By Staff writer
700,000 sq m of new commercial property is delivered in emirate last year; rents set to remain flat in 2016
Dubai's commercial property market saw the delivery of 700,000 square metres of new office space in 2015, increasing the total stock to 8.3 million sq m, according to a new report.
JLL's annual review of the UAE Real Estate Market for 2015 said 26 percent of new offices was delivered in Business Bay, followed by the new Dubai Design District (17 percent), TECOM and Logistics City (13 percent).
The year-end also saw the delivery of the first building in the new Dubai Trade Centre District, it said, adding that an additional 600,000 sq m of office space is expected to be delivered between 2016 & 2017.
The JLL report said: "Dubai remains two tiered office markets, with strong demand for single owned Grade A office, but little interest in secondary locations.
"While Grade A space with developed infrastructure and surrounding amenities are retaining rental levels, demand has slowed down throughout 2015 as overall commercial activity remained subdued and corporate activity focused on consolidation of operations as opposed to expansion."
Meanwhile, rents in Grade B space - typically strata owned and located in less developed areas - continued to face downward pressure as supply outstrips demand, JLL added.
The report said that as more Grade A stock is delivered to the Dubai market over the next couple of years, rental rates across the Central Business District (CBD) are expected to remain flat. Vacancy rates across the CBD, currently at 22 percent, are expected to increase.
JLL said much less office space was completed in Abu Dhabi in 2015, with just 146,000 sq m added, increasing the stock to around 3.3 million sq m.
David Dudley, international director and head of Abu Dhabi Office at JLL MENA, said: "The decline in oil prices has led to a contraction in Abu Dhabi's dominant oil and gas sector.
"Reduced oil prices, coupled with the government re-allocating funds to deal with regional matters, has also led to a major reduction in government domestic spending - also causing a contraction of the government sector and the pace of economic diversification. While demand has reduced, so has supply and therefore on balance, the market remains relatively stable, with some prime buildings experiencing an uplift in rents throughout the year."