DIFC office demand lifts Dubai to top spot

Wednesday, Aug 31, 2016

DUBAI: High demand for space within the DIFC cluster seems to have been a factor in office rentals in Dubai gaining 20 per cent in the last 12 months. And it was enough to make Dubai the standout performer in the office space within the region, according to data released by consultancy JLL.

“Underlying market fundamentals are sound, and corporate demand remains strong, notably in Dubai as office vacancy rates continue to decline in the DIFC,” said Jeremy Kelly, Director in Global Research Programmes. As a result, we have witnessed a boost in rental values within the DIFC unlike other locations where rental values have remained largely unchanged.”

That takes some doing, for the fact is that the majority of locations in Dubai had seen limited rental gains during this period, while in others it actually went into retreat mode. Rents were also held in a tight rein because of the general negative sentiment that businesses and large office tenants were enduring over the state of key sectors. To compound the issue, new office buildings were delivered during this period, pulling down rents there.

But the JLL report expects some gains in the coming months. “In Dubai… low vacancy rates coupled with little interest in occupying alternative space will continue to prevent substantial fall in rents,” said Kelly. “In terms of overall performance and demand in Q2 for Dubai, the Central Business District (CBD) remained popular, “evident through the high rental rates that currently average around Dh1,922 per square metre meeting low vacancy levels”.

Meanwhile, across the region, rents on prime office assets “continued to increase at around the same pace recording an average growth of 11.3 per cent in the year to Q2-2016 compared to 11.9 per cent in the year to Q1”, the report adds.

“This confirms the ‘two-tiered’ nature of the market across the region with demand for space in ‘prime’ buildings in each city remaining the preferred option.

According to JLL’s Office Global Index Report, Dubai was followed by Cairo with a 16.7 per cent increase over a 12-month period to the end of Q2-16.

“Office demand is proving resilient in many of the world’s dominant commercial real estate markets despite increased political and economic uncertainty which is leading to corporate occupiers striking a more cautious tone,” said Kelly.

Cairo office rental gains were largely driven by “relocations to higher quality spaces in more convenient locations”.

Staff Report