Office landlords in Dubai are offering increasingly attractive incentives, including rent-free periods of up to two years on five-year leases, as they compete for tenants. As new buildings were delivered in the first quarter this year, rents fell by as much as 45 per cent from the levels of the previous quarter, said the property brokerage Cluttons.
Only 60 per cent of office space in buildings on Sheikh Zayed Road are occupied, the broker says, while Landmark Properties estimates that almost half of Dubai's office space will be empty by the end of next year, with 2.97 million square metres of new space on the market. The oversupply has prompted landlords to come up with new ways of securing long-term leases. Limitless, a Dubai World-owned company, is offering tenants at The Galleries in Downtown Jebel Ali such incentives as rent-free periods and additional parking spaces. It is also paying for office fit-outs as it lures customers to the building, which is half full.
Businesses are also seeking cash-saving deals as they trim costs. "Everything is done on a case-by-case basis. It depends on the lease and the amount of space they have," said a spokeswoman for Limitless, adding the company would also start offering advertising opportunities for tenants seeking exposure on the giant screens projecting from The Galleries on to Sheikh Zayed Road. Corfu Investments, a Greek company that owns a number of offices in Damac's Executive Heights, is offering free rent for the last two years to tenants who sign up for five-year leases, although the company has yet to finalise any deals.
"The market, especially for commercial space, is very bad right now because of all the offices that are being built," said Themos Papalas, a partner at the company, which charges Dh136,000 (US$37,000) a year for an office in the building. "In Executive Heights the offices are 'shell and core', so to compensate tenants for the fit-out expenses we are offering this deal ? so instead of the offices being idle, we give them incentives. Customers have seen the prices fall, and so they want to pay less."
Al Kazim Real Estate, a private property management and leasing company in Dubai, is offering rent-free occupancy for three months, or during the office fit-out period, for its long-term clients in Business Central Towers, a development in Media City that has gross leasable space of more than 110,000 sq metres. "In future, we may consider extending this period but we have not taken a decision yet," said Shivan Rajarapnam, the leasing manager at Al Kazim.
Robin Teh, the director of valuations and research at the property consultancy Chesterton International, said such incentives would become more widespread, particularly in areas of low occupancy or in lower-grade buildings. "The market is slowly changing and is turning into a tenant's market rather than landlord's one," Mr Teh said. firstname.lastname@example.org email@example.com