The flight to quality continues in Dubai’s office market, but corporates are looking at two other factors: proximity to a Metro station and availability of car parking.
“A continuing trend remains the ‘flight to quality’, with a number of companies relocating from older buildings and secondary locations towards prime areas and higher quality buildings,” Jones Lang LaSalle said in its Q4 2013 report on Dubai real estate market.
It further added that two aspects of location - proximity to a Metro station and car parking availability – were becoming increasingly important to occupiers.
A two-tier market was evident within locations such as Business Bay and Jumeirah Lakes Towers (JLT).
Prime rents (for best buildings) in Business Bay rose by 21 per cent year-on-year (yoy) and five per cent quarter-on-quarter.
Rents in JLT remained stable in the last quarter, having jumped 75 per cent increase yoy.
The increase was however limited to the best quality buildings that have been able to capitalise on JLT’s Metro access and free zone status, the report said.
Although landlords in secondary locations were still offering rent-free periods to attract tenants, that wasn’t the case in prime locations.
Vacancy rates within the central business district (CBD) fell slightly to 29 per cent by year-end, which was hovering at over 30 per cent for sometime now.
A number of deals closed in the fourth quarter 2013 as corporates rented new space to align with their business strategies.
The average quoting rent across the market remained unchanged at Dh1,390 per square metre in Q4 2013. Among the best performing locations were Dubai International Financial Centre, Burj Downtown and Tecom A&B.
“2014 is expected to see a continuation of the two-tier office market in Dubai, with prime locations improving and secondary areas remaining under downward pressure. The strong supply pipeline will continue to apply a natural break to potential rental growth,” JLL said.