31 May 2016
The sale price of office space declined by up to 14 percent in some areas of Dubai over the last year, as the low oil price and concerns over slowing economic growth begin to have an impact on demand, according to a new real estate report.

The price of office space dropped in most areas of the city, with Downtown Dubai, Business Bay and Jumeirah Lakes Towers reporting declines of 14 percent, 4.9 percent and 13.6 percent respectively, according to the latest Dubai Investment Outlook H1 2016 report compiled by Core, the United Arab Emirates (UAE) subsidiary of global real estate consultancy firm Savills.

The popular central business district of Dubai International Financial Centre (DIFC) also saw declines 3 percent year-on-year respectively, the report said.

"Socio-economic and geopolitical deterrents, along with a consolidating job market across the Middle East, are currently causing a decline on tenant demand in Dubai's office market," the report said.

Some of the drop in demand can be attributed to reluctance by companies to boost their headcount in the current market. The latest SME Sentiment Survey, based on around 200 respondents in the UAE and published by Gulf Finance Corporation earlier this month, found the majority of executives in small and medium-sized enterprises are reluctant to hire more staff while issues collecting payments continue to be a hindrance.

While 62 percent of respondents said they had experienced a rise in orders during the first quarter of 2016, a quarter of respondents said it had gotten harder to collect payments and 51 percent said it had gotten more difficult in the first quarter of 2016 compared to the previous quarter.

Looking forward, companies were more optimistic and 78 percent said they expect order growth to continue to increase grow in the second quarter of 2016. As a result, David Godchaux, CEO of Core forecast that demand for office space in central areas such as DIFC "is expected to continue to be steady" for the remainder of 2016 and into 2017.

(Writing by Shane McGinley)

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