Office rents climb as premium stock declines

Office Rents in DubaiAlmost 500,000 sq m of office stock will be completed this year, around 30 per cent of it in the Business Bay area l Image Credit: Supplied

Office rents in Dubai are still rising, with average prime central business district (CBD) rents up 3 per cent quarter-on-quarter and almost 25 per cent year-on-year, according to the Q2 2014 Dubai Market View by global property adviser CBRE.

“The average prime rental rate is now Dh1,884 per square metre per year and this figure is expected to increase further within the short term amid strong economic growth and rising business confidence,” said Mat Green, Head of Research and Consultancy — UAE at CBRE Middle East.

According to the report, the CBD market also continues to face a diminishing availability of good-quality office accommodation, specifically offices that can accommodate large corporate space occupiers over contiguous floors.

Occupancy rates within prime CBD offices have been rising steadily over the past 12 months, with less than 16 per cent vacancy rate compared to an average of 40 per cent for all Dubai office stock.

“Secondary office locations continue to see an improving performance with average rents rising from Dh924 per square metre per year in the second quarter last year to Dh1,148 per square metre per year in the second quarter this year. This reflects a growth of 24 per cent in just one year, with a 5 per cent rental growth recorded during the second quarter,” added Green.

With limited availability of good-quality office accommodation in prime areas, CBRE expects demand to spill over into some secondary locations, particularly for single-owned property in close proximity to transport links.

“Office stock in Dubai continues to see significant growth with more than 1.8 million sq m set to be delivered by the end of 2017,” said Green. “However, while there is a large pipeline of new supply, the majority of this space will be negatively impacted by its strata ownership title.

“This year, almost 500,000 sq m is scheduled for completion, with more than 30 per cent of this total to be delivered in the Business Bay area.”

According to the report, Dubai’s residential sector continues to experience strong demand from both occupation and transactional sources. However, there has been a slowdown in the number of transactions for ready-to-move-in property.

According to the Dubai Land Department (DLD), the number of transactions dropped 10 per cent quarter-on-quarter and 18 per cent year-on-year, with a total of 3,545 real estate transactions completed during the second quarter.

CBRE also noted that the DLD figures seem to indicate a stabilising market, with second-quarter sales exceeding Dh7.7 billion and first-quarter transactions valued at Dh7.6 billion. However, the off-plan market remains buoyant, further underlining concerns over speculation.

Source: Property Weekly


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