Property developers in Dubai will complete another 460,000 square metres of office towers this year, putting more pressure on rents and potentially giving relief to businesses affected by tougher economic conditions.
The glut of new stock equates to 7 per cent of the city’s total 6.61 million square metres of primary and secondary office stock, says a report published yesterday by Core, the Dubai affiliate of property brokerage Savills.
Rents in Business Bay and Sheikh Zayed Road fell by an average of 4 per cent last year to Dh105 per sq foot and Dh130 per sq ft, respectively, as new supply comes on to the market at a time when the economic slowdown has forced landlords to cut rates.
“The context of a strengthening dollar, growing supply and weakening oil economies across the Middle East are causing some downward pressure on Dubai office space at present and this will continue in the short term," said Core’s chief executive, David Godchaux.
Small and medium enterprises have been hit hard by the slowdown and some are struggling to repay their loans, banks have said.
“The growth in supply is likely to be most significant in Business Bay over the next few years as the area seeks to establish itself as one of Dubai’s premier business districts," said Mr Godchaux.
However, overall, Core found that rents recorded an average increase of 1.5 per cent across the city as landlords in some prime areas continued to cash in on their locations.
Office tenants in the Dubai International Financial Centre (DIFC) had the biggest increases over the year with rents rising by 7 per cent over the year to Dh225 per sq ft.
Core said it expected rents in the DIFC to continue to increase this year, at least until construction work on thousands of sq metres of new offices at the nearby Dubai World Trade Centre is completed next year.
Average office prices in Dubai fell by 9.2 per cent last year as investors responded to the emirate’s slowing economy and the oil price crash. Values in Business Bay fell by 9 per cent to Dh1,200 per sq ft. Core reported that while land values in the area have also fallen, encouraging some developers to buy up stalled projects in the hope of restarting them at more viable prices.
Capital values in prime office locations also fell during the year, but by smaller amounts. Average office values in the DIFC dipped by 3 per cent during last year to stand at Dh1,950 per sq ft. And in Downtown Dubai, Core Savills reported values decreasing by 4 per cent over the same time to stand at Dh2,500 per sq ft.
Content Courtesy : thenational.ae