The amount of office space in Dubai is set to increase by more than a fifth next year as developers bank on a recovery in the emirate’s hard-hit commercial property market.
According to the property consultant Knight Frank, office stock in the city is likely to increase from a predicted total of 8.4 million square metres this year to 10.2 million sq metres by the end of 2014, driven by a market recovery.
At the end of 2012, Knight Frank estimates that the total amount of office space in the city stood at about 6.1 million sq metres, only slightly more than the 5.9 million total of 2011, as schemes that would have been completed over the past few years were put on hold because of the global financial crisis.
In a report published yesterday Knight Frank predicted that the expected glut of new offices coming to the market would prevent any steep increases in rents.
It said rents for Dubai’s most prestigious office buildings could edge up slightly next year, from an average of Dh1,600 per sq metre to about Dh1,700 after remaining flat for the past two years.
The stagnation in office rents follows steep falls after the property crash. According to Knight Frank data annual office rents in the city fell from just over Dh4,000 per sq metre at the market peak in 2008 to Dh1,600 in 2011.
Knight Frank reports that rents are rising in five of the 12 office districts it surveyed: Tecom C, where they stand at Dh700 per sq metre per year; Jumeirah Lakes Towers, where they are Dh1,025; Business Bay at Dh1,075 and Sheikh Zayed Road, where they are Dh1,400.
However, rents remain static in the more expensive locations of Dubai International Financial Centre, where they stayed at Dh2,530 per sq metre and Emaar Square, where they were Dh1,615. Rents also remained static in the more northerly locations of Bur Dubai (Dh860), Deira (Dh1,075) and Festival City (Dh1,075).
Rents continued to fall in Knowledge Village, Internet City and Media City where average rents were all reported to be Dh1,615 per sq metre.
The report found that although landlords were achieving quoting rents from smaller occupiers, they were continuing to office incentives to larger occupiers. It said that a third of all new lease inquiries came from small companies and start-up businesses looking for less than 100 sq metres of space. Corporates looking for between 100 and 500 sq metres made up 54 per cent of inquiries.
“With Dubai’s economic fundamentals strengthening, it’s not surprising that corporates and new start-ups are expanding,” said Khawar Khan, a research manager at Knight Frank Dubai. “That in turn has helped to drive office occupier demand, as witnessed in Business Bay and Jumeirah Lake Towers, for example. However, with new supply entering the market, the expectation is that office rents will be static this year.”