At a rental value of $108.91 (Dh399.69) per square foot per year, CB Richard Ellis Group (CBRE) has ranked it the eighth most expensive office market. Next year's surplus will bring prices down further, thus increasing its affordability and attractiveness.

CBRE's Global 50 Index said Abu Dhabi reported the fifth highest decrease in prime office rents, plummeting 38.6 per cent year-on-year over a 12-month period.

Of the 179 markets CBRE Global Research and SEConsulting monitors, 131 experienced an annual decline accounting for a collective drop of 7.7 per cent worldwide.

Dubai, with a 27.3 per cent decrease, fared far better than other financial centres such as Singapore which was down 53.4 per cent, Hong Kong down 40.7 per cent and New York down 30 per cent.

"Many of the world's important financial centres are seeing unprecedented declines and are at the top of the list of fastest-changing markets. These include Hong Kong CBD and New York's Midtown Manhattan along with some emerging markets such as Ho Chi Minh City and Abu Dhabi, both of which until recently had been among the fastest-growing markets," said CBRE.

Commercial leasing markets across the Middle East and Africa have been depressed for the past 18 months as a direct consequence of the global and regional economic downturn, which significantly reduced demand for office space across all sectors of the economy from mid-2008. The onus will now fall on agents and landlords to lure companies to new office space.

"Landlords will try long-term deals and offer free rental periods, probably even pay the moving costs. They will do whatever they can,'' said Neil.

Buildings that are still owned by investors have a much better chance of being successful than buildings that were sold off-plan because the latter will have multiple landlords, he said.

Neil said: "The question is how are they going to attract tenants? Tenants want to see who is in the building, who the retailers are. And the retailers want to know what the office mix is going to be.

"This is one of the things we're looking at; to work with developers who sold off-plan. We are working with the owners to try and position a building, get a strategy for them so they attract a certain type of mix and then also do the retail strategy for them so they have the right retail mix. That's the only way they can increase the value of the building, otherwise they're going to have a real mismatch," said Neil.

Much of this demand is for the space that is immediately available, preferably with a previous tenant fit-out in place making relocation 'cost-neutral', reported Jones Lang LaSalle (JLL).

The majority of demand is for units of less than 20,000 sqft, although there remain some active enquiries for much larger areas, it said.

JLL said declining revenues and headcounts were also forcing companies to renegotiate current leases or move and offload surplus space. This has resulted in the development of a market in sub lease or 'grey' space in many markets, it said.

The size of the office market in mid-2008 was 23 million sqft and it has now grown to 33 million sqft. Nearly 25 million sqft of additional office space is expected to enter the market by the end of 2011.

By Sean Davidson

© Emirates Business 24/7 2009

 

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