Dubai settles for 20th most expensive for offices

Grade A offices in Dubai are the 20th most expensive in the world — at $92.57 (Dh339.73) a square foot — to lease while those in Central London are the priciest, commanding $272.56. Central Hong Kong offices figure in the second spot with average rentals of $269.31 a square foot and third comes these in Beijing’s Finance Street, at $190.99.

These are based on CBRE’s latest rankings of the costliest cities in the world to lease offices. London — Central was placed eighth (at $148.63) and Midtown Manhattan in tenth with $127. New Delhi’s Connaught Place was in sixth, fetching rentals of $151 plus for a square foot, while Mumbai’s Nariman Point was 32nd, at $72.71, based on data up to the third quarter of 2015 end.

“Despite the fact that some markets have been hit by the China oil and commodities slowdowns, we expect that most advanced economies will keep growing in 2016 and 2017, which combined with limited availability and relatively muted development levels, will result in moderate 2-3 per cent cost increases,” said Dr. Richard Barkham, Global Chief Economist, CBRE.

A mid-table global position for Dubai’s Grade A offices is just right for the longer term sustainability of the property market. Unlike what’s happening in residential, offices have been doing well in terms of leasing activity and rental stability. And, just as important, the demand that is there is not restricted to a handful of prime locations.

Dubai’s free zones are operating at optimum occupancy levels and new spaces snapped up instantly. Giant billboards hawk the merits of office high-rises in JLT and with the caveat that the leasing will be managed by a single owner.

Subdued growth

Also heartening is the high demand for large format spaces in locations such as the DWTC expansion (where the oil industry giant Schlumberger became the first tenant), the Dubai Design District and the Tecom areas.

Even with a subdued growth phase forecast for the local economy in 2016, there is still a lot of latent demand for office locations from overseas businesses.

But the situation is relatively different in Abu Dhabi, which figures in the CBRE rankings as those cities to record declines in office occupancy costs. The city figures in the 18th spot, with 2.9 per cent drop over a 12-month period ending Q3-15. The decline stems from the volatility in oil prices and what this could mean for the energy industry and those businesses affiliated to it.

Offices in Moscow lost out the most, dropping 23.9 per cent. (These estimates are based in local currencies.)

Factbox: Prime occupancy

* Hong Kong (Central) remained the only market in the world other than London’s West End with a prime occupancy cost exceeding $200 a square foot. “However, there is some evidence that overseas financial services companies are resistant to continued high costs and may be seeking alternatives to a Hong Kong location,” the CBRE report states.

Of the top 50 “most expensive” markets, Asia-Pacific had the most number of cities to feature in the list with 20.

Source: Manoj Nair, Associate Editor, gulfnews.comGN


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