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Tue 16 Feb 2010 09:28 AM

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Q4 confidence slumps in UAE office market

New RICS report says Dubai debt news hit sentiment in real estate sector.

Q4 confidence slumps in UAE office market
GETTING CHEAPER: Office occupancy rates in Dubai dropped 34 percent in 2009, a new report has found.

Confidence in the outlook for the UAE commercial property sector declined sharply in the final quarter of 2009, driven by uncertainty surrounding Dubai's debt issue, a new report said on Monday.

The first UAE report by the Royal Institution of Chartered Surveyors (RICS) showed that sentiment towards future lettings in the office, industrial and retail sectors fell significantly compared to the previous quarter.

"After encouraging signs in Q3 where confidence levels turned positive for the first time in 12 months, the drop has seen confidence in all three sectors return to levels more akin to Q1 2009," the report said.

Tenant demand showed little improvement in the last quarter of 2009 and continued to decline "at a moderate pace" across all three sectors, albeit at a slower rate than that recorded in the aftermath of the Lehman Brothers collapse.

However, rental expectations for Q1 2010 have returned to levels as low as early 2009 which has weighed on investor confidence, RICS said.

The office sector saw the largest drop in confidence in Q4, RICS said, having showed the biggest recovery in the previous quarter's figures.

Investment bidders per property also fell at a faster pace than in Q3 with the UAE showing some of the weakest sentiment off the major countries surveyed by RICS.

"Investor transaction activity fell across all sectors although once again most significantly for office property," the report added.

RICS also noted that available commercial property space in the UAE continued to increase in Q4 but at a slower pace than previous quarters.

Earlier in February, a report by DTZ Research said although office occupancy costs in Dubai dropped by 34 percent last year, the emirate remained the most expensive location in the Middle East.

Occupancy costs throughout the region overall declined by an average of 12 percent in 2009, it said.

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