Dubai: After Dubai’s luxury homes, it is the turn of the city’s Grade A offices to start seeing signs of change in rents for the first time in five years. Rents at prime office addresses have started to stabilise as demand starts to build up among tenants for bigger floor spaces and flexible fitouts.
Office landlords couldn’t have asked for a better outcome – after the COVID-19 strike last year, it was felt initially that it would be another three to four years before demand picks up again. And that businesses would continue with hybrid work arrangements for this year and 2022 at the very least, which means less need for bigger spaces and new offices.
But the way demand has perked up in recent weeks, analysts are reworking their earlier forecasts. Super-premium locations such as the ICD Brookfield tower in DIFC continues to pull in new tenants. And other addresses in and around the prime commercial locations of Dubai are getting to be just as busy.
As office tenants chase bigger space, those buildings that cannot offer tenants those options keep suffering. It explains the 20 per cent drop in rents at such buildings over the last 12 months as demand shifts to locations and premises that can offer more for a relatively higher rent.
A decade’s low
Even then, there are opportunities for business-tenants to make full use of the rental situation – lease rates in Dubai are at a “nine-year low”, according to a latest market update from Knight Frank, the property consultancy. For office tenants, the “question has shifted from ‘do I still need an office’ to ‘how much office space do I actually need’. Which explains the steady increase in tenants looking for options.
“The big challenge as we see it will be on how landlords and businesses will attract workers back to their desks in a meaningful way,” said Faisal Durrani, Partner – Head of Middle East Research at Knight Frank. “We know the ‘green agenda’ will be core to this and is likely to influence the real estate decisions of 9 out 12 businesses in the future. So, landlords are in a way being presented with a roadmap to safeguarding future demand and therefore income.”
Contactless points and ample automation options will also decide which office buildings score with tensnts in the near term. “Take the newly completed Supreme Court Chambers on Dubai Creek for instance,” said Durrani. “The automated car parking system results in less vehicle emissions and makes more efficient use of space; a clear indication of how sustainability has been placed at the heart of the user experience.
“And this is already attracting the attention of a number of legal sector tenants. In fact, the building has rapidly achieved over 25 per cent occupancy, with its sustainability credentials being key to its success.”