Big global firms move Dubai up their location agenda

Nearly one in three global companies has identified the Middle East as an area for potential growth – with Dubai set to be the main beneficiary.

Dubai’s hard-hit office market could benefit from a wave of corporate occupiers heading to the city.

The real estate adviser CBRE says in a report that almost one in three global companies has identified the Middle East as an area for potential growth – with Dubai set to be the main beneficiary.

CBRE polled more than 70 decision-makers at global corporations that collectively occupy 2.7 billion square feet of offices worldwide. It found that the proportion of multinationals considering expanding into the Middle East over the coming two years has increased to 30 per cent, from 24 per cent a year ago.

The property consultancy found that 56 per cent of occupiers said that getting access to new markets and new customers was a key factor in guiding their decisions over where to locate, up from 40 per cent a year ago, as companies responded to signs of global market recovery.

“The Middle East is witnessing strong economic and population growth which represents significant investment opportunities for global businesses. Dubai being the region’s commercial and tourism hub remains a focal point in the Middle East and a destination of choice for global corporates looking to expand into this region or the lucrative African market, ” said Nick Maclean, the managing director of CBRE’s Middle East office.

“The World Expo 2020 announcement in November last year has further fuelled this positive sentiment and over the period of the next six years we will see real estate assets exhibiting strong growth and development,” he added.

India was the most popular new destination for multinationals looking to expand, with 48 per cent of those surveyed saying they would look to expand into the subcontinent over the coming two years, compared with 48 per cent a year ago.

Africa was also considered a desirable new market to enter with 34 per cent of respondents reporting that they would look to expand there in this year’s survey – up from 21 per cent a year ago.

But CBRE reported that there had been a decline in interest in expansion into China and Central and Eastern Europe.

Office rents in Dubai were hammered by the global financial crisis as companies cut back the amount of space they occupied, or left the city altogether, prompting rents to fall by as much as 50 per cent.

Jones Lang LaSalle reported this month that rents in a few prime office locations in Dubai had increased slightly in 2013. But with vacancy rates in the city centre standing at 29 per cent and up to 850,000 square metres of new offices due to be completed this year, average rents in most areas remained unchanged.

“Landlords remain more bullish in the most prime locations, being less flexible on rents or willing to offer rent-free periods. Landlords in secondary locations, however, remain flexible as they continue to struggle to attract tenants,” said Dana Williamson, the head of agency for the Middle East at the property company Jones Lang LaSalle.

“The office market in Dubai continues to see a flight to quality, with the best-performing locations being DIFC, Burj Downtown and Tecom A&B. Rental values in secondary locations remain under downward pressure,” she added. “2014 is expected to see a continuation of the two-tier office market in Dubai, with prime locations improving and secondary areas remaining under downward pressure.”