By Andy Sambidge
Jones Lang Lasalle says oversupply continues to impact commercial property market.
Office vacancy rates in Dubai are expected to exceed 50 percent over the next year as new supply continues to be released, a new report by Jones Lang Lasalle has said.
The study said city-wide vacancy rates have increased to around 38 percent with levels set to rise further.
However, in the CBD area (between World Trade Centre and Downtown Burj Khalifa), vacancy rates were significantly lower with just 12 percent of the single ownership stock currently empty.
JLL said that total office stock as at the end of the second quarter of this year was approximately 48 million sq ft.
More than two million sq ft of office space was completion during Q2, the report said, adding that there was another 15 million sq ft currently scheduled to complete during the remainder of 2010.
However, JLL added: "Further delays in construction and handover are expected to result in much of this space not being available for occupation this year."
The report said city-wide rents decreased by two percent to around AED135 per sq ft over the second quarter of 2010 and by 38 percent compared to the same period last year.
Average rents in the CBD area decreased by eight percent to around AED200 per sq ft during the second quarter, JLL added.
Average rents, it said, had declined between 45-60 percent since peaking in mid-2008.
On the outlook for Dubai's office market, the JLL report said: "Although Dubai's office market is likely to experience a supply overhang, there is still a shortage of good quality supply, as evidenced by lower vacancies in CBD areas as compared to the rest of the city."For all the latest UAE news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
The reason the CBD area has higher occupancy is because it is a developed area. Most of the new office buildings are located in the desert or a construction zone. Why should I rent an office space in the desert when I can rent it in a developed area with infrastructure, restaurants and a Metro Station?!? If Dubai wants companies to occupy these office spaces, the solution is very simple!!! They need to remove sponsorship laws and allow foreign companies to operate with 100% ownership i.e. no local sponsor/partner.