Office rents in prime areas of Dubai are set to rise this year after five years of falling accommodation costs, according to a forecast by Jones Lang LaSalle.
The property broker predicted yesterday that there will be potential for long-awaited rental growth this year – although it will be limited to office buildings with high occupancy rates in Dubai’s best areas, according to Jones Lang LaSalle’s review of the last quarter of 2012.
The agent, which monitors 6.9 million square metres of offices in Dubai, found that average headline rents in the best offices in the city rose 3 per cent during the final three months of the year compared with the previous quarter and are set to rise higher this year.
Jones Lang said that the highest open market office rents in Dubai stood at Dh2,370 (US$645) per square metre in the Dubai International Financial Centre and Dh1,615 per square metre elsewhere in the city centre.
However, it added that offices in secondary locations were likely to suffer further rent falls this year.
The agent said the increase in prime office rents was likely to be brought about by a decrease in the amount of new office stock coming to the market. It said the total amount of office space completed last year stood at 570,000 square metres, 45 per cent less than the amount completed in 2011.
Robin Pugh, the head of agency at Jones Lang for the Middle East and North Africa, said that as a result of a number of projects being delayed at the final completion stage, there remains “around 1.2 million square metres of additional supply that could complete in 2013”. However, he added: “In reality, the future supply pipeline is likely to be somewhat lower.”
Almost 50 per cent of office supply in 2013 and 2014 will be in Business Bay, said the report. Other locations expecting new projects are Dubai World Central, Jumeirah Lake Towers, Sheikh Zayed Road, the DIFC and Silicon Oasis.
Just over half of the existing office stock (about 52 per cent) is concentrated in onshore locations while the remaining 48 per cent is located in free zones.
Meanwhile, Jones Lang predicts that the recent announcement of a cap on UAE mortgage lending and the significant levels of new supply scheduled this year are likely to limit price increases below the levels reached last year.
“The overall residential market has recorded a positive year, with the villa market continuing to outperform the apartment sector,” said Craig Plumb, the head of research at Jones Lang’s Dubai office.
[ lbarnard@thenational.ae ]
