Barring Dubai Design District, office rents fell across the emirate in the first quarter of 2019 with market strongly favouring tenants, a new study released on Saturday revealed.
According to the latest research by Savills on the emirate's office market, Dubai Science Park recorded the highest decline of 11.3 per cent in the first quarter, followed by the old Dubai areas of Bur Dubai and Deira where rents dropped 11.1 per cent and 6.7 per cent, respectively. In most of other areas, rents fell between 3 to 6 per cent.
However, office rents at Sheikh Zayed Road, Al Barsha, Tecom, Dubai Internet City, Dubai Media City, Dubai Knowledge Village, Dubai Studio City, Dubai Silicon Oasis, Garhoud and One Central remained stable.
Dubai Design District bucked the trend as office rents jumped 13.8 per cent in the last quarter.
Average rents at the Dubai International Financial Centre were the highest at approximately Dh200 per square foot annually. Dafza and Downtown Dubai office rents averaged Dh135-Dh170 per sqft, while it was at Dh160 in Media City and Internet City. Sheikh Zayed Road averaged Dh140.
Earlier, ValuStrat had said that median office asking rents declined by 4.4 per cent year-on-year in the first quarter.
The citywide median asking rent for a typical office size stood at Dh90 per square foot. Commercial office occupancy in Dubai was estimated at 84 per cent.
Going forward, Savills expects office market in Dubai will favour occupiers as supply continues to outpace demand in 2019 with increasing trend towards co-working spaces catered towards startups and tech entrepreneurship, where open desk spaces offer more cost-effective solutions for fledgling companies.
In order to retain the tenants, the landlords have become more flexible, with approaches such as rent-free periods, offering extended car parking facilities, shorter lease terms and even upgrading shell and core spaces to Category A fit-outs to secure agreements.
Savills predicts that supply will continue to outpace demand through 2019, meaning developers and landlords will continue to offer such benefits to tenants. The most stable sub-sector is good quality prime buildings, with demand remaining more consistent and therefore holding more stable rental values.
"There is a culture for entrepreneurship in the UAE, as the economy diversifies away from oil-based industries and moves towards technology and knowledge-based start-ups as set out in UAE Vision 2021. It is clear that such trends are affecting the Dubai office market and that landlords must keep pace with the changing business demands in order to stay profitable and ensure continued occupancy of their office spaces," said Paula Walshe, director for international corporate services at Savills.
"While office market activity has softened in the first quarter of 2019, the city offers an increasingly beneficial operating environment for businesses. With lower rents, a range of quality developments available and landlords taking a more flexible approach to leasing, both domestic and international organisations are well-placed to take advantage of Dubai's business-friendly rental environment," she added.
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