By Andy Sambidge
Jones Lang LaSalle sees noticeable rise in asking prices during the last six months
Landlords have become firmer on prime Dubai office rental deals amid an increase in leasing activity during the first quarter of 2013, Jones Lang LaSalle has said in a new report.
The real estate specialists said the rise in asking prices, noticeable during the last six months, has now been translated into an increase in the dealing rents.
It said vacancy rates are expected to decline in the coming quarters in prime areas driven by stronger demand.
Jones Lang LaSalle said it is aware of approximately 190,000 sq m of current potential demand for office space.
Average headline dealing rents in quality office buildings in selected areas have seen a rise of 10 percent in the last three months, JLL said.
It added that the top open-market rent remained unchanged at AED2,370 per sq m in the DIFC but improved by four percent to AED 1,690 per sq m elsewhere in the central business district (CBD) since Q4 2012.
JLL's report said prime locations such as TECOM A&B, Sheikh Zayed Road and Burj Downtown have all seen increase in their rental values. Business Bay has also witnessed an increase in popularity recently as more of the area’s infrastructure has been completed.
While landlords have become firmer on rents in the most prime locations, they remain flexible elsewhere, offering rent-free periods to attract tenants to fill unoccupied buildings.
"As the 'flight to quality' continues, older areas continue to suffer from lower occupancy rates while the newer buildings in areas such as Business Bay, Downtown and even Jebel Ali, are filling up," the report said.
Vacancy rates within the CBD remained flat at 31% in Q1 as the take up was in line with the new supply entering the market.
"While the office market appears on a recovery path, it is important to note that growth remains concentrated within prime buildings and is not being experienced in secondary and lower quality office space," the Jones Lang LaSalle report said.
"With market confidence and optimism improving, demand for office space is picking up. Activity remains focused on prime buildings in the top locations, while demand for dated and poor quality space continues to be weak," it added.