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Landlords in Dubai with office properties on their books had better come up with something out of the ordinary if they want to lease. In a tightening market, a tower or commercial location that offers extra is still showing good demand and occupancy, according to the latest update from Cluttons, the property consultancy.
“It is important to note that a number of submarkets contain buildings that do not follow the same trajectory as the wider market and have rents that go beyond our upper limit because they are considered flagship, prime, signature schemes,” states the report. And to buttress its point, the agency cites the cases of Burjuman Business Tower [where rents average Dh180 per square foot for offices] and Emirates Towers.
The former “commands rents above the wider average for Bur Dubai of Dh120 psf [per square foot] because of the unique quality of office space and specification it offers,” the report adds. “Emirates Towers also remains extremely popular and has very low vacancy rates, despite the slowdown in the wider market.”
But for Dubai’s office space as a whole, office rents remained flat during the second quarter, with declines experienced by those in Garhoud (down 18 per cent), Al Barsha (by 10 per cent) and Deira (by 5 per cent).
In fact, falls were “recorded in six of our 22 sub-markets,” Cluttons notes. “Most declines have been recorded in areas with higher vacancy rates, particularly of second-hand stock.”
But there were a couple of sub-markets that did not partake in the slackening. The DIFC based offices saw rental gains of 6 per cent during the period as did the wider Tecom submarket (up by 7 per cent).
For the near term, the bad tidings look likely to continue.
“The general lack of rental growth is unlikely to change in the short-term,” the report adds. But for landlords, there is some silver lining to be had.
“Across the market as a whole, we do not expect rents to fall much further, particularly as they are at a point where they are considered to be fair market value and landlords appear unwilling to lease below a certain level,” it notes.
“However, we do see landlords offering increased incentives, such as rent-free periods and fit-out contributions to attract tenants. As such, we expect a period of minimal rental change for at least six to nine months before there are any signs of an uplift.”
Source: Staff Report, gulfnews.com