Dubai’s office market is forecast to see demand of around 4.5 million square feet over the next year, with rents expected to remain flat, according to the latest analysis from CBRE.
After four straight quarters of flat growth in the emirate’s office market, the rental outlook for 2012 is ‘one of continued stability, albeit with attractive landlord incentives on offer’, the real estate consultants said.
It added that an estimated 25 million square feet of office space could enter the market by 2014. However, based on past market experience, construction, infrastructure and handover delays, this figure could be reduced by 20 to 30%, said Nicholas Maclean, managing director, CBRE Middle East.
‘Declining lease rates over the past three years have significantly reduced set up costs making the emirate a more attractive proposition for international occupiers looking to service the EMEA region,’ he said.
‘Despite current market challenges, Dubai continues to offer attractive mid to long-term investment opportunities, with well laid infrastructure, an investor friendly business environment and well structured real estate laws,’ he explained.
‘Despite being heavily impacted by the global economic downturn, Dubai is now emerging post crisis as a far more competitive business environment,’ he added.
According to CBRE, overall office vacancy rates are currently around 45% in Dubai, largely due to the entry of new office stock and weak demand. However, the central business district area and DIFC are still holding strong, with occupancy rates of over 85%.
A major part of this new space is expected to emerge from within the Business Bay and Jumeirah Lakes Towers developments while the DIFC and CBD areas will contribute just 3.61 million square feet, or 14% of the total.
Since the third quarter of 2008 when Dubai’s property markets were hit by the economic downturn, demand for office space has remained relatively weak, largely as a result of reduced activity among companies related to construction, architecture, real estate and media.
At the end of 2011, Dubai’s commercial office stock stood at 70.6 million square feet, rising from 50.6 million square feet at the end of 2009, an increase of 40%.
According to CBRE, the highest vacancy rates are seen in Business Bay, Jumeirah Lakes Towers, Silicon Oasis and Jebel Ali areas, largely due to disadvantages in ownership, completion period, design quality, location and accessibility.
