Dubai office rents stay flat in Q3

dubai - Areas such as DIFC, Tecom and D3 face steady upward pressure on rents

Average office rents remained flat in most sub-markets in Dubai in the third quarter, according to Core, the UAE associate of Savills.

"There are many sub-markets - both freezones and onshore areas - that follow distinct dynamics and may be at a different stage of their real estate cycle. For example, areas such as DIFC, Tecom and D3 have been facing steady upward pressure on rents while other economic clusters are witnessing a varied level of rental drops over the last few quarters," said CEO David Godchaux.

Smaller offices in DIFC are commanding a 15 to 20 per cent higher rent due to a lack of availability of similar unit sizes. Grade A buildings in Downtown Dubai saw a five per cent increase in the upper rental range due to very high occupancy levels.

Godchaux informed: "As HSBC is expected to move into its purpose-built facility by the end of 2017, we expect its current office in Emaar Square to also come to market, adding the only near-term stock to the district."

After a sharp annual drop of more than 20 per cent, rents have bottomed out in Jumeirah Lakes Towers, with the lower rental range seeing no change from Q2 to Q3.

Business Bay continues to see increased enquiries from small to mid-sized occupiers, especially from start-ups and SMEs, and was able to maintain its average rents throughout Q3.

"With the marginal softening of rents in core business districts over the last few quarters, Dubai is increasingly becoming favourable for international occupiers looking to expand in this city," said Godchaux.

"Dubai offers attractive rents and strikingly lower overall lease acquisition costs for both financial corporations as well as creative/SME firms when compared to other global cities."

A vast majority of landlords are adapting to present conditions by adding incentives such as contribution to fit-outs, extended rent-free periods and shorter lease terms to retain or attract new tenants.

An increasing preference towards fitted out units is also coming into play. Furthermore, as parking increasingly becomes an issue, access to Dubai Metro becomes a key differentiator.

Older areas such as Bur Dubai, Deira and Garhoud experienced limited movement in activity levels, keeping rents relatively flat at most buildings.

- deepthi@khaleejtimes.com