Dubai is set to strengthen its position as the most sought-after market for office space in the Middle East, new research shows.
The UAE, and Dubai in particular, had been a key investment target for international investors because of its “safe haven” status in a volatile region, said global real estate services firm JLL in its inaugural annual occupier sentiment survey for the Middle East and North Africa (Mena).
Over the last four years, Dubai has had a net absorption rate in its central business district of about 112,000 square metres a year. In other words, it has let more space than has come on to the market each year.
“The results of our survey reflect that Dubai has solidified its place as the preferred business and financial centre in the Mena region,” said Dana Williamson, JLL’s head of agency for Mena.
The key drivers include the anticipated annual GDP growth in the UAE of 3 per cent between 2015 and 2018, population growth of 2 per cent, and a labour force increase of 2 per cent.
The multinational companies that JLL surveyed said they planned to increase their workforce in the country by between 5 per cent and 20 per cent a year over the next three to five years.
Sean McCauley, director of agency at property consultancy Asteco, said demand from multinational firms for new office space had increased “particularly over the last two quarters”.
He said: “These tend to be multiple-floor transactions. Last year, demand for these types of deals was more scarce.”
These major companies also want to occupy buildings with a single landlord, as opposed to strata-owned space, because such buildings are often better maintained and negotiations to renew leases are easier.
Mr McCauley said the UAE’s growing economy was also fuelling demand at the low end of the Dubai market, with more individuals deciding to “push the green button to start their own business” and rent small units. This has piqued the interest of serviced office providers.
“What they are telling us is that the market is exceptionally strong for serviced office space,” said Mr McCauley, explaining that they are less capital-intensive for start-ups compared to furnishing their office.
Despite the rise in demand, price sensitivity remains. When companies are presented with two to three similar options with a price difference of between Dh5 and Dh10 per square foot, they will typically opt for the cheapest, according to Mr McCauley. As a result, landlords are finding it difficult to increase rents.
“There is still an oversupply of space,” he said. “The market has been good, but only up to a point.”
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