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At least some landlords are getting generous on rents. Some “non-strata” owners of office units at JLT (Jumeirah Lake Towers) and Business Bay are now offering rent-free periods of up to six months on longer leases, according to a market update from Cluttons.
They are, if they are particularly desperate about retaining a tenant or winning one, going to the extent of offering up to 20 per cent reduction on rents. Others are making “contributions to utility bills and fit-out costs”.
“Some landlords are also accepting shorter lease terms or tenant break clauses and offering to cover tenants’ agency fees in some cases in an effort to drive down void periods,” the report adds.
But all of this remains location-specific. Landlords elsewhere are doing just fine.
“The city’s core free zones such as the Dubai International Financial Centre (DIFC), Internet City, Media City and Knowledge Village experienced no change in rents during Q1,” the report finds. “We are seeing more incentives being offered but headline rents are holding steady in these prime free zone locations where occupancy levels remain high.
“We have also seen strong pre-leasing activity in further phases of the Dubai Design District and One Central (formerly the Dubai Trade Centre District).”
But certain Business Bay office properties have experienced declines, by as much as 14 per cent for the entry-level units. JLT office properties were the “weakest performing submarket” during Q1-16, with entry-level units dropping by as much as a quarter in the 12 months to end March to Dh60 a square foot on average.
“New completions and landlords undercutting one another in order to entice occupier demand have been among the key growth dampeners here,” the Cluttons report adds.
During Q1, average prime office rents outside of the leading free zones dipped to Dh230 a square foot, an 8 per cent decline on Q4-2015. It is also the “first downward adjustment in 18 months”.
Source: Manoj Nair, Associate Editor, gulfnews.com