Even though residential sales and rents seem to be doing better than last year, office rents in Dubai continue to be under pressure with some kind of stability seen only in prime locations.
According to a latest report from Knight Frank, Dubai’s office market continues to witness an increase in inventory entering the market with approximately 63 million sq ft of current completed stock.
This increased supply has put the current vacancy rate for city wide properties at approximately 48 per cent, said the report.
“The completion of large amounts of new secondary stock will continue to provide a challenging occupational environment and detract from positive activity in prime locations and buildings.”
With the options available, tenants are benefitting and taking advantage of the oversupply. Resultantly, many are seen consolidating operations along with upgrades into better quality accommodation. “We anticipate this trend of trading up to continue through 2012,” said analysts at Knight Frank.
With the continued oversupply, rents will remain under continued pressure. As per the findings of Knight Frank, prime locations with best in class accommodation are reaching their low point in the rental cycle.
The trend of doling out freebies and incentives that started during the recession of 2008 will likely continue this year as well. “Tenant incentives in the form of rent free periods and/or fit out periods vary depending on term certain but broadly reflect a 12-15 per cent discount to headline levels.”
With choice at hand, tenants will look at well located, single ownership buildings with good levels of car parking and high quality management will continue to attract and retain tenants.