By Andy Sambidge
New CBRE report says emirate is facing a diminishing availability of good quality office accommodation
Office rents in Dubai are still rising, with average prime Central Business District (CBD) rents up three percent quarter-on-quarter and 25 percent year-on-year, according to the Q2 2014 Dubai Market View by global property advisor CBRE.
CBRE said the CBD market continues to face a diminishing availability of good quality office accommodation, specifically offices that are capable of accommodating large corporate space occupiers over contiguous floors.
Occupancy rates within prime CBD offices have been rising steadily over the past 12 months, with less than 16 percent vacancy rate compared to an average of 40 percent vacancy for all Dubai office stock.
Mat Green, head of Research & Consultancy UAE, CBRE Middle East, said: “The average prime rental rate now measures AED1,884 per square metre per annum and this figure is expected to increase further within the short term amidst strong economic growth and rising business confidence.”
He added: “Secondary office locations continue to see an improving performance with average rents rising from AED924 per sq m per annum in Q2 2013 to AED1,148 per sq m per annum in Q2 2014. This reflects growth of 24 percent in just one year with a 5 percent rental growth recorded during Q2 2014."
With limited availability of good quality office accommodation in prime areas, CBRE said Dubai can expect to see demand spill-over into some secondary locations, particularly for single owned properties in close proximity to transport links.
“Office stock in Dubai continues to see significant growth with over 1.8 million sq m set to be delivered by the end of 2017," said Green.
"However, whilst there is a large pipeline of new supply, the majority of this space will be negatively impacted by its strata ownership title."
CBRE said during 2014, almost 500,000 sq m is scheduled for completion, with over 30 percent of this total to be delivered in the Business Bay area.
Last month, CBRE said prime office costs in Dubai are the highest in the Middle East but are still only a third of those of the world's most expensive commercial property markets.
Its Global Prime Office Occupancy Costs survey showed that Dubai ranked 23rd globally with occupational costs of $92.56 per square feet per annum as of the first quarter of 2014.
London's West End recorded overall occupancy costs of $277 per sq ft per year and topped the "most expensive" list.