Dubai Real Estate : Office space market supply still high

Steady decline in price, demand for office space rentals has finally bottomed ou.

In late 2010, Landmark Advisory predicted that office supply in the UAE would”virtually double” by 2014. Despite all odds, with the global financial crisis topping the list, this prediction has come true.

There is currently a gross oversupply of office in the capital and Dubai. Rents have continued to fall in the past few years, with lot of them bottoming out finally in the last quarter of 2012. The steady decline of rents in commercial properties since 2008 seems to have stopped and slowed, and some areas like Dubai International Financial Center, even showed a modest 2% Increase in rental rates.

According to the Dubai Real Estate Market Overview, 1.4 million square meters have been added to Dubai’s office space last year. This is an addition to the already existing 6.1 million square meters of office space.

Landlords in the commercial sector have been offering competitive rates and incentives like rent-free months and customized office space fit-outs to attract. Some landlords have even split up their office units to maximize their potential. As a result, businesses are experiencing savings as much as 40% of their fixed costs that would have previously gone towards rent.

Quite surprisingly though, commercial space in malls both in the capital and in Dubai is high demand, and malls are enjoying full occupancy. In contrast, new office space in the capital has less vacancy than its counterpart in Dubai.

The good news is that 2013 will be the year that landlords will rejoice. Rental rates are either bottoming out or showing increase and the demand and interest in office spaces in picking up again, albeit a little slowly. Offices spaces on Shaikh Zayed Road, Jumeirah lakes Towers, Business Bay and Al Barsha look particularly promising.

Dubai Real Estate Tips:

·       Businesses get savings because of fall in demand and prices

·       Some areas in Dubai have seen modest increase in rental rates

·       Commercial space in malls in Dubai, Abu Dhabi in high demand.