Dubai’s office sector off to strong start
Dubai, May 4, 2014
Dubai’s office sector made a strong start to the year, with the number of leasing transactions up significantly in both annual and quarterly terms in the first quarter, said a report.
Consistent with Dubai's strong economic performance, businesses have been increasing the size of their workforces. What’s more, with workloads anticipated to rise, firms’ hiring intentions remain positive, stated property expert Knight Frank in its review.
Whilst office take-up in Dubai has been rising, new supply continues to be released into the market. Consequently, the market-wide vacancy rate has held steady at 50 per cent over the past year, it stated.
Furthermore, owner-occupiers of strata commercial space have increasingly been expressing an interest in purchasing accommodation in freehold locations.
"The rationale appears to be that, not only will they be able to build equity in the property over time, but also potentially benefit from capital value gains in the medium term, as well as rental savings," said experts.
However, the value of transactions were down markedly on the previous quarter – not surprising given that a flurry of high-value leasing contracts were signed by corporates before year-end.
The recent completion of projects along Sheikh Zayed Road, in Business Bay and Al Barsha has increased the level of office supply in those areas, providing greater tenant choice and helping to stabilise rents.
According to Knight Frank, the prime vacancy rate edged down to 16 per cent as strong economic conditions provided corporates with the impetus to expand their operations.
Furthermore, data from Dubai’s Department of Economic Development (DED) showed that, in 2013, the number of new business licenses issued rose by 11.4 per cent year-on-year to more than 18,000, with the strongest growth seen in the professional services category.
Consistent with that, rental values in locations such as Emaar Square/Downtown, Tecom C and Business Bay have seen double-digit increases over the past year. However, this has largely been limited to prime office buildings under sole ownership, stated the report.
Jon McGloin, the leasing manager at Knight Frank said in the first quarter of this year, demand was strongest from the professional sector, which accounted for almost 40 per cent of all enquiries.
"The technology (14 per cent) and general trading (12 per cent) sectors were the next biggest sources of demand, while engineering & construction (7 per cent), leisure & hospitality (6 per cent), real estate (6 per cent) and oil & gas (4 per cent) sectors featured further down the list," he added.
Underpinned by rising demand from corporates and SMEs, and the low supply of good quality office space in prime locations, rents in Dubai are projected to see annual increases of around 20 and 10 per cent in 2014 and 2015, respectively, said the report by Knight Frank.-TradeArabia News Service