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UAE landlords need to lower rents for entrepreneurs - report

Researchers at Core Savills argue that conventional real estate strategies are not always applicable to the new age start-ups
By Tamara Pupic
Tue 10 May 2016 09:25 AM

Local real estate developers must take into consideration the needs of SMEs, not only large international corporate companies, according to a new report from Core Savills.

David Godchaux, CEO at Core Savills, has said that local real estate developers and landlords are increasingly addressing the demand from more than 350,000 locally-based SMEs.

“This trend is gaining traction in secondary on shore locations and technology- and commodity-themed free zones, with landlords subdividing floor plates and offering partially fitted out options for faster movement in stock,” says Godchaux.

“These competitive locations continue to be the preferred choices for SMEs and start-ups looking to set up initial bases.”

The Core researchers argue that conventional real estate strategies are not always applicable to the new age start-ups that are often advised to strategically align growth stages, workplace strategies and real estate requirements to optimise footprint and cost.

Real estate costs typically dominate the office space selection criteria closely followed by flexibility in lease terms along with the ability to expand/contract.

As the employee base rises, easy access to public transport and requisite social infrastructure also become imperative.

The UAE’s cost conscious start-up founders prefer to set up their businesses in Dubai Multi Commodities Centre and Dubai Silicon Oasis, the report states on the basis of an analysis of real estate costs across more than twenty free zones housed in Dubai by benchmarking a typical small scale start-up office unit of 2,000 sqft.

Capital requirements vary in each free zone, with Dubai International Financial Centre (DIFC) having the highest capital requirement, attributed to its financial and legal operations.

Industrial and logistics free zones such as JAFZA (Jebel Ali Free zone), Dubai Flower Centre and Dubai South typically have medium to high base capital requirements attributed to higher infrastructure costs, activity type and licence obtained.

Other free zones such as DAFZA (Dubai Airport Free zone), D3 (Dubai Design District), DMCC (Dubai Multi Commodities Centre), DSO (Dubai Silicon Oasis), DIC (Dubai Internet City), DMC (Dubai Media City), Knowledge Village, DIAC (Dubai International Academic City), Studio City, IMPZ (International Media Production Zone) and DHCC (Dubai Health Care City), the requirements are relatively easier to meet, however, are again subject to activity and ownership.

In addition to base capital requirements, smaller yet scalable office options, public access for employees and supporting social infrastructure, are among the major issues faced by of the sub-urban free zones located away from Sheikh Zayed Road.

The report further states that many expatriate-owned start-ups, which account for almost 95 percent of the SME sector, still face issues relating to hiring, developing and retaining top talent, attracting the target audience and achieving critical mass, and maintaining low real estate and operating costs while keeping the door open for expansion.

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Last Updated: Thu 26 Jan 2017 01:27 PM GST

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