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· AED 250 psf Average prime grade A office rents during Q3
· 0% change in prime office rents between Q1-Q3 2015
· Diverse occupier activity with flat outlook for rents
· Warehouse market plateaus
· Industrial market sees growing momentum in sale and leaseback activity
Dubai, Following a period of strong growth, Dubai's office market is showing signs of stabilising, with average rents remaining virtually unchanged across all the city's major submarkets and free zones, according to leading international real estate consultancy Cluttons.
Cluttons Winter 2015/16 Dubai Commercial Market Outlook report reveals that overall, prime, secondary and tertiary office rents have remained unchanged for the first three quarters, standing at AED 250 psf, AED 130 psf and AED 70 psf, with the market remaining quite fragmented.
Micro markets, which are often as small as specific buildings, continue to buck wider market rates, such as Emirates Towers (AED 310 psf), or The Gate District (AED 225 psf).
Steven Morgan, CEO of Cluttons Middle East, said: "Occupier activity is down, however a positive sign remains in the diversity of the market, which is reflective of the overall economic activity. Banks, financial institutions, law firms, construction companies and technology-media-telecoms firms round off the list of the most active occupier groups, with the city's free zones remaining the primary target."
The upward creep in rates in some of Old Dubai's office submarkets is also reflective of the performance of the wider economy and dominated by domestic occupiers.
Morgan adds: "Although space requirements from this segment are undoubtedly lower than this time last year, the limited amount of new stock deliveries in these areas, coupled with a steady rate of requirements, is putting upward pressure on rents in some key locations and buildings. This is driving some migration to submarkets such as Business Bay, where average rents range from AED 70 psf to AED 120 psf are perceived to offer better value for money compared to Deira or Bur Dubai with the added advantage of being more centrally located, as the city's centre of gravity continues to drift further south."
According to the report the city's free zones still tend to be dominated by multinational organisations, with take up activity is intrinsically linked to business performance in their home markets. Cluttonsalso underlines moves by hydrocarbon based occupiers to consolidate office space as global headcounts are adjusted downwards, although this is not considered to be a major occupier group in Dubai compared to other regional markets.
Faisal Durrani, Head of Research at Cluttons, said: "Free zones across the city continue to review expansion plans in order to cater to the buoyant level of requirements, with schemes such as the Innovation Hub at Dubai Internet City expected to ease pressure on rents once completed in Q4 2017. New free zones are also seeing increased interest and activity, highlighting the important role free zones play.
"EnPark,for instance, has emergedas Dubai's latest success story and US based occupiers in the energy sector appear to be showing high levels of interest in securing space at TECOM Investments' specialist Dubai Biotechnology & Research Park (DuBiotech) freezone cluster as they home in on the growing green tech and energy sector in the region".
Despite this, Cluttons does however remain cautious on the short term outlook for Dubai's commercial market.
Durrani added: "With the outlook for global growth faltering, we expect occupier activity will continue to slow, with office space requirements shrinking during next 12 months. This comes at a time when land values in submarkets such as Business Bay are cooling and therefore improving the financial viability of some previously stalled projects, which are now seeing a resumption in construction activity. The ability of the market to absorb this new space is likely to dampen the speed at which the office market sees a resumption in rental value growth as there is a risk of supply inching ahead of demand, although a lot of this is likely to be in the Grade B category."
Warehouse market plateaus
Away from the office market, the report reveals that rents across Dubai's industrial sector are showing increasing signs of plateauing, following the record growth last year, with rents across most submarkets remaining unchanged in the first nine months of 2015.
Morgan said: "Although rents appear to have plateaued, a trend we expect to persist over the next six months, events such as the Expo 2020, the ongoing expansion of Jebel Ali Port, the progression of works at Al Maktoum International Airport and the lifting of trade sanctions on Iran early next year are all expected to help inject additional momentum into this crucial segment of the city's economy"
Overall activity in the industrial market remains diverse with Al Quoz remaining a hub for the automobile sector, while at Dubai South, logistics occupiers continue to show a high level of interest in acquiring airside plots."
The report also confirms that investment activity has remained robust, with DIP being a particularly active market for Cluttons' commercial teams. The recent sale-and-leaseback of a 55,000 sqft light industrial unit for AED 25 million, representing a net yield of 8%, attracted a high level of interest from a wide range of investors.
Morgan concludes: "This underscores the growing momentum behind this niche investment segment, which, unlike other property sectors, continues to offer investors a wide range of opportunities, with relatively attractive returns."
-Ends-
Press contacts:
Leen Al-Barqawi
Mobile: +971 56 547 1436
E-Mail: leen.albarqawi@edelman.com
About Cluttons
Cluttons is a global real estate services company, with a presence in over 50 countries. Cluttons was on one of the first surveying and property advisory businesses to open offices in the Middle East, and now offers dedicated real estate services across the Arabian Gulf, with offices in Abu Dhabi, Dubai, Sharjah, Bahrain and Oman.
Cluttons provides clients with residential sales and letting services, commercial leasing and investment, consultancy, property and facilities management, and valuations, fulfilling their property needs across the Middle East. Cluttons delivers its high-quality real estate services to clients ranging from international corporates and institutional investors, to private individuals and families.
With a strong presence in the Middle East since 1976, Cluttons is a trusted market leader in the region, having grown its operations and established a proven track record of success over the last 40 years.
Founded in 1765, Cluttons employs over 700 staff worldwide and has a fast-growing international presence, including a network of offices in the UK, Europe, Middle East, Asia Pacific, India and Africa.
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© Press Release 2015
