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Freezone Office Rents in Dubai Drop Up to 60pc

DUBAI — A decline in demand due to the global economic crisis has resulted in substantially cheaper rents for office spaces in Dubai’s free zones, according to an industry analyst.

Mohammed Faheem, research analyst at CB Richard Ellis, said that the average rates of privately managed buildings in the free zones have dropped from about Dh240–380 per sq ft ($65—103) in the third quarter of 2008, to about Dh92–180 per sq ft ($25–49) in the first quarter of 2009, indicating a drop of 52 to 61 per cent.

“This is a clear sign of weakened demand in the surveyed free zones that include Internet City, Media City, Knowledge Village, Dubai Silicon Oasis and Jumeirah Lake Free Zone,” he told Khaleej Times.

“Rents within the various zones do vary from one to another with some zones implementing rate restrictions to stimulate demand for occupiers. Dubai Internet City and Dubai Media City are pegged lower to attract international companies,” Faheem said. The average rents in buildings managed by free zone authorities range from about Dh170-190 ($46-52) per sq ft.

He noted that the Dubai International Financial Centre 0r DIFC — special economic zone located in the city’s central business district — has fared better. “DIFC still stands out above the rest as the prime office location in Dubai. Average rents at DIFC are about $115 - 123 per sq ft. This is generally due to the fact that the DIFC is one of the most popular locations for companies looking to move to Dubai,” he said.

The lower rents in some of the free zones could make Dubai more attractive, “however, it depends on the objective of the free zone managers. The main point to emphasis is that the rents are artificially affected within the free zones, upwards or downwards, because the authorities have a different agenda than commercial landlords,” said Nicholas Maclean, Managing Director of C B Richard Ellis said.

“The concept of the free zone was a very bold idea that has proved to be hugely successful,”Maclean said. But he said that the issue of declaring the whole of the UAE as a free zone might be discussed in great detail as a part of government’s plan to boost economic growth. “It has been debated ever since I have lived here, but if there is a stimulus for the economy then I think the potential to change the regulations will be discussed more rigorously,” he said.

aneela@khaleejtimes.com