Serviced office space in Dubai hit by downturn, tougher regulations

The number of serviced office spaces in Dubai has fallen 29 per cent over the last two years while the number in Abu Dhabi over the same period has risen 73 per cent.

The number of serviced office spaces in Dubai has fallen 29 per cent over the past two years because of the global financial crisis and red tape while the number in Abu Dhabi over the same period has increased 73 per cent.

Serviced office broker Instant Offices said that the downturn hit the serviced office sector in Dubai hard, with the number of work station spaces available in serviced office buildings falling by almost a third from 3,100 spaces two years ago to 2,200.

In a recently published report on serviced offices in emerging markets, Instant Offices added that the number of workstations in Abu Dhabi was rising rapidly from a very small base as more companies choose to relocate to the capital from Dubai. The researchers found that the number of serviced office centres in Dubai fell from 27 in 2011 to just 19 at the end of last year, while in Abu Dhabi the number increased from seven to 11 over the same period.

"We are seeing a link between the fall in the number of work stations in Dubai and the increase in Abu Dhabi," said Branton Moore, the head of research at Instant Offices. "We see two reasons why the number of serviced offices has fallen dramatically in Dubai. The global financial crisis cut demand from tenants. And at the same time the authorities in Dubai have been getting tougher with companies operating in the emirate.

"Before the crisis lots of companies licensed through trade zones were based elsewhere but since the crash the authorities have been restricting their ability to operate outside of trade zones or government-owned buildings. In Abu Dhabi the authorities are becoming more business friendly and making it easier for businesses to set up in serviced offices."

The amount of money it costs to rent a workstation in Dubai fell from a high of US$1,675 (Dh6,152) per month in 2008 to a low of $900 in 2011. As of late last year, rates have recovered slightly to $955 per month. In the smaller Abu Dhabi market, meanwhile, average workstation rents have risen steadily to $1,075.

Mr Moore predicts that over the coming two years the number of serviced office centres in Dubai will return back to around pre-crisis levels at 26 while in Abu Dhabi the number will surge by 45 per cent to 20 centres.

The researchers found that Istanbul had the largest number of serviced offices in the region, its market having doubled in size over the past two years to a total of 21 centres. Manama came fourth in the Middle East with a total of eight serviced office centres, followed by Beirut, Doha and Amman.

Doha was the Middle Eastern city with the most expensive serviced office rents at $1,475 per workstation, followed by Riyadh where they stood at $1,380.

"In Istanbul the financial crisis led to good deals for space which meant that serviced office providers rushed in to take space and to take advantage of low rents," Mr Moore said. "Doha is the shining star of the Middle East at the moment. Demand there is through the roof and we are having to turn down enquiries to move in there due to a lack of available centres."

Instant Offices found that Regus was the largest service office provider in the Middle East and Eastern European region, followed by Servcorp, Plaza Cubes, InOffice and Dago Centrum.