Office rents in Dubai are at their most affordable levels in years, having witnessed a decline of more than 14 per cent year-on-year on an average in October 2010 as new supply continues to depress commercial rentals across the emirate, an Emirates 24|7 analysis of data provided by Better Homes, a real estate consultancy, shows.
Average office rents in Dubai stood at Dh101 per sq ft in October this year, down 14.16 per cent from the average Dh117 per sq ft they commanded during the same month last year, according to the consultancy’s monthly rent monitor.
Office stock in Dubai is reckoned to double in two years, from 43.6 million sq ft at the end of 2009 to around 85 million sq ft at the end of 2011, according to an earlier report from property research firm Jones Lang LaSalle, which estimated that office rents declined 44 per cent y-o-y in 2009.
Dubai’s commercial space market has moved further in tenants’ favour this year, with office space available for as cheap as Dh40 per sq ft in Dubai Investment Park (DIP), where rentals have dropped an average 40 per cent over the past 12 months to make it the cheapest location to rent an office in Dubai.
DIP has claimed that honour from Dubai Silicon Oasis (DSO), which offered the cheapest office space until last year, when office space could be rented for between Dh50-70 (October 2009). Office rentals in DSO have declined at a lower pace than DIP, dipping around 16 per cent to between Dh45-55 per sq ft in October 2010.
According to Better Homes data, while the current going rate for an office in DIP is between Dh40 and Dh50 per sq ft (from Dh65-85 in October 2009), DIFC boasts of the most expensive office space in Dubai, with rentals ranging between Dh250-300 per sq ft, down marginally from between Dh275-300 last year.
Data shows that rents in the DIFC have held up quite well over the past 12 months, declining less than 5 per cent, almost a third of the overall market decline.
“There is still a scarcity of truly prime, ‘Grade A’ office space in Dubai,” according to an earlier report from Cluttons, another property consultancy. “The best option remains firmly in DIFC which is reflected in their high occupancy levels,” it noted.
Experts at Cluttons also reckoned that “Sheikh Zayed Road and Downtown Dubai benefit from proximity as well as the spill-over affect from DIFC.” That is corroborated by the latest data from Better Homes, which showed that average office rents declined the least in Downtown Burj area, slipping by just a little over 3 per cent to Dh165 per sq ft in October 2010 from Dh170 per sq ft in October 2009.
Overall for Dubai, while the average minimum rent during the same month last year was Dh100 per sq ft, it stood at Dh85 per sq ft in October 2010. On the other hand, the average maximum rent for commercial spaces in the emirate is Dh116 now compared with Dh134 in the corresponding month last year.
Office rents in relatively newer areas of Jumeirah Lake Towers and TECOM Sector C remain at the lower end of the spectrum, averaging between Dh68 and Dh75 per sq ft. Experts maintain that newer areas take time to establish their presence in the marketplace, and that these areas are at present suffering from a lack of market momentum to carry them through.
“Moreover, of the stock coming on-line in JLT, TECOM site C and Business Bay, the reputation is currently one of disjointedness. There are not only disparate levels of quality within the developments, but fragmented ownership has proven difficult for larger companies to rent or buy appropriately sized contiguous spaces,” the Cluttons report said.
“As such, we expect DIFC, Sheikh Zayed Road and Downtown Dubai to continue to lead in terms of commercial space offering, as well as, occupancy.”