The impact of the softening global economy continues to hamper the UAE's office market as redundancies in the oil and gas, finance and banking sectors have stifled demand for office space across the emirates, according to Cluttons.
Its 2016 UAE Property Market Report forecasts declines of close to 5 percent in Abu Dhabi and Dubai, while Sharjah will witness declines of closer to 10 percent by the end of the year.
Faisal Durrani, head of research at Cluttons said: "Global economic headwinds in the form of the Chinese slowdown, the era of $40 per barrel oil, the ongoing sovereign debt issues in the EU and the global fall out now playing out as a result of Britain's decision to leave the EU are amongst the most significant growth dampeners for the UAE.
"Despite the relatively diversified economy across the emirates, the non-oil economy is being subjected to a deterioration in sentiment and overall confidence; vital ingredients for sustaining positive growth.
"This is undermining rents and capital values, which are, for the most part, weakening across the board as the office market across the UAE waits in anticipation to feel the Expo effect. We believe this will begin to kick in next year as activity ramps up for the mega event."
In Abu Dhabi, Cluttons said rents have remained largely unchanged in Q2 following declines in the previous quarter. The same is true for most major Grade A office buildings in the city, where rents have held steady, after the slight falls in Q1.
It added that with mute economic conditions expected to persist in Abu Dhabi in the short term, the prospect of seeing a surge in take up activity remains low. Consolidation activity remains a dominant feature of the market, while some firms are taking a "wait and see" approach to relocating from more secondary space, deterred by the capital expenditure associated with a move.
In Dubai, Cluttons' report showed that during Q2, office rents across most submarkets in Dubai registered almost no change, with the exception of Deira where upper and lower limit rents appear to be converging.
The only location to record a rise in rents was at the Dubai International Financial Centre (DIFC), where upper limit rents in the DIFC core edged up by 6 percent during the second quarter.
Murray Strang, head of Cluttons Dubai said: "In our own experience, the market remains active, with a steady level of requirements, but these are undoubtedly lower than this time last year. Of note is the fact that we continue to receive requests from companies wishing to downsize, or consolidate operations in to a single better value location, reflecting the more subdued state of the economy compared to a year ago."For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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