E-mail Article
Printer Friendly
Share Article
Dubai office rents to drop off
Dubai's office tenants are set to see a fall in rents and more location choices as the emirate continues to see high levels of construction activity, according to a Colliers International report.
The emirate currently has over 27 million square feet of confirmed activity under construction.
"To put that in perspective, that's approximately the same amount of office space as Geneva, Rio de Janeiro, Beijing and Singapore. As a result, this influx of space is expected to reverse the current supply-demand dynamics that characterise the market," said Ian Albert, regional director of Colliers International.
Dubai is ranked third in terms of global office real estate construction activity in the real estate consultants' 2007 Global Office Real Estate Review. Moscow and Shanghai take the top two spots.
"Despite strong latent demand for office space, the sheer volume under construction combined with the period of delivery will have a marked impact on the competition between landlords, with a concurrent softening of rental levels and a greater number of tenant incentives on offer," Mr. Albert added.
Colliers expects that the volume and timing of the impending supply will shift the market's favour from landlord to tenant.
"Much of the supply will enter the market within a one to three-year window, inevitably leading to a landlord - as opposed to tenant - competitive market. Attractive rental price and payment terms, increased rent-free periods and equitable lease conditions, together with improved finishing levels, are expected," explained Albert.
However, with the current high demand and low availability of stock, Colliers believe that rental levels being achieved in some of the established locations are being inflated as tenants bid for space.
At present, Dubai's prime commercial property rents are still on the rise, with rents in Dubai's Central Business District offices registering steady increases over the past nine months.
However, despite considerable rental increases, Dubai is still significantly less expensive than London, Hong Kong, Tokyo, Moscow, Paris, Dublin, New York and both Mumbai and Delhi, and ranks 13th in Colliers' Global Survey of the top 25 Office Occupancy Cost destinations.
Quick Links(Residental)
Filter by address:
Comments 1-5 of 5
Posted by Albert on 5 May 2007 at 12:56 UAE time
read all comments. one thing is sure - the rent will come down. this is just a bubble created by real estate giants.
Posted by Marc, Dubai, UAE on 26 April 2007 at 09:10 UAE time
I would like to comment on comments posted by Srivatsa and Hassan. Office rents are higher than anywhere in the world. This situation has been created by the lack of supply versus demand. But the situation will change. Look at Tecom 60+ office towers coming on line next year, look at Jumeirah lake, DIFC, Business Bay, Festival City, Outsource Zone, Burj Dubai complex just to name a few. Every single large development includes office space these days. Now look at Abu Dhabi, Sharjah, Ajman, Umm Al Quwain, they are all building office space in Free zones at reasonable distances from the airports and centres of activity. Take a broad look and you will see it; it won't take until 2012. I I give it one year before the trend changes.
Posted by hiro bachani, dubai, uae on 26 April 2007 at 02:07 UAE time
I feel Colliers are on the right track if they predict that the rents might come down . This is perhaps necessary, if dubai has to remain a viable, competitive market-place. I remember renting a small shop in the meena bazaar area for dhs 16,000/- per annum. This was 8 years back. The same shop in the same old building was being offered by a top-five landlord for dhs 60,000/- Of course, subsequently we have taken many more shops in malls for over 200,000 each, but i wish to state that a shop goes up from 16,000 to 60,000 for no real reason. I have not seen any traders see any such increase in their turnover or net-profits from such shops. It shows that somewhere along the way dubai has become atrociously expensive and uncompetitive. There are many spectators who blithely comment that if you feel that dubai has become too expensive why don"t you all go back from where you have come. After over 35 years in this country and seeing our whole family growing up here, where do you think the businessmen ought to go ?. The same situation is for all types of rented properties- whether they are for shops, warehouses, residences, offices.etc. If dubai has to be the same hot spot for future business growth, it has to do something to make everyone"s life more affordable. Every body is not a halliburton who come with unlimited budgets. The major chunk of dubai"s prosperity hinges on the survival of the small and medium business enterprises- SME"s. Let the SME"s prosper and automatically Dubai will bloom. regards- hiro bachani
Posted by Uzair Hassan, Dubai, UAE on 24 April 2007 at 09:07 UAE time
Several factors impact the rents of commercial space. In your article, we have looked at the availability of office space only. What is not being taken into consideration is that the dynamics of this market are totally different then other more established markets. The demand for commercial space is growing by the day with the number of corporations setting up in Dubai at staggering levels. Visit any one of the 15 free zones and try and obtain office space to get a more real picture of the current situation. Just not available. Companies are utilizing hotels, villas and their own homes to work out of. Gigantic projects being announced are bringing in more demand as is the influx of the likes of Halliburton head offices, ICC association etc. The expansion in the property market and its underlying legal setup has also opened up Dubai for mutual funds that are coming in without much notice. All in all I do not see drop offs in the coming three years. My time horizon is more around the 5-7 year period and even then, not a Dropf off, but a correction is envisaged.
Posted by Srivatsa, Dubai, UAE on 23 April 2007 at 20:56 UAE time
I do not think that office rents would drop off within 3 years. In fact, I think I would peak till 2012 and then start the decline to current levels. The no. of projects not only in Dubai but in other emirates and other GCC countries is any indication, they will not drop off in 3 years.