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Office rents in Dubai free zones fall 60% in six months
Office rents in Dubai’s free zones have plummeted by 60 percent as a result of the global economic crisis, according to an industry insider.
Average rates of privately managed buildings in the free zones had dropped from about AED240-380 per sqft ($65-103) in the third quarter of 2008, to about AED92-180 per sqft ($25-49) in the first quarter of 2009, according to Mohammed Faheem, research analyst at CB Richard Ellis.
The figures indicate a drop of 52 to 61 percent, according to a report in UAE daily Khaleej Times.
"This is a clear sign of weakened demand in the surveyed free zones that include Dubai Internet City, Dubai Media City and Dubai Silicon Oasis and Jumeirah Lake Free Zone," Faheem said.
"Rents within the various zones do vary from one to another, with some zones implementing rate restrictions to stimulate demand for occupiers, Dubai Internet City and Dubai Media City are pegged lower to attract international companies," he added.
However, Dubai International Financial Centre (DIFC) special economic zone located in the city's central business district had fared better, keeping rents higher, he noted.
"DIFC still stands out above the rest as the prime office location in Dubai."
"Average rents at DIFC are about $112 -123 per sqft. This is generally due to the fact that the DIFC is one of the most popular locations for companies looking to move to Dubai," Faheem told the newspaper.
Lower rents in some of the free zones could make Dubai a more attractive option for some international companies in the current economic climate.
Average rents in buildings managed by free zone authorities ranged from about AED170-190 ($46-52) per sq ft, according to latest figures.
However, free zone rents managed by the authorities would always be artificially affected up or down, because the authorities had a different agenda to commercial landlords, pointed out Nicholas Maclean, managing director of C B Richard Ellis.
"The concept of the free zone was a very bold idea that has proved to be hugely successful," he said.
Declaring the whole of the UAE as a free zone might be discussed in great detail as a part of government's plan to boost economic growth, Maclean suggested.
"It has been debated ever since I have lived here, but if there is a stimulus for the economy then I think the potential to change the regulations will be discussed more rigorously.”
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Posted by paul, Dubai, UAE on 4 May 2009 at 13:16 UAE time
DIC is still charging 200 AED /ft including service charge. It is not really sustainable in the present market so I am sure they will have to reduce this.
Creating one big free zone in the UAE would certainly be a big boost as it would remove the reliance on a single provider and allow free choice of location and office space. But I don't think this will happen - too many locals make money for nothing by sponsoring companies outside of freezones. I don't think they see the big picture yet.
One of the major uncertainties for companies in the UAE, or those thinking about relocating, is the threat of expensive new rules being introduced overnight, such as forced emiratisation. Certainly my company has been forced to set up a contingency to move our business quickly overseas if such rules come in. This in itself is expensive, but we have no choice given the threat to our business of such policies. The UAE needs to make clear that it understands businesses are simply not able to absorb these kinds of costs, certainly not in the current climate, and give 100% clear assurance that no move like this would happen without at least 6 months notice. This would allow companies like mine the peace of mind that we'd have plenty of time to make an orderly move out of the country rather than an emergency one.
Posted by Kaptain, Abu Dhabi, UAE on 4 May 2009 at 12:43 UAE time
Where are the tall claims that Middle East is haven for rich and poor have no place..??
The prices and rents are falling, once was a time where the tenants were at the receiving end and there seemed no end to this plight and they enjoyed their profits.
Now What???? They don't want to integrate the expats, so what do they else have on in their minds..?? Is there any viable alternative..?? Can they build and grow without Expats..??? Think again..lest the expats realise their importance and start quoting a price..