Dhabi Global Markets has, however, recently announced the free zone status of Al Maryah Island, raising rates of up to Dh325 per square foot, an increase of nearly 50% compared with pre-free zone rates. The average prime office rates in Abu Dhabi now stand at Dh236 per square foot; if including the free zone space, higher than Dubai. Other non-free zone Grade A space in the capital stands at Dh160 per square foot. Sharjah has no grade A space. Al Ain has seen a recent addition at the Al Ain stadium project, now the best space in the city, achieving rates of close to Dh95 per square foot, 35% higher than average.
- Could you provide more details about the office market in Abu Dhabi in the last quarter?
Demand for office space has remained constant this quarter as the decline in oil prices started to show an impact on the overall market and slowed down government spending, affecting all market sectors.
Office rental rates were stable with relatively high vacancy rates recorded in older office buildings, while rental rates ranged from Dh800 to Dh900 per square metre, whereas fitted office space in new Grade A buildings continued to achieve up to Dh1,900 per square metre.
Several office buildings are expected to be handed over in the next months.
These include the Grade A Al Hilal Bank office building on Al Maryah Island and the ADNOC headquarters on the Corniche.
These could put some pressure on rental rates especially for the poor quality stock as tenants are now looking for improved quality.
- In comparison, how does the Dubai market fare?
Whilst the average office sales prices showed a 2% decline, this was predominantly for the lower end of the market as owners were keen to sell.
However, enquiry levels were up compared with the first half of the year as a significant number of transactions were completed for good quality space.
These offices were purchased either for investment purposes by larger investors, or small and medium-sized companies for occupancy.
Rental rates have remained unchanged across the board, although there was a high level of enquiries during the last quarter.
Over the next 12 months, the market is expected to witness a significant amount of office stock being released for both Grade A and strata units that could potentially lead to a reduction in rental rates as landlords see to limit vacancy levels.
- How does Q3 compare to Q2 and what are the trends?
The rental rates in Dubai's office sector have remained unchanged this quarter, as rates were conducive to deals concluding with good quality, fitted space leasing at above-average rates.
Quality space from single owners continued to be most in demand with several deals complete at Dubai International Financial Centre (DIFC) for approximately Dh190 per square foot for shell and core space and up to Dh300 for fitted offices.
The trend of setting up smaller, serviced and/or fitted offices has attracted good enquiry levels in DIFC with Emirates Financial Towers even offering monthly lease contracts. This has led to achieved rates of approximately Dh300 to Dh350 per square foot for small office units.
In Dubai Marina, the Al Habtoor Business Tower has subdivided floors into smaller 1,000-square-foot offices, which are leasing at approximately Dh140 per square foot, whereas the API Trio Towers offices are now 50% leased and achieving similar rates for the best units.
- Question of the Week: How strong has the sales market been for the offices in Dubai?
Contrary to the residential market, office sales in Dubai were relatively strong in Q3 as several transactions closed at higher-than-average rates.
For instance, in Business Bay, both enquiry and transaction levels were good for quality towers nearest the metro station.
These include Aspect Tower, One Business Bay and Vision Tower. The latter of these towers achieved close to Dh1,800 per square foot for a space of nearly 2,000 square feet.
On the other hand, towers in Business Bay located closer to Al Khail Road witnessed lower levels of demand, and predominantly for smaller office space with rates starting from as low as Dh800 per square foot.
The main buyers for this space were companies from the subcontinent who seemed to prefer purchasing space for their own occupancy, and are amongst the main buyers of office space in the area.
Burj Daman at the Dubai International Financial Centre (DIFC) traded well in Q3 and achieved prices of up to Dh2,200 per square foot for smaller office units, whereas larger offices traded at approximately Dh2,000 per square foot.
Buyers comprised both investors, such as large funds, buying to lease as well as small and medium-sized companies who bought for their own occupancy.
Ask the Agent - What will happen if a freehold title deed holder has died?
Source: John Stevens, Special to Freehold
The author is Managing Director - Asteco
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