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Following a period of strong growth, Dubai’s office market is showing signs of stabilising, with average rents remaining virtually unchanged across all the city’s major submarkets and free zones, according to real estate consultancy Cluttons.
In its Winter 2015/16 Dubai Commercial Market Outlook report, Cluttons revealed that prime, secondary and tertiary office rents have remained unchanged for the first three quarters, standing at Dh250, Dh130 and Dh70 per square foot respectively, with the market remaining quite fragmented.
Micro markets, which are often as small as specific buildings, continue to buck wider market rates, such as Emirates Towers (Dh310), or The Gate District (Dh225).
“Occupier activity is down, however a positive sign remains in the diversity of the market, which is reflective of the overall economic activity,” said Steven Morgan, CEO of Cluttons Middle East. “Banks, financial institutions, law firms, construction companies and technology-media-telecoms firms round off the list of the most active occupier groups, with the city’s free zones remaining the primary target.”
Cluttons also noted that the upward creep in rates in some of old Dubai’s office submarkets is also reflective of the performance of the wider economy and dominated by domestic occupiers.
“Although space requirements from this segment are undoubtedly lower than this time last year, the limited amount of new stock deliveries in these areas, coupled with a steady rate of requirements, is putting upward pressure on rents in some key locations and buildings,” said Morgan. “This is driving some migration to submarkets such as Business Bay, where average rents ranging from Dh70-Dh120 per square foot are perceived to offer better value for money compared to Deira or Bur Dubai, with the added advantage of being more centrally located.”
The report also revealed that the free zones still tend to be dominated by multinationals, with take-up activity intrinsically linked to business performance in their home markets. Cluttons also underlined moves by hydrocarbon- based occupiers to consolidate office space as global headcounts are adjusted downwards, although this is not considered to be a major occupier group in Dubai compared with other regional markets.
“Free zones across the city continue to review expansion plans to cater to the buoyant level of requirements, with schemes such as the Innovation Hub at Dubai Internet City expected to ease pressure on rents once completed in Q4 2017,” said Faisal Durrani, Head of Research at Cluttons. “New free zones are also seeing increased interest and activity, highlighting the important role free zones play.
“EnPark, for instance, has emerged as Dubai’s latest success story and US-based occupiers in the energy sector appear to be showing high levels of interest in Tecom Investments’ specialist Dubai Biotechnology and Research Park free zone cluster as they home in on the growing green tech and energy sector in the region.”
Despite this, Cluttons remains cautious on the shortterm outlook for Dubai’s commercial market.
Source: Property Weekly