By Andy Sambidge
New Cluttons report says diminishing supply of Grade A space is also putting upward pressure on commercial rents
A shortage of prime office space in Dubai, which is being underpinned by robust demand, has translated into strong upward pressure on rents across the city, Cluttons said in a new report on Sunday.
The real estate consultancy said a rapidly diminishing supply of Grade A space in more centrally located submarkets and free zones is also driving up commercial rents in the emirate.
Cluttons’ Dubai Winter 2014 Commercial Market Outlook report said that during the third quarter of 2014, rents for prime office space reached AED250 ($68) per square foot, which represents a near 14 percent rise on Q1 and a 25 percent increase on the same time last year.
In the secondary market, strong business activity is fuelling the demand for high quality space, with rents rising by 44 percent over the past 12 months to reach an average of AED130 per sq ft.
Steve Morgan, chief executive of Cluttons, Middle East, said: “Following the usual summer slowdown, the market has regained its strength, with strong demand persisting for well-located space. Across the business sectors, the office market remains very active in all segments.
"We have been recording a steady rise in take up by both existing and new occupiers, with the banking and financial services, real estate and aviation sectors being amongst the most notable.”
The report also showed that the most expensive offices remain at the DIFC, Downtown Dubai and on Sheikh Zayed Road, where Grade A space lets for between AED220 and AED280 per sq ft.
The report also highlighted that with the Grade A supply deficit unlikely to ease in the near term across the city’s office submarkets, attention appears to be turning to Business Bay, where land plots are still available, unlike more core parts of the city.
Cluttons’ report said that with prime office space in desirable centrally located submarkets and free zones remaining either unavailable or in very short supply, occupiers are now beginning to consider more secondary options.
Serious? Im sitting in Internet City 3 and can show you 4 offices on my floor that have sat empty for 16 months. Rents here have fallen from 100K AED to 75K for a office with 5 visa slots in past year.
Situation is slowly changing. What this means is the begining of arrival of new companies and new enterprises. Year 2015 will be a year for Office space, which will always create demand for residential...
I dont really know from where they are getting their information or what kind of market resarch they have run, however I guess is an honest mistake on the year of publishing this article... 2005 maybe...
Yet another case of a real estate company trying to boost their own revenues by trying to create a market trend from perhaps one or two examples of rent increase. In the real world where everyone else lives it is clear rental demand is flat and people are looking very carefully at the costs they incur for the companies. I agree with Ahmed as in my location which is a Grade 1 Free Zone there are many empty offices, and some of them have been empty for a while.
@SKP...I think you will find that the situation will not play out as you summise. New companies won't land in Dubai and take up the slack in office space until the economic landscape levels and the 'profiteering' rates decline.
When it comes to business, profit and expenses is the bottom line...not the 'joy' of landing in Dubai. I think you will find that there are buildings upon buildings of office space in Business Bay. There is too much current slack and future coming inventory to support your statement.
This Steve Morgan guy is either in his own bubble or he really doesnt know whats happening in the market today!
There are dozens and dozens of office spaces lying empty for more than six months. And the funny thing is that the prices are still high!!!!!!!
Please do not mislead people with all this false information!
Please get your facts right on this one, average rents shown are in fact asking rents and not actual rents and there has not been much change in the asking commercial grade A rents for DIFC and Burj Khalifa Downtown since the last few years. Average Grade A commercial rents on SZR are AED 140 per sq.ft. with exception to Emirates Towers which have been averaging AED 300 per sq.ft. over the last three years and Business Bay, the highest rent in a Grade a tower, namely U-Bora is AED 180 per sq.ft.! The premium office leasing market this year has been luckluster,. frustrating and extremely slow for most of the commercial brokers in Dubai!
I have been working in Dubai in commercial leasing for the last 6.5 years, this article is wildly misleading and does not accurately reflect the Dubai commercial leasing market in 2014, the annual rents given are asking rents and not actual rents and the average price per sq.ft. for Grade A commercial on SZR is AED 140/150 psf! There is nothing over AED 200 psf with exception to Emirates Towers which has been averaging AED 300 psf the last few years! DIFC has been asking between AED 200-350 per sq.ft. for a long while now and Burj Khalifa Downtown has been at between AED 200 - 235 psf for fitted Grade A again for the last few years....so no changes there! As for Business Bay, U-Bora Tower tops the highest asking rents for Grade A at AED 180 psf with AED 110 - 130 psf being the average for the rest of the Bay. In a nutshell the Dubai Office lettings market this year has been very slow and dull for most of us commercial brokers!