New report says consolidations are continuing across Dubai with commercial tenants trying to reduce rental costs
Total office supply in Dubai reached 8.86 million sq m in the fourth quarter of 2017, according to a new report.
Real estate consultants JLL said consolidations are continuing across various sectors of the market, with tenants trying to reduce rental costs by looking for more affordable buildings but still focused on good locations.
Therefore, the majority of upcoming offices are concentrated in established commercial areas such as Tecom, the DIFC, and Business Bay.
Future office supply in Dubai is expected reach 9.13 million sq m and 9.28 million sq m at the end of 2018 and 2019 respectively, JLL noted, adding that likely notable completions in 2018 include The Opus in Business Bay (5,200 sq m), Du Biotech Headquarters (34,500 sq m) and the first phase of Motorsport Business Park (6,000 sq m).
JLL's report said that despite a generally challenging year, some buildings recorded positive leasing results in 2017 including Central Park Towers in DIFC, which due to attractive rental terms announced two major key tenants including Marriott International.
It added that Dubai Internet and Media City have among the highest occupancy levels in the city, an average of 95 percent across all buildings, illustrating the lack of speculative development and Tecom’s success at retaining its tenants.
In Abu Dhabi, there were no completions in the office sector during Q4, with office supply in Abu Dhabi remaining at around 3.5 million sq m.
Future completions in Abu Dhabi are expected to deliver around 211,000 sq m and 57,000 sq m of GLA in 2018 and 2019 respectively.
JLL said vacancies in the office sector in Abu Dhabi reached 22 percent in Q4, remaining stable over the quarter. Office rents remained largely stable over the year for both Grade A and B buildings.
"As new supply enters the market, we are likely to see rents decline as competition increases which will prompt tenants to negotiate better rents and additional benefits to their tenancy terms such as longer grace periods, additional parking spaces and better service provision, as landlords incentivise to attract tenants," the report noted.