By Sarah Townsend
Core Savills research says Business Bay will account for majority of forecast growth
Office supply in Dubai will grow by 7 percent in 2016, with most of the growth taking place in Business Bay, according to new research.
Core Savills’ first quarter 2016 Dubai Office Market report stated: “The development pipeline in Dubai indicates a further 7 percent prime and secondary sector supply growth in 2016.
“The growth in supply is likely to be most significant in Business Bay over the next few years as the area seeks to establish itself as one of Dubai’s premier business districts.
“Given the rapid growth in supply, office sector sales prices in this area remain under slight downward pressure, at least for the moment.”
The report said that, by the end of 2015, Dubai’s office supply reached an estimated 8.4 million square metres, of which around 28 percent (2.4 million square metres) was located in the prime areas of Dubai International Financial Centre (DIFC), Downtown Dubai, Sheikh Zayed Road (Trade Centre to First Interchange), Dubai Internet City and Dubai Media City.
The bulk (51 percent) of total supply, constituting 4.2 million square metres, was in secondary office locations such as Business Bay, Deira, Bur Dubai, Dubai Healthcare City, Tecom and Jumeirah Lakes Towers.
It noted that despite the global economic downturn, prime and secondary stock growth was “extremely rapid” in the five years until 2011, but moderated to 7 percent, 3 percent and 5 percent in 2012, 2013 and 2014 respectively.
Growth in prime and secondary supply dropped further in 2015 to around 5 percent with notable additional schemes in Deira, DIFC and Tecom.
However, Business Bay saw the bulk of secondary office space completions, with approximately 318,000 square metres of new stock in 2015, Core Savills said.
David Godchaux, CEO of Core UAE, said: “2015 was an interesting transition year where, on the back of overall softening demand for office space in the UAE, prime properties significantly outperformed the average market in terms of rental rates and occupancy levels.
“We expect this trend to continue over the next few years with relatively strong underlying demand for quality office space that is currently not being fully met.
“This has resulted in a widening gap on rate and occupancies between prime and Grade B offices.”