The office market in Dubai and Abu Dhabi remain favourable to tenants as average rents in both emirates fell during the first quarter as demand for space remains muted amid the pandemic induced economic slowdown, according to the latest report from the consultancy Knight Frank.
Average office rents in Dubai and Abu Dhabi dropped more than 7 per cent during the first quarter, according to the report. In Dubai citywide office rents declined 7.7 per cent to Dh1,033 per square metre, while in Abu Dhabi rents slid 7.3 per cent to Dh897 per square metre.
Average prime office rents across Dubai fell 4.2 per cent year-on-year and currently stand at just over Dh2,150 per square metre. This is the lowest level recorded since third-quarter of 2012, the report said. Vacancy rates also increased to 24.3 per cent.
“The fallout from Covid-19 is still being felt across the market. However, there are pockets of activity emerging, with the technology-media-telecoms sector being notably active, mirroring trends in other major global markets,” Faisal Durrani, head of Middle East research at Knight Frank, said.
“The increased level of activity stems from rising nationwide business confidence, driven by the world-leading vaccine roll-out programme that is allowing a semblance of normality to return.”
The UAE’s Purchasing Managers’ Index (PMI), which tracks business confidence in the country’s private non-oil economy, stood at 52.7 in April, the highest since June 2019 and the fifth month in succession that a reading over 50 was registered, indicating continued business expansion.
Vacancy rates in Dubai’s office market stood at 24.3 per cent at the end of 2020, up from the 19.4 per cent recorded last summer, according to the report.
“Looking ahead ... the trends of consolidation of space and flight to quality are likely to continue. Occupiers are, where possible, looking to take advantage of weaker market conditions to upgrade occupational space whilst being mindful of increasing total spend,” the report said. Landlords are expected to remain flexible in order to retain and attract occupiers.
In Abu Dhabi prime office rents rose 5.5 per cent year-on-year to Dh1,725 per square metre, while Grade A office rents fell 2.3 per cent to Dh1,192 per square metre.
Vacancy rates in Abu Dhabi’s office market stood at 21.7 per cent at the end of the first quarter, down slightly from 21.9 per cent at the end of last year. Prime office space, on the other hand, registered a vacancy rate of 25.6 per cent by the end of the quarter, down from almost 29 per cent in the first quarter of 2020.
“Activity in Abu Dhabi’s occupier market is expected to remain subdued with new take-up likely to continue being driven by public sector entities and smaller domestic businesses,” Mr Durrani said.