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Fri 22 May 2015 01:14 AM

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Better Iran relations 'could transform Dubai office market'

Cluttons says international businesses would hub any Iran ops out of Dubai if global relations with Iran normalises

Better Iran relations 'could transform Dubai office market'

The first quarter of 2015 has seen office rents stabilise across Dubai's prime and secondary markets, following a slowdown in the rate of rent increases during Q4 2014, Cluttons has said in a new report.

The real estate consultants also said the emirate's industrial market has retained its momentum during the first three months of this year.

Cluttons said the prospect of the normalisation in global relations with Iran could have huge ramifications for the Dubai office market, although it added that this was "still too early to adequately assess".

It said: "It is however likely that international businesses will hub any Iran operations out of Dubai, should trade relations be normalised with the UAE's northern neighbour.

Cluttons' international research and business development manager, Faisal Durrani, said: "It is our expectation that global businesses will use Dubai as a launch pad for any Iranian business ventures, should trade sanctions alongside any nuclear energy treaties signed with the permanent members of the UN Security Council.

"Any benefit to office take up levels in Dubai would be slow to be felt and we are certainly not anticipating a sudden surge from any normalisation in relations. It is something we are keeping a close eye on however."

Cluttons' Spring 2015 Dubai Commercial Property Outlook report highlighted that Grade A office rents grew by 14 percent in 2014, while secondary space saw a more substantial 24 percent uplift last year.

"This strong growth has largely failed to carry through to this year, with a widespread stabilisation in rents, despite a steady stream of requirements from corporate occupiers," the report said.

"In the secondary market, rents have been affected by the abundance of stock which continues to trickle through in locations such as Jumeirah Lake Towers and Business Bay," it added.

 Cluttons said that while demand for Grade A space remains diverse and strong, mirroring the growth across the various business segments of the economy, average rents have stabilised.

Steve Morgan, chief executive at Cluttons Middle East said: "The range of requirements filtering through range between 2,000-25,000 sq ft, underscoring the diversity of business activity.

"The finance and banking, real estate and business services sectors have been especially active in recent months, with both existing and new market entrants seeking out space."

The Cluttons report backs up the results of the latest Dubai Economic Department Business Confidence Survey, where 69 percent of responding businesses indicated that they will invest in capacity expansion over the next 12 months.

Cluttons' report highlighted the performance of the micro market across Dubai, particularly in areas such as DIFC, where rents vary greatly across the 4.8 million square foot site.

Elsewhere, rents are expected to remain stable, or in some cases, such as with some of the strata owned stock, downward revisions are likely to persist.

The report also showed that in the industrial market, rents continue to rise against the backdrop of low supply levels in most of the city's industrial estates.

Morgan said: "The overall buoyancy and strength of demand for industrial space is unlikely to weaken in the near term. And with space in many primary submarkets now in short supply, we do not expect any let up in the upward pressure on rents over the course of 2015."

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