Dubai office lease rates have fallen 75 per cent since 2008 as landlords find few takers for new space.
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More than 45 per cent of office space across the city is vacant, according to a CB Richard Ellis (CBRE) report released yesterday.
The firm's data also said average lease rates had dropped 18 per cent in the past year.
Empty space translates to good deals for companies. Current lease rates in the central business district are from Dh1,080 (US$294) to Dh1,940 a square metre per year, lower than typical rates in 2005, CBRE reported.
Most current construction is in new developments such as Business Bay and Jumeirah Lake Towers, where there is "huge new supply" and vacancy rates are among the highest in the emirate, said Matthew Green, the head of research and consultancy for CBRE in the Middle East.
"There is so much competition between buildings that rates will continue to go down in these locations," he said.
CBRE's data corroborate findings from other property consultancies.
The vacancy rate stands at 44 per cent and is expected to increase to more than 50 per cent in the next year, Jones Lang LaSalle reported.
Leasing agents said there were signs of increased leasing activity in the first quarter.
The international electronics and electrical engineering company Siemens reportedly leased space in Jebel Ali.
But leasing activity was "weak" in the second quarter, with many potential tenants interested in Dubai waiting on the sidelines, Mr Green said.
Uncertainty in the region and the sputtering global economy, combined with dropping rates, have made some companies hesitant to commit to expansions, he said.
"They're just not getting to the completion stage," Mr Green said. "Decisions are either being delayed or pushed back."
About 450,000 sq metres of new office space was completed in Dubai in the first six months of the year, CBRE reported.
Another 600,000 sq metres expected by the end of the year will "continue to exert pressure on rental rates and landlords already battling rising vacancy rates", the company said.
Landlords have started offering deals to entice tenants, beyond lowering the rent, Mr Green said. Concessions include free rent periods, funding to help fit-out the office space and lower move-in costs.
