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Dubai office builds planned despite high vacancies

on Jul 31, 2013

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Developers are being encouraged to push ahead with new office buildings in Dubai despite the ongoing high vacancy rates due to a lack of ease in gaining space at buildings with contiguous floors, according to a new report.

CBRE has said that the Dubai office market "is continuing to experience rising demand, with new leasing enquiries and live requirements reflecting the improving state of the sector".

Moreover, although a recent report from competitor firm Jones Lang LaSalle stated that vacancy rates remain above 30% even in the prime central business district (CBD), CBRE said that demand for new space is being driven by corporates seeking new headquarters in prime locations.

Such occupiers often don't want to deal with strata-owned buildings where they would have several different landlords.

"Despite the high headline vacancy rates the availability of good quality office accommodation on contiguous floors is limited, and this is encouraging developers to push ahead with developments," said CBRE's UAE head of research, Mat Green.

CBRE said that rents in prime areas of the CBD remained flat during the second quarter at AED: 1,500 ($408) per m2 a year.

Although rents in secondary space are currently around AED: 1,050 per m2 a year, CBRE said that rates in strata accommodation in less popular lucations can only expect to achieve rents of around half this rate.

Landlords with inferior products continue to face difficulties in increasing their occupancy levels amidst stiff competition to secure tenants," it added.

Rents in some of the more popular secondary officle locations like Business Bay, TECOM and Jumeirah Lakes Towers have witnessed average growth rates of around 6% during Q2.