Monday, May 18, 2015
Dubai: All of the action in Dubai’s freehold office space is confined to leasing transactions with little — or even none — taking place on the buying and selling side in recent weeks.
“Companies prefer to use their fund resources for expanding their business operations or on capacity rather than acquire real estate even if it’s for their own premises,” said an industry analyst. “They see no cost benefit from taking it on the balance-sheet.”
Even with the spate of recent launches, the developers’ intention have been on adding to the residential stock or creating new hospitality space. Coming out with additional office capacity is not on their radar.
It could be that the freehold office market may need some sort of prod to get back on track. According to a new report by Cluttons, “prospect of the normalisation in global relations with Iran could have huge ramifications for the Dubai office market.” But it is still early days on the scale of the likely impact.
“It is likely international businesses will hub any Iran operations out of Dubai, should trade relations be normalised with the UAE’s northern neighbour.”
On the overall rental activity within Dubai’s office category, “DIFC and the Tecom zone retain high popularity with overseas businesses seeking an address, with the free zone status being a key motivator,” the industry source said. “There’s limited vacant space at any of the existing properties.”
Cluttons, in its latest update, also corroborates the DIFC primacy in the rental space. “Top-end rents have edged up to Dh325 per square foot from Dh280 at the end of last year,” the report says. “While supply has generally kept pace with the level of requirements in this submarket, much of the vacant stock is concentrated in strata owned stock, which is largely avoided by larger international occupiers.
“That said, stock under single ownership is still expected to see rents maintain their upward creep over the course of 2015.”
Recent single-owner office stock releases at DIFC include the 17 floors owned by Emirates REIT at the Index Tower, one of the signature high-rises in the cluster.
According to Clutttons, there are several dynamics visible within the 4.8 million square foot master-development, as “Gate Precinct and adjoining buildings command the highest rents and are the most sought after.
“The second section — which includes third-party developers, such as Al Fattan’s Currency House — is the next most desirable location. Finally, single-ownership developments at the other end of the yet-to-be completed retail spine operate in a micro-market environment, where higher quality buildings, such as Index Tower and Park Central, command higher rents than smaller surrounding schemes.
“The absence of the promised retail spine is to an extent curbing the full rental potential of some of the third-party office schemes.”
By Manoj Nair Associate Editor
Gulf News 2015. All rights reserved.
