Many years until vacant office space can be absorbed, says Jones Lang LaSalle
Continued oversupply of office space in Dubai will see rents fall by as much as 20 percent in 2011, according to the latest research from Jones Lang LaSalle (JLL).
In its Real Estate Outlook for 2011, the consultancy predicted that both capital and rental values for Dubai commercial property would decline by between 10 and 20 percent, putting the emirate at the bottom of a survey of the world’s most important business cities.
In contrast, demand in Hong Kong will rise by more than 20 percent, followed by Moscow, Singapore, Tokyo, London, New York and San Francisco, all of which are expected to see gains of between 10 and 20 percent.
The only other cities on the list predicted to see negative value change are Mexico City and Madrid.
“Residual declines will still be recorded in a few Tier I cities such as Seoul, Madrid and Dubai,” the report indicated.
“Dubai has a significant overhang of vacant office space which will depress rents and take many years to absorb – prime office space is now available with a 50%+ discount on its 2008 peak.”
The JLL research said that office leasing volumes worldwide are expected to be at their highest level since the financial crisis began, reflecting greater confidence on the part of corporate occupiers.
Demand is likely to be driven by the strong economic conditions in top-tier countries in Asia Pacific, which will post record absorption levels at almost double 2009 figures and 10 percent more than the previous peak in 2007.
JLL also said that global and local investor sentiment in the MENA region was stabilising, with significant oil-based capital inflows resulting in reinvestment in local infrastructure.
The report said that while MENA real estate investors have remained focused on Western Europe and the UK, there was evidence of increased appetite for Asia.
“Within MENA, there is growing interest in opportunities in North Africa, most particularly Egypt, and Saudi Arabia,” it added.
“Both of these markets are benefiting from increasing demand from a large and growing population and a shortage of high-quality modern real estate.”
Have Dubai property prices hit rock bottom?