CBRE says scarcity of high quality office space in the market is maintaining lease rates
Lease rates in Dubai’s prime office market continued to witness stability in the third quarter of 2017, according to a new CBRE report.
The market stability reflects a scarcity of good office space in the market which is set to be disrupted as a raft of new office buildings come online, the global real estate consultancy firm said.
A total of 85,000 sq m of new office accommodation was completed during in the third quarter of 2017, including the handover of the National Bank of Abu Dhabi headquarters in Al Jadaf and Building C3 at Dubai Trade Centre District, the report found.
At the same time Cityscape Global 2017 witnessed the launch of District 2020, a mega mixed-use development providing high quality office space that will form the back-bone of Expo 2020’s real-estate legacy.
The project includes offices, retail, hospitality and residential units, expected to be handed over after the Expo in Q4 2021.
Mat Green, CBRE Middle East’s head of UAE Research & Consulting, said the flurry of new major launches would disrupt the market’s steady rental prices of prime office space:
“Average prime and secondary rentals have remained steady since Q1 2016, with rates recorded at AED1,916/m2/annum for prime offices and average of AED1,014/m2/annum for secondary office rents,” he said.
He added that the ongoing stability in rents underlines a lack of good quality office space in key areas, but the market is expected to pick-up with a surge of major new launches
The report also noted that the emirate's residential transactional market climbed around 11 percent over the same period last year, according to data released by the Dubai Land Department.
The growth was driven by a surge in overall transaction numbers, which rose by around 29 percent.
However, average sales prices experienced a minor dip, falling by around 1 percent, while average rentals fell by 1.5 percent from the previous quarter.
Green said the results reflects a new trend of investors exploiting flexible payment plans to bag both built and off-plan projects at attractive prices.
“The disparity between rising deal volumes and the performance of the leasing sector, demonstrates how investors appear to be taking a longer-term view on the residential market, looking beyond softening rentals and focusing on the availability of attractive prices and the increasing flexibility of payment plans offered across both completed and off-plan projects,” he said.
CBRE also said that Dubai’s retail demand remains heavily orientated towards the major shopping centres, with prime malls continuing to attract high occupancy and stable leasing rates.
At the same time smaller communities and regional centres have struggled with rental prices and sought more flexibility from landlords amid volatile sales volumes.
Retail development also remains buoyant with approximately 1.0 million sq m of gross leasable area set to be handed over between 2017 and 2019, the report added.