Dubai: The Dubai World Central is starting to get a lot of traction and it is not just confined to airlines launching flights from the emirate’s new aviation hub.
The master-development is garnering attention for its commercial space, with multinationals making a beeline for prime space there, according to a new report on Dubai’s commercial realty prospects by Knight Frank. “With the Dubai World Central HQ building now near full occupancy, including global FMCG corporations such as Nestle, occupiers are starting to consider available space within the surrounding business park buildings,” the report noted.
And as the countdown nears for the Expo 2020 host city announcement next month, “Investors, developers and occupiers are beginning to look at Dubai World Central as a potential hub of activity,” the report said.
Also, “With Dubai Airports’ CEO Paul Griffiths recently raising questions over the long-term future of the existing Dubai International Airport, Dubai World Central is well placed to benefit from the potential shift in activity southwards.”
It is not that all of the pull for corporate tenants in Dubai are headed towards DWC. Office properties in existing commercial hubs are feeling the benefits of all-round improvement in tenant demand. Sure, the multiple strata ownership remains an issue, but even here the Knight Frank report suggests clear demarcations are starting to appear.
“While corporate occupiers continue to consider strata title buildings, the associated complexities mean that they prefer those that are solely owned,” the report said. “Smaller, start-up occupiers, however, see strata accommodation as a viable and cost-effective option.”
New clusters are also being created to help out the small-occupier tenant base. In Business Bay, the recently launched Dubai Design District is starting to take shape as a future commercial destination, for aspiring fashion mavens and those who have just set out to make a name for themselves.
And if anyone needed confirmation that real estate is and will remain a waiting game, the Knight Frank report duly points out: “Developers who have persisted and delivered high-end projects in established business districts are now looking to capitalise on current and future occupier demand.”
Does all this mean that Dubai’s commercial realty is finally ready to play catch up with the residential?
“Empirically speaking, commercial prices always tend to follow residential real estate prices with a lag,” said Sameer Lakhani, managing director of Global Capital Partners, a consultancy. “This relationship has been observed in developed markets as well. In the US and UK, the lag has been 12 to 18 months.
“The surge in residential real estate prices clearly implies that commercial prices are expected to follow, and we have already started to witness this, particularly in the free zone area of JLT. Quite clearly, the commercial segment was witnessing a larger overhang in supply in Dubai, and we see that supply is now being absorbed; as reflected in steadily higher occupancy rates over the last 12 months.”
According to Lakhani, areas like JLT have witnessed a near 50 per cent increase in occupancy rates, a process accelerated by the creation of more small and mid-sized businesses.
In Dubai, the development of free zones have been pivotal in harbouring an influx of new businesses in the region, as reflected in the superior growth rates of business formation as compared to onshore Dubai,” Lakhani said. “The DMCC free zone is now the largest such in the UAE with a 50 per cent year-on-year growth, as compared to 15 per cent in DED (Department of Economic Development) areas.”