Prime office rents in Dubai fell by an average 6.5 per cent the first nine months of 2020, according to the latest market update by Knight Frank Middle East.
Over the first three quarters, Dubai’s office market recorded average prime rents at Dh205 per square feet, average Grade A rents of Dh130 per sq.ft. and average citywide rents at Dh 100 per sq.ft. “While prime office rents in Dubai fell 4.7 per cent in the year to Q3 2020, Grade A and Citywide rents fell by 6.1 per cent and 7.7 per cent respectively over the same period,” Knight Frank report said.
Taimur Khan, associate partner, Knight Frank, said given the current level of economic uncertainty, it is not surprising that we have seen limited levels of additional take-up in Dubai’s commercial market, with many firms suspending any expansion plans or adopting a wait-and-see approach.
“Despite this weaker backdrop, many firms, where tenancy contracts allow, are taking the opportunity to take advantage of weaker market conditions to upgrade their occupational space.
Given the recent changes in dual licensing regulations, prime and Grade A offices in Free Zones are most likely to benefit from this flight to quality,” said Khan.
“Finally, while currently, vacancy in most prime projects remains relatively low, over the course of the year with the delivery of additional supply we are likely to witness the prime vacancy increase. The Grade A vacancy rate is also expected to see a marked increase over the coming year as the vast majority of supply scheduled to be delivered in 2021 is of Grade A quality,” said the report.
There are estimated to be 25 active projects within Dubai, with delivery dates up to 2024, which are either being executed or in the study or design phase. The total value of these projects currently is estimated at $7.618 billion.
The report said occupiers are looking to take advantage of weaker market conditions to upgrade occupational space whilst being mindful of increasing total spend. “Landlords are expected to remain flexible in order to retain and attract occupiers, with incentives to achieve this including but are not limited to flexible payment terms, capex contributions and rent free periods.”
Quoting data from the Dubai Statistics Centre, the report said as a result of the pandemic and its impacts on global economic activity, Dubai’s GDP is expected to contract by 7.4 per cent in 2020. According to forecasts from Oxford Economics, Dubai’s GDP is not expected to return to its 2019 level before 2022.
“Given the challenging economic backdrop, employment is set to contract by 9.1 per cent in 2020 If Dubai’s economy recovers as expected, employment is set to register growth rates of 6.7 per cent and 5.1 per cent in 2021 and 2022 respectively,” said the report.
The transport, storage and IT and the consumer services sectors are expected to see the most significant declines in employment, where in 2020 employment in these two sectors is expected to decrease by 14 per cent and 12 per cent respectively, said the report.
All rights reserved to the initial publisher for Khaleej Times.
Collected and published by Arms &McGregor International Realty editorial team.