According to Cluttons’ report, in addition to rent reductions of up to 20% in a few extreme cases, landlords in some submarkets have begun to offer contributions to utility bills and fit out costs through gross rents. Some landlords are also accepting shorter lease terms or tenant break clauses and offering to cover tenant’s agency fees in some cases in an effort to drive down void periods.
Faisal Durrani, Head of Research at Cluttons said: “The current weakness in some submarkets of Dubai’s office market is expected to persist, with further rental declines likely as we move into the summer months. Following a period of relative stability, we are increasingly noting instances of negotiated rent reductions, materialising at the same time as a growing number of lease incentives offered by landlords.
“This is symptomatic of a market entering a tougher period, particularly as more macro-economic factors weigh down on the level of occupier requirements. It is challenging to put an exact figure on the level of rent falls given the wide range of submarkets and individual micro-demand drivers, but falls of up to 10% on average cannot be ruled out this year. In parallel, lease incentives, which still remain the exception, rather than the norm, are something we expect to increase across the market as voids are sustained.”
