The rebound in rents for Dubai’s hard-hit office market looks set to gain pace over the coming months.
“Over the period of the next 12 months, demand for prime office space will continue to increase as companies upgrade their existing setup or expand their offerings in light of the recent positive activity,” said Nick Maclean, the managing director at CBRE Middle East. “The lack of high-quality offices in the CBD area and the increased demand from corporates has resulted in rentals slowly rising in prime locations.”
Earlier this year Tecom, which operates Dubai Internet City, Dubai Media City and Dubai Knowledge Village, increased rents and service charges by as much as 43 per cent in some areas.
“Vacancy rates within the CBD have decreased to 26 per cent with a number of deals closing as corporates have sought new space,” said Craig Plumb, the head of research at JLL’s Dubai office. “Landlords of prime buildings are adopting a more mature approach, gradually increasing their asking rents as occupancy rates increase.”
Meanwhile, a survey by the property broker CBRE showed the city remained the 23rd most expensive place in the world in which to rent office space – the same ranking it received six months ago.
The study, which compares the costs of rents, service charges and local taxes in 50 major cities around the world, found that companies in Dubai, on average, spent US$92.56 per square foot on their offices in the first three months of this year – the same level recorded by CBRE six months ago.
Agents say that Dubai office rents – a key component of the overall cost – plummeted after the global financial crisis, crashing from more than $100 a sq ft a year in 2008 to less than $38 a sq ft in 2011 as many occupiers disappeared or fled leaving vast swaths of empty blocks across the city. Many of these blocks remain in multiple ownership and so are unattractive to large office tenants.
However, over the past year, as Dubai’s residential, retail and hotel markets have recorded boom rent rises, the emirate’s beleaguered office market has shown some signs of recovery. Rents increased to about $49 a sq ft in the first quarter.
“Dubai continues to be the destination of choice for global investors looking to enter the region. Overall market fundamentals are arguably stronger now than during 2008, with solid occupier demand, a smaller development pipeline, improved regulations and a healthier global economy,” said Mr Maclean.
According to the CBRE table, London’s West End remained the world’s highest-priced office market, with total overall occupancy costs of $277 a sq ft per year.
It was followed by central Hong Kong, where office costs reached $242 a sq ft. Finance Street in Beijing came third at $194 a sq ft.
lbarnard@thenational.ae
Follow us on Twitter @Ind_Insights
