Office sector offers 25% capital gain in five years

Investors in UAE property can expect a capital appreciation of up to 25 per cent by investing into the office market sector for a minimum of five years, as the real estate market is expected to bounce back by then, said property agents.

"In today's market conditions, real estate buyers in the UAE will have to have a medium- to long-term vision when thinking of investing in the country's office property market," Iseeb Rehman, Managing Director of Sherwoods Property Consultants, told Emirates Business.

"If they have such plans, a good capital appreciation of up to 25 per cent can be achieved in five years time."

Other real estate agents also expressed confidence that the Dubai's property sector will soon bounce back to positive growth, as a number of infrastructure projects are under way and the metro railway will be complete next year.

Real estate agents said the present slowdown was only part of the ongoing global downturn and asked people not to single out Dubai in this regard. "Dubai's real estate market has slowed down only because of the global recession. Dubai still has the best-cushioned market in the world and you will still have better liquidity here than elsewhere in the world," said Rehman.

Real estate prices in Dubai will not be affected by the panic selling in the market, he said, since developers have not lowered their prices and there are limited buyers currently even in the secondary market.

Alaa Nagawa, Business Development Director for Jamal Al Habtoor Real Estate, said: "There is not much reason for real estate prices to fall overall, although we have seen a dip in prices in the secondary market by about 20 per cent.

"Also, end-users look keen to hold on to their properties and are not selling them."

Real estate agents also said there was a dearth of quality office space and the liquidity crunch had not impacted the demand for offices in Dubai.

A Tecom official, who spoke to this paper on conditions of anonymity, said: "We are still seeing the same growth in the numbers of companies being registered at Tecom. In the last three months, we have seen small to medium sized multinational companies from Europe, America and Asia registering for office space in Dubai."

According to the official, around 1,300 companies have been registered in the Dubai Internet City.

Amr Soliman, Chief Executive Officer of Blu Realty International, said the average price per square foot in Business Bay is currently around Dh2,000 to Dh3,000. Last year it was around Dh1,400 a square foot. Nagawa said he expected a further 15 per cent increase in prices in Business Bay and Downtown Burj Dubai next year.

"In Business Bay we expect a surge in prices because none of the buildings has been handed over as yet and, when they do, it will lead to a sudden spurt in real estate prices. Downtown Burj Dubai is designed to be a business hub and infrastructure is getting ready fast, people are fighting to get space in the area even today," he said.

According to realty agents in Dubai, demand for off-plan properties have been waning owing to delayed construction and handover by developers. Demand for ready properties, however, is increasing from both rental and sales perspectives as more people are looking to move into ready properties.

Fluctuations in rents have been confined mainly to the freehold areas, with rentals in the non-freehold areas looking almost stable. According to Nagawa, Dubai Marina is around Dh400 a square foot currently, however last year it was around Dh300 a square foot. In Jumeirah Lake Towers the current rents are around Dh200 to Dh280 a square foot, while last year they were around Dh180 a square foot.

On Sheikh Zayed Road, rents at present are around Dh350 to Dh450 a square foot and have remained the same as in the past year.

In DIFC, rents now stand at around Dh500 a square foot and here, too, they have held almost steady for a year. In a recent report, CB Richard Ellis found in its Global Market View of Office Occupancy Costs survey that office rents in Abu Dhabi surged 94.6 per cent to touch $132.44 this year.

The report also said Dubai was ranked the world's third fastest-growing office rental markets with rents of $156.53 per square foot.

Meanwhile, on the home rental front, Abu Dhabi-based real estate agents said rents of new residential units in the capital have gone up by between 120 and 150 per cent since the beginning of the year.

"In an average location in Abu Dhabi, the rent for a two-bedroom apartment is around Dh260,000 per annum. In high-end areas such as the Corniche, a two-bedroom apartment is around Dh300,000 per annum," said Soliman.

In Dubai, Rehman said there will be an overall softening in rentals by about 10 to 15 per cent considering prices across the sector have fallen because of the exit of speculators in the market. There is little quality office space in Dubai and even a slight softening in office prices will increase the demand for quality office spaces in Dubai, he said.

Abu Dhabi will see strong office space demand since they have a number of industries, such as the petrochemical and energy companies, who will look for quality office space to buy into.

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