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Dubai, Abu Dhabi office rental markets in pain - CBRE
The current crisis has resulted in falling demand for office space in Dubai, according to commercial real estate services company CB Richard Ellis (CBRE).
In the office lease market, there has been no significant change in the fourth quarter but prime rents saw growth of 29 percent year-on-year, CBRE’s latest report said.
Commenting on Dubai’s office rental growth from 2004-2008, the firm said that in terms of stock – much of new entry during Q4 was located in Al Barsha and the Freezone developments of TECOM.
CBRE admits that since rent is normally paid half-yearly or full year and with limited new office supply entering market, a drop in lease is not yet apparent. It expects a correction in rents in first quarter 2009 with adjustments less prominent in the prime locations like DIFC / SZR.
The commercial real estate services company expects other districts to see more notable declines and marked increases in the availability of landlord incentives.
Commenting on Abu Dhabi, CBRE said that a climate of uncertainty is evident in the relatively subdued office rental market there. Demand for office accommodation fell specifically in the prime segment, impacting rental rates, it added.
“We envisage that present conditions will present opportunities to developers as well as end-users – developers [would] become more cautious, pursuing only well-planned premium quality projects and end-users [would benefit] from a better quality of property product as a result,” CBRE said.
The real estate services firm feels that the Abu Dhabi market remains significantly under-supplied across almost all property sectors; it essentially offers an environment conducive to continued growth, albeit at less aggressive pace, CBRE estimates.
The firm sees the year ahead as an opportune time for the Abu Dhabi government to lay-down the much awaited property regulations befitting for a mature market. "This should not only push the appeal of the market but also put Abu Dhabi in a competitive stance internationally.”
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Comments 1-3 of 3
Posted by Hamid on 2 March 2009 at 11:29 UAE time
The office rent in Dubai has already dropped more that 50% in 4th quarter of 2008, by the looks of it it will be down 75% by the end of the 2009 first quarter. This is based on what I see in the market today compare to what it was in 3rd quarter of 2008. So, I am kind of surprised at the numbers given in this article.
Posted by Peter Lee, DXB on 2 March 2009 at 02:40 UAE time
Lots of Companies are still caught in a Catch 22 Situation because rent was previously paid in either one or two cheques...
Posted by Jebel Ali Baba, Dubai, United Arab Emirates on 1 March 2009 at 18:54 UAE time
Why should the office rental market not be effected the same way as the apartment and villa rental sector? I think, the office situation is even indicating the mid and long term development of the UAE economy. Many company move or leave due the high cost and downfalling business in the UAE. And with the companies, the tenants for rental also go.