Dubai office rents to fall by up to 20% in 2011

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REAL ESTATE: in its Real Estate Outlook for 2011, JLL predicted that both capital and rental values for Dubai commercial property would decline by 10-20% (Getty Images)

REAL ESTATE: in its Real Estate Outlook for 2011, JLL predicted that both capital and rental values for Dubai commercial property would decline by 10-20% (Getty Images)

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.”

 

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Posted by: Red Snappa

The only way to fill up the external office space is to permit majority maybe even 100 per cent foreign ownership outside the freezones or with the local minority partner as the Ministry of Economy or Chamber of Commerce, who will also act as the holder of perhaps a larger cash guarantee from the company owners for the privilege. Also trade licences should be granted for longer periods

Freezones are fine but they are a monopoly and limited in terms of the trade licence categories they offer. An open equal opportunities commercial market in a tax free economy has to be a winner by comparison. The public sector, retail industry and many other businesses in the private sector need a rising number of resident consumers. Non-GCC visitors are short term and seasonal and Europe is battening down the financial hatches again.

Posted by: Jake

The trend especially in the west for the last decade is to work from home, I wonder which moron in Dubai thought that there will forever be high demand for office space here.

Posted by: Haddad

Problem is office price in freezones is not falling at all, it is still very high and expensive (I pay more in dubai, then i pay in europe). Only non freezone office space is falling so much. And this wont help business grown in dubai as companys are interested in freezone office space, only JLT freezone is cheap in dubai at the moment. I started a business in silicon oasis some months ago, and was surpriced that rents are even higher then in europe. But i could get 80-90% cheaper office rentals if it wasnt in a freezone rental. I dont see business grown alot before freezone office rentals fall alot more, as visa's for employments depends on how much office space you have.

Posted by: Arjun

40% more down for office space, then stabilize........get the residential rents down by another 50%. The cost of hiring for many companies will become affordable.......then you can see more people in Dubai. More people, more money at the entry point and more money spent by these people in the country. If you dont want them you can keep them away by increasing the rents of everything.

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