Dubai
A subtle shift seems to be happening in Dubai’s office realty within the freehold zones — some of the occupiers are veering over to the idea of actually owning the space. If this holds up, it could just be the right prescription for the office property market to play catch up with the boom in residential.
On the transition from occupiers to owners, “The rationale appears to be that, not only will they be able to build equity in the property over time, but also potentially benefit from capital value gains in the medium term, as well as rental savings”, says a new Knight Frank report on Dubai’s office realty in the first quarter.
It does seem a good time to own or be renting an office in Dubai, especially if the property is rated in the Grade and plus category. In Knight Frank’s estimates, vacancy rates at prime office properties has come down to 16 per cent “as strong economic conditions provided corporates with the impetus to expand their operations”.
Across the market, the vacancy rate continues to be around the 50 per cent mark as new supply keeps getting absorbed. (Top-tier offices are commanding Dh1,950 a square metre, while it comes down to Dh1,650 for Grade A and Dh1,075 for Grade B stock, Knight Frank notes.)
“Though there aren’t any new freehold office projects being launched, there is a lot of the pending supply being delivered,” said Chandrakant Whabi, CEO of Acrohouse Properties. “And these are quite substantial in themselves — for instance Bay Square [from Dubai Properties] in Business Bay is getting ready for occupation by the next quarter and will add 1 million square feet of upmarket office space. That is quite substantial and will surely emerge as one of the most prominent commercial addresses in town.
“Office buildings in Business Bay have been among the key beneficiaries in the upturn; against Dh800 a square foot in 2011-12, it’s gone well past the Dh1,000 level now.”
Apart from Business Bay, the other prominent locations for offices such as Tecom C and Downtown have seen rental gains in double-digits in the last year. “However, this has largely been limited to prime office buildings under sole ownership,” Knight Frank report said.
And where is the demand coming from? In the first quarter, the professional sector accounted for nearly 40 per cent of all enquiries. Technology was next with 14 per cent and general trading at 12 per cent, the report added. Engineering and construction firms made up 7 per cent of the enquiries, followed by leisure and hospitality (6 per cent), real estate (6 per cent) and oil and gas (4 per cent).
