Dubai: For Dubai's original stretch of signature high-rise properties, the Shaikh Zayed Road (SZR), it is back to the good old times. Mind you, not the octane-driven period between 2007 and end-2008, but the one prior to that when commercial lease rates there were first starting to inch up.
The current lease rates for office space on SZR — at or around the Dh130 a square foot mark — have been showing a good deal of resilience for the better part of the last three or four months, according to market sources. (Offices in the Emirates Towers carry a higher lease rate than the average on SZR because of its landmark status.)
With increased demand re-emerging from corporate tenants, landlords with space to spare are suddenly sitting pretty.
But then again there is that much of space available. One of the leading luxury retailers in the country will shortly move into its swank new headquarters at one of the newer high-rises on SZR. A couple of other blue-chip names did so earlier, including a leading law firm.
But they are among the luckier ones. Market sources say, some of the other enquiries from corporate houses for prime space on this stretch of road came to nothing. For a very simple reason — there was none available in the kind of floor spaces they wanted.
"And if the space was there, we could not get them at the lease rates we were willing to pay," said a senior official with the administration department of a leading multinational on the lookout for new offices. "In a weak economic environment, our global operations are looking very closely at the costs."
Their problems could be alleviated shortly. Two new high-rises — with 180,000 and 140,000 square feet of dedicated office space respectively — will be releasing their office spaces into the market between now and the end of the year. Leasing operations have not started either, but should do so shortly.
"Lease rates, to a good extent, are dependent on the occupancy levels and for clients willing to commit to floor plates of 25,000 square feet and more, there will always be some accommodation being made on the part of the landlords," said Porush Jhunjhunwala, head of commercial sales and leasing at Better Homes.
"In such instances, there can be a revision on the current rates to anywhere from Dh100-Dh110 a square foot. Plus there are the add-ons such as rent-free periods and the offices coming with fit-outs, etc.
"The recent stability in SZR office rentals bodes well for the commercial real estate space, more so if the trend continues over a longer period," Jhunjhunwala said.
During the market peak in 2008, office rents on SZR were Dh400 plus. "Nobody wants the market to ever go back to those levels," said a senior official with a real estate consultancy. "Those levels were unjustified and unsustainable in the market." No one associated with the local real estate market in the last three years is bound to forget those lessons.
Off the high street
Beyond the immediate stretch of the cluster of buildings along Shaikh Zayed Road comes the Business Bay and the Executive Towers within it.
But there remains a steep differential between what they command.
As against the Dh130 a square foot for the former, the average square footage rental is Dh60 to Dh70 — depending on the condition of the premises — at the Executive Towers, said Porush Jhunjhunwala of Better Homes. "And we've seen very limited movement in the last six months."
"We might see some correction when the infrastructure of Business Bay is fully developed."
On the residential side too there has been a recent spike in demand and transactional activity along Shaikh Zayed Road. For those looking to make a switch now, current rates are from Dh50,000 for a one-bedroom and from Dh75,000 for a two-bedroom. These are some distance removed from 2008's Dh85,000 for a one-bed and Dh120,000 for a two-bed.
