- Broker Directory
- My Tools
- News & Advice
- Market Trends
- Other GN Sites
Office rents in the main commercial districts of Dubai have remained stable in the first quarter with demand from both domestic and international occupiers still high. According to a biannual report by Cluttons, 13 submarkets, including Dubai Marina, Al Barsha and Deira, had no change in starting rents this year. Seven of the 22 submarkets, tracked by the report, saw significant increases, including Tecom, Dubai Internet City, Dubai Media City and Dubai Knowledge Village — collectively the strongest-performing submarket with a 10 per cent rise in lower-limit rents to Dh165 per square foot, and 13 per cent increase in upper-limit rents to Dh225.
“Firms continue to be attracted to this free-zone submarket because of the high-quality buildings and the presence of other high-profile occupiers,” says Murray Strang, Head of Investment and Agency at Cluttons UAE. “In comparison, Jumeirah Lakes Towers [JLT] has seen both lower and upper-limit rents fall over the past 12 months by 13 per cent and 10 per cent to Dh70 and Dh180 per square foot respectively.”
Popular office rental addresses
This is largely due to an increased number of commercial buildings that entered the market in the last 12-18 months. The report notes that JLT is oversupplied with grade B space and a large number of strata owners tend to attract occupiers by undercutting rents, impacting average rental level.
Central Dubai, which has long suffered from demand-supply imbalance because of rising requirements, generated a lot of attention from occupiers and developers last year with the establishment of two new free zones: Dubai Design District (d3) and Dubai World Trade District. D3’s lower and upper-limit rents rose 67 and 28 per cent respectively since its launch (Dh150 and Dh165 per square foot). The sharp rise was underpinned by the gradual fading of favourable terms offered to initial occupiers.
“Despite sustained demand, occupiers remain cost-conscious and budget-driven in the face of a softening global economy, with the key word for many being prudence,” said Faisal Durrani, Head of Research at Cluttons. “Landlords, by contrast, appear to be slow to react to the cooling market, with many reluctant to move asking prices and others lacking flexibility for lease terms at renewal. The emerging gulf between market reality and landlords’ expectations is a concern, particularly for a market that is now starting to show signs of maturity.”
Old Dubai remains a hub for local businesses, with a steady stream of demand coming through from last year. The continued popularity of Dubai’s old district is reflected in the rise of rents in areas such as Bur Dubai and Garhoud.
Bur Dubai registered a 20 per cent rise in lower-limit rents to Dh60 per square foot, while upper-limit rents moved up by 7 per cent to Dh140 at the end of last year. “The narrowing rental band is reflective of the market’s gradual maturing process,” says Strang. “However, it is also hinting at the achievement of a potential ceiling in upper-limit rents.”
“With the majority of stock comprising older buildings, there is a growing opportunity for landlords to undertake refurbishment to drive rents up,” Strang adds.
Some submarkets are also experiencing rental stagnation. Dubai South, IMPZ, Dubai Investments Park, Dubai Studio City and Dubai Silicon Oasis, which Cluttons collectively band as the Dubai fringe submarket, are among the first few to witness this trend, with three of five submarkets in the area registering no change last year. “This reflects a stabilisation in requirements for fringe office space,” says Durrani. “Dubai South, which will house the largest airport in the world, Al Maktoum International Airport, in addition to the World Expo 2020 site, is positioning itself as a significant destination, which is likely to help bolster office rents in the long run.”
Find offices for rent in Dubai now
Cluttons predicts no significant rental falls this year, with landlords remaining optimistic and willing to offer better incentives such as rent-free periods. The new stock added in the last 12 months in areas such as JLT, Business Bay, Dubai Trade Centre District and d3 is likely to see occupier interest. From a macroeconomic perspective, the impact of the economic slowdown in China, persisting issues in the EU, threat of Britain leaving the EU and most significantly the collapse in oil prices are factors some multinationals in the region will be following closely. However, the lifting of sanctions on Iran and the upcoming Expo are poised to improve commercial activity in the medium to long term.
Source: Manika Dhama, Special to Property Weekly