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29 March 2024

Dubai office rent jump shadows home rental increases

MSCI's decision to upgrade UAE from frontier to emerging market status underscores Dubai’s role as regional financial centre. (Patrick Castillo)

Published
By Parag Deulgaonkar

Increase in number of enquiries from corporates to small and medium enterprises, and a resultant shortage of Grade A office space in Dubai, has driven office rents in the emirate to register a 44 per cent increase in the past 12 months, according to a new report.

“Prime office rents continued to edge upwards during the third quarter, reaching Dh250 per square foot (psf), which represents a near 14 per cent rise on first quarter and a 25 per cent increase on the same time last year,” Cluttons, a real estate consultancy, said its commercial market outlook, Winter 2014.

As prime office space in desirable centrally located submarkets and free zones remain either unavailable, or in very short supply, some occupiers have been left with little option but to consider more secondary space.

Cluttons says it has seen an increase in enquiries, which range from 3,000 square feet for smaller occupiers, with corporates looking for larger space of up to 25,000 square feet on average.

“Unsurprisingly, this has translated into strong upward pressure on rents in this segment of the office market, which have risen by 44 per cent over the past 12 months to reach an average of Dh130 psf,” the consultancy said.

UK-based Knight Frank’s prime global rental index for second quarter 2014 said residential rents in Dubai rose by 14.1 per cent during June 2013 to June 2014, the highest among the 17 global cities tracked by the index
 

Demand on rise

Cluttons says the office market is recording a steady rise in take up by both existing and new occupiers, with the banking and financial services, real estate and aviation sectors being amongst the most notable.

The buoyancy in the office market has persisted despite the latest Dubai Economic Department Business Confidence Survey showing the headline Confidence Outlook Index for larger corporate occupiers weakening in the second quarter, reflecting the softening global outlook and disappointing economic data from China and the European Union.

“It is still, however, too early to assess any longer term impact this may have on office rents in the city, but a prolonged period of mute global economic growth will no doubt curtail any planned significant take up by larger international firms,” the report added.

Rents in Deira and Al Barsha are up 20 per cent and 18 per cent to Dh120 psf and Dh100 psf, respectively. The most expensive offices remain in the Dubai International Financial Centre DIFC, Downtown Dubai and on Sheikh Zayed Road, where Grade A space lets for between Dh220 psf and Dh280 psf.

With the Grade A supply deficit unlikely to ease in the near term across the office submarkets, Business Bay is turning out to be the point of attention where land plots are still available unlike more core parts of the city, added Cluttons.

‘Emirates 24|7’ has reported earlier that developers had sought conversion of their office towers in Business Bay to serviced apartments/hotels or residential/service apartments.

On Monday, this website reported that Global Property Guide had placed Dubai on top of the chart of the world’s best performing markets for seven consecutive quarters with prices rising 23.73 per cent during the year to Q3 2014.