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Dubai Office Rents Seen Heading South

DUBAI — Office rents across Dubai have shrunk to 2007 levels, but are are poised to fall further as additional supply comes into the weak office space market, said property broker Jones Lang La Salle.

Office rents fell by an average of 25 per cent in the second quarter compared to 45 per cent in the first quarter, said Jones Lang. For premium office space, excluding the Dubai International Financial Centre, rents are now at the level of Dh225 per square foot, the lowest since mid-2007.

At these rates, prime office spaces in Dubai are even lower than those in major international office centres of London, Paris, Hong Kong, Mumbai and Moscow.

Jones Lang said that it expected Dubai office rents to decline further due to new supply coming in. By the end of 2011, 25 million square feet of additional space is forecast to enter the market. This is seen increasing the vacancy rate, putting more pressure on rentals.

In the second quarter, the vacancy rate has risen by about 25 per cent with more than two million square feet that entered the market in a subdued leasing demand.

Property prices in Dubai have plunged from their peak levels in 2008 by nearly 50 per cent. Deutsche Bank said in mid-June, that it expected prices to decline by another 20 per cent before the end of the year.

“The market has swung in favour of tenants over the past six months, and there are some very attractive deals available in a range of newly completed buildings across Dubai. This has created a situation where tenants can take advantage of tomorrow’s prices today and negotiate rents below current asking levels,” said Matthew Hammond, head of Jones Lang La Salle Middle East.

· rocel@khaleejtimes.com