Dubai: Prime central office rents see 6% drop
Prime central office rents in Dubai’s Sheikh Zayed Road and Downtown areas witnessed a 6% drop in Q2 2016, according to the Q2 2016 Dubai Office Report from Core, UAE associate of Savills
Prime central office rents in Dubai’s Sheikh Zayed Road and Downtown areas witnessed a 6% drop in Q2 2016, according to research from Core, UAE associate of Savills.
The real estate specialist’s Q2 2016 Dubai Office Report found that Dubai’s prime central office locations are having to contend with growing competition from grade-A supply in Dubai Trade Centre District and Dubai Design District (D3).
Competitively priced stock in Business Bay was also cited as a contributing factor, although the area continued to see a marginal softening in rentals. Office occupancy in Business Bay witnessed a 3% drop during the quarter, with occupancy levels at just 60% - the lowest among all office sub-markets.
Commenting on the findings, David Godchaux, chief executive officer of Core UAE, said: “This is because the area is relatively new and is yet to be fully developed.
“We see buildings located in the interior of Business Bay facing decreased space take-up compared to the buildings near Sheikh Zayed Road as a gap in infrastructure and access is yet to be resolved. However, we expect absorption levels to moderately go up as the development nears completion along with assistance from the burgeoning demand from start-ups.”
Tecom – an area that includes Dubai Internet City, Dubai Media City, and Knowledge Village – emerged as the highest performing established office sub-market, with a 10% rise in rents.
“Occupancies hover northwards of 90% across most towers and we see a strong demand, especially from existing technology and media occupiers looking to expand, [whose requirements are] not being met due to constraints in supply.”
Jumeirah Lakes Towers (JLT) saw the sharpest drop in rentals (10%) as the sub-market largely consists of strata-owned grade-B stock. Oversupply issues and entry points as low as AED60 per ft2served to further lower the market average, according to Core UAE.
During what Core UAE referred to as “the busiest Ramadan in recent years”, moderate upward pressure was exerted on the Dubai International Financial Centre (DIFC) office market.
Factors such as high occupancies; sustained demand from banking, financial services, and insurance (BFSI) and ancillary sectors; robust regulations; and largely single-owned grade-A stock helped to drive a 6% increase in rents during the quarter.
Dubai has around 8.36 million m2 of office stock, 30% of which currently qualifies as prime, according to the Core UAE report.
Approximately 680,000m2 of additional supply is expected to come online by 2018, with Business Bay accounting for 30% of this stock.