Dubai rent alert: Which prime office property areas still a bargain?

Office rents in Dubai slowed down in the third quarter 2013 though the first six months saw lease rate rising, according to a new report.
“The momentum in office leasing activity that was noticeable in the first months of 2013 has slowed in the third quarter of the year.

“Despite improved market sentiment and stronger demand, the high level of supply continues to constrain the sector,” Jones Lang LaSalle said in its third quarter report.

Average headline quoting rents in quality office buildings in selected areas increased by three per cent quarter-on-quarter (q-o-q) in Q3 2013.

Newer areas such as Business Bay, Jumeirah Lakes Towers (JLT), Jebel Ali, Dubai Silicon Oasis, Downtown Dubai, Sheikh Zayed Road (SZR) and Tecom A&B continue to improve and are experiencing rental growth.

Business Bay

Prime rents in Business Bay have grown 28 per cent year-on-year and 10 per cent quarter-on-quarter, as surrounding infrastructure continues to improve.
Rental growth is expected to be maintained despite the strata nature of the area, which makes it unpopular amongst larger occupiers.

JLT, Jebel Ali

Despite being also a strata location, JLT offers more affordable office space to companies seeking free-zone premises.
Prime rents in JLT’s best quality buildings have seen a rise of 75 per cent y-o-y and 14 per cent q-o-q, while the other buildings are also recording growth in their rental values.
Jebel Ali has also been filling up quickly and rental values in both its free-zone and onshore areas have been on the rise.
Rental values have picked up in Barsha too as the area saw some activity from smaller occupiers.
Older business districts such as Deira and Bur Dubai saw rents fall, with Jumeirah Beach Residence and Dubai Marina from the newer districts joining the list.

DIFC

The top open-market rent in the Dubai International Financial Centre (DIFC) increased marginally to Dh2,610 per square metre, while it improved to Dh1,830 per sqm elsewhere in the CBD.

DIFC has seen a good level of activity, from both new occupiers taking space and existing firms expanding. A lot of the DIFC activity originated from newly arrived European companies and existing law firms.
Vacancy rates within the CBD remained at around 30 per cent as the take up remains counterbalanced by the new supply entering the market.

Landlords are becoming more bullish in prime locations, less flexible on rents and reducing rent-free periods.
However, landlords in secondary locations remain flexible in order to attract tenants and to fill their buildings, the report states.

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