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Dubai: For the office property space in Dubai, rental stability remains the dominant theme, which would be of immense relief to both tenants.
It also clearly shows that landlords are reacting with maturity to the current softness in market conditions, both within the property market and the wider economy.
Average rents have remained “virtually unchanged across all the city’s major submarkets and free zones,” states the latest update from Cluttons, the property services firm.
The locations recording gains were Al Garhoud — where office rents on the higher side touched Dh110 a square foot at the end of the third quarter from Dh95 a year ago — and Bur Dubai, where units at the lower end of the spectrum were up 20 per cent to Dh60 a square foot, according to Cluttons data.
The location where office leases terms showed a dip was Jumeirah Lake Towers, “where average rents slipped back to between Dh70-Dh180 per square foot during Q3, from between Dh80-Dh200 at the start of 2015.”
Fresh supply contributed to the dip, with the Mazaya Business Avenue’s three 45-storey towers being “marketed for between Dh65-Dh70 psf (all inclusive).”
But super Grade A locations are going against the prevailing trends, with Emirates Towers’ offices commanding around Dh310 per square foot, and The Gate District charging Dh225.
On the whole, “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.”
Things are bound to remain subdued for office leasing activity, indicative of a “faltering” for global growth. Office space requirements will shrink during the next 12 months — “This comes at a time when land values in submarkets such as Business Bay are cooling and therefore improving the financial viability of some previously stalled projects, which are now seeing a resumption in construction activity,” said Faisal Durrani, Head of Research at Cluttons. Land values in Business Bay are now in the Dh225-Dh350 a square foot range,
“The ability of the market to absorb this new space is likely to dampen the speed at which the office market sees a resumption in rental value growth.”
But the city’s free zones will continue to be in expansion mode, with the noteworthy projects being Innovation Hub at Dubai Internet City, which is “expected to ease pressure on rents once completed in Q4-2017,” Durrani added.
“New free zones are also seeing increased interest and activity — 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 securing space at Tecom Investments’ DuBiotech cluster.”