Dubai: An oversupply of office space is prompting developers to change the use of incomplete buildings from commercial offices to residential and hospitality purposes, according to a new report by property consultancy CBRE.
Most of these conversions happened in Business Bay, which has high office vacancy rates because of over-development of strata buildings during the market peak, the report stated.
Dubai’s office market is polarised with the best buildings in prime areas such as the CBD seeing pick up in rent growth while secondary and tertiary locations continue to suffer oversupply, it showed.
Average prime rents in the CBD rose by four per cent in the first quarter to reach Dh1,500 per sq. metre annually, according to CBRE analysts.
In Jumeirah Lake Towers, the most attractive buildings are getting rates of about Dh1,200 per sq. metre annually but the poorest quality strata units are available from around Dh590 per sq. metre.
“With landlords becoming increasingly bullish on the market outlook, we may expect to see further growth in prime rents over the remainder of the year, particularly as occupancy rates in the CBD slowly edge up,” the report stated.
Looking forward, this polarisation of the office sub-markets is expected to continue.
“Rising occupancy levels in the CBD could see vacancy rates creep towards single digits before the year is out, although this will be tempered by rising vacancy levels in locations such as Dubai Investment Park and Dubai Silicon Oasis,” the report stated.