UAE: Commercial rents stay low in Q3 2016

The third quarter of 2016 saw office rents steadily decrease across most of the city with JLT seeing no change from Q2

David Godchaux (above) is the CEO of Core Savills.
David Godchaux (above) is the CEO of Core Savills.

Average rentals remained low across most submarkets throughout Q3, according to the Dubai Office report from Core Savills.

After a sharp annual drop of more than 20%, rents have finally reached its lowest in Jumeirah Lake Towers (JLT), with the lower rental range seeing no change from Q2 to Q3.

Mazaya Business Avenue saw fixed absorption owing to the lowest entry point of $16 (AED60) per sqft it offers in the area.

However, due to lack of availability of small commercial units in Dubai International Financial Centre (DIFC), smaller units are demanding a 15-20% higher rent.

David Godchaux, CEO of Core Savills, said: “Corporate tenants sometimes assume the commercial market will mirror residential market dynamics. However, the former is more complex, with each sub-market at different stages of the real estate cycle, influenced by a variety of drivers.

“There are many submarkets – both freezones and onshore areas – that are following distinct dynamics and may be at a different stage of their real estate cycle.

Areas such as DIFC, Tecom and Dubai Design District 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.”

Grade A buildings in Downtown Dubai saw a 5% increase in the upper rental range due to very high occupancy levels. Godchaux said: “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.”

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, said the report.

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