Office space rents in Dubai have not increased in two years as supply continues to outweigh demand, making the emirate six times cheaper than Hong Kong, the world’s most expensive office market.
Dubai commercial rentals in buildings over 30 storeys have cost US$43.55 per square foot for the past two years, according to the London-based property consultancy Knight Frank’s skyscraper index. The emirate ranks 18 out of 21 listed cities.
Activity remains “muted” in Dubai’s office market, with a majority of districts reporting flat or cheaper rents, broker Cluttons said in January.
The company’s Spring 2017 Dubai Office Market Bulletin reported declines in top-band rents in 15 out of 23 submarkets monitored and increases in only two: DIFC, where top rents increased by 5.7 per cent year-on-year to Dh370 per sq ft and non-free zone space in Dubai Design District.
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Nick Maclean, the managing director of broker CBRE Middle East, said in January that a polarisation was taking place in Dubai’s office sector, with prime rents maintaining values but rents in the secondary market declining by 12 per cent.
The latest Knight Frank survey analyses rental costs for sky rises in the second half of last year. The property consultant said that the general picture for the surveyed cities is one of flat growth, reflecting the nervousness in most office markets over political risks from US elections to Brexit.
Despite this uncertainty, US cities retained their lustre with New York holding on to its second place slot at $159 per sq ft, moving up 0.6 per cent; Chicago office rents climbing 3.4 per cent to $61 with San Francisco at $113, Boston, $77, and Los Angeles, $46, all remaining flat.
And Brexit failed to have an impact on London as rents remained stable at $104.56 per sq ft – nearly double that of Paris at $53.83. “Despite uncertainty following the Brexit vote, rents in London’s skyscrapers remain significantly higher than those in other major European cities,” said Dan Gaunt, head of Knight Frank’s City Agency.
But the global office rental market could pick up this year.
“However, in 2017 the tone of global economic news is improving and both Brexit and the [Donald] Trump government have not had the negative impact on growth that was initially feared,” said James Roberts, chief economist at Knight Frank.
Fewer vacancies and limited new supply helped Australian cities register the largest gains over the second half of last year. Commercial rentals in Melbourne and Sydney shot up 11 per cent and 10.1 per cent, respectively. “When we compile the next skyscraper index in the summer, I expect to see more cities reporting rental growth in tower buildings,” said Mr Roberts.
lgraves@thenational.ae
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