High supply levels hit Dubai office market
Dubai, April 15, 2012
Dubai's office real estate sector remains highly competitive due to the high levels of supply – touching on 60 million sq ft, with an additional 10 million anticipated by the end of the 2012, a report said.
The effect of such high supply is that vacancy rates have remained high at approximately 40 per cent across the city. However, instead of ongoing downward pressure on prices experienced throughout 2010 and 2011, average quoting rents for prime developments in
the city have remained stable over the past three months, said the report by Cluttons, a real estate specialist, in its Q1 market report.
DIFC, Emaar Square and the Sheikh Zayed corridor remain the most expensive locations, with JLT, Barsha and Tecom offering the
lowest rates, it said.
Despite the excess of supply, there still remains a relatively short supply of good quality buildings for corporate occupiers with major requirements. Single landlord owned buildings still remain an essential requirement for most larger corporate occupiers but there is a lack of supply in prime areas of buildings that can accommodate larger requirements over 40,000 sq ft, it said.
Cluttons is noting a greater appreciation of ‘green’ or sustainable initiatives from occupiers and the market is seeing evidence of this becoming a regular requirement in the search process.
In terms of development going forward, initiatives have been put in place with an aim to restart work on previously stalled projects. There remains however an increased recognition by government agencies to reduce the future supply pipeline. Due to the lack of good quality stock there is an improved appetite for prime situated development sites, it said.
The retail market within Dubai experienced a supply slow-down during 2011, however the recently announced extension of Dubai Mall and the planned Mall of Arabia, signal that retail supply will be a strong focus for 2012.
Cluttons is also seeing a small growth in developments within the smaller community shopping centres, which were designed to
support local residences.
Finally, the hospitality sector is probably the furthest ahead in the performance cycle in terms of all of the commercial sectors. Increasing visitor numbers (particularly from new markets of Africa and China), the continued expansion of Dubai's tourist infrastructure and its 'safe haven' reputation will remain instrumental to its resilience during 2012, said the report.
There is now an emphasis on mid-market hotels, not just luxury ones, and several hotels are considering the feasibility of refurbishment, or in the case of the Metropolitan Hotel, complete redevelopment, it said. - TradeArabia News Service