Dubai’s office market appears to have hit a sweet spot, at least for tenants looking for the right address. Rents are slipping; there is more to choose from amid a supply-demand mismatch and office landlords are even throwing in attractive deals – it’s a renters’ market, at least for now.
Average office lease rents has slipped by 2.1% in the first quarter of this year as compared to 1.2% in the fourth quarter of 2018, according to a new Knight Frank report. In Q1, prime sector lease rates were at AED 240 per sq ft per annum – a fall of 3.6% — and Grade A rents were down 3.3%, according to the report.
This appears to have led to spurt in transactions, with growth in new and renewed lease contracts jumping. According to Dubai Land Development’s Annual Report on Real Estate Sector Performance 2019, the total number of newly leases touched 246,509 and renewed leases numbered 251,409 as of 2018.
For instance, take office properties at the Dubai International Finance Centre (DIFC), among the hottest free economic zones for prime and Grade A office spaces in the emirate, and fast forward to Q3 — there was more than 80,000 sq ft of net absorption.
What appears to have swung the office market during a supply glut, besides low rents, are a slew of concession that were once hard to come by in a renters’ market: rent-free months and fitted offices and well, great views from the desks.
Like the furnished new offices just readied for lease on the 14 and 20th floors of Central Park Office Tower at DIFC. The lease rates in the skyscraper for areas starting at over 1,000 sq. ft. here range from AED 123/sq ft (for shell & core) to AED 210/sq ft (for category A fitted offices) and AED 290/sq ft (for executive furnished offices), with two months free rent for every year lease term.
Central Park has been a sought-after address ever since the signature 51-floor office tower and the 46-story residential tower with spikes piercing the clear desert sky, opened for business in 2014.
Jointly owned by Dubai Assets Management and Deyaar Development and designed by Hopkins Architects, there was 860,000 sq. ft. of flexible office space on offer. And companies and government departments lapped it up – from UAE Federal Tax Authority and UAE Ministry of Economy to Marriott Hotels, Merck Serono Middle East, Bank of Singapore and ICICI Bank.
It remains a premium space, but tenants can now move in at a discount. A perfect example of how the office market is shaping up till demand picks up again. With addition of as much as 1.3 million sq ft of space so far this year, landlords can just let out and wait for good times.