Dubai office rents halve in H1 2010: Colliers

Dubai office construction development is third largest in the world and at the same time is becoming more affordable as the rates have halved in the first half of this year, according to a report by Colliers International.

Global Office Real Estate Review report said that office construction activity in the emirate bounced back in the first half of this year after dropping in the second half of last year.

Office development market in Dubai has increased to 28.0 million square feet in H1 2010 from 24.0m sq.ft. at the end of December 2009 and 27.1m sq.ft. in the first half of last year.

The emirate has been ranked third globally in terms of office space under development after Shanghai and Moscow.

Abu Dhabi and Riyadh are also among the top ten cities ranked seventh and ninth, respectively.

The figures showed that the activity shrank in the UAE capital in the first half to 12.9m sq.ft. from 13.1m sq.ft. in the second half of last year.

The global real estate advisory company’s statistics showed that Riyadh is witnessing massive office construction activity with 11.2m sq.ft. of office space under construction against just 2.0m sq.ft. in H1 2009.

Colliers also said Dubai office rents rate nearly halved in the first half of this year, making it one of the most economical cities in the world with a ranking of 46th. The office rate fell to $39.47 per square foot for class A prime office compared to $75.8 at the end of last year. The statistics showed that the rents remained nearly static during the second half of last year.

Despite drop in office rents in Abu Dhabi, the UAE capital remained the most expensive in the region. It dropped to $52.94 in H1 2010 from $66.98 for the same period last year.

Hong Kong was the most expensive with $161 per square foot.

In terms of vacancy, Dubai is witnessing vacancy rate of 30 per cent which is the highest in the world.

The rise in vacancy was felt across the region, but was particularly acute in Dubai, Riyadh, Sofia, Bucharest, Athens, Abu Dhabi, Budapest, Johannesburg and Tirana, all of which saw their respective vacancy rates rise by at least four percentage points in the first half of 2010, Colliers said.

The report said that Office space markets around the world took another step towards returning to normal in the latest six month period. Most regions showed increasing signs that the worst of the global financial crisis had passed.

Leasing activity was up significantly from the prior six month period. In particular, Asia Pacific, Latin America and Canada all posted healthy growth rates and showed signs of future expansion.

The United States and much of Europe, however, chalked up another six month period of tepid demand. With the exception of Asia Pacific, all regions again reported higher vacancies while rents were more mixed. Midyear is almost certain to mark an inflection point for the global office market. In contrast to lukewarm letting conditions, however, office investment sales activity in the first half of 2010 was up in all regions. This suggests investors see a firming in market fundamentals in the coming months and are prepared to bid up prices. The outlook for the balance of 2010 and into 2011 is for continued signs of growth and the worst is behind, it added.

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