Office rents predicted to fall as demand eases

Office rents will fall as occupancy rates plunge in Dubai this year, according to real estate services firm Jones Lang Lasalle (JLL).

The completion of an additional 4.7 million square feet of office space in the second half of last year pushed up the overall vacancy rate in Dubai to 16 percent at the end of the year from 7 percent in July, it said.

“This headline figure does not, however, reveal the full story. Because of the barriers to entry into free zones, there are pockets of higher vacancy in areas such as TECOM and Jumeirah Lakes Towers/Dubai Multi Commodities Centre,” the report said.

In the residential market, 32,000 new units were completed in Dubai last year, bringing the city’s total residential stock to around 253,000.

If all projects announced were to be completed on schedule, an additional 190,000 residential units would hit the market between 2009 and 2011.

But JLL estimates that cancellations and construction delays will reduce this by more than 50 percent, meaning that around 90,000 additional units would enter the market in the same period.

“More radical measures such as a removal of the current link between employment and residency status and a clarification of the law providing for residency for expatriate purchasers of residential units may be required to provide a floor to the market,” it said.