Dubai: It’s time investors and market watchers had a rethink about UAE’s offices and commercial real estate prospects. Because the size of the deals for offices are getting bigger and demand for prime office spaces is at its highest point in the last five-seven years.
Not convinced? Then, all you need to do is check out the Dh4.3 billion deal that Aldar signed to acquire four office towers on Abu Dhabi’s Al Maryah Island from Mubadala. Needless to say, this is one of the biggest such transactions in the UAE’s real estate space.
If you think that’s a one-off featuring two of the biggest corporate names in Abu Dhabi, you would be on the wrong track. Because away from the constant limelight on residential property demand and price tags, offices are doing well. Quite well.
“The most sought-after building in Business Bay - The Opus from Omniyat - registered 26 transactions in the first six months, with the highest price per square foot for an office space at Dh3,200 per square foot,” said Firas Al Msaddi, CEO of fam Properties.
"With the rise in demand for offices, warehouses and retail spaces, Dubai’s commercial property market will continue to attract both local and global businesses from around the world, resulting in increased commercial activities and continued growth," said Ben Bargh, Director at CRC.
Business Bay and JLT top
For offices, Business Bay (helped by The Opus deal and other) and JLT were the most popular picks for businesses and investors, with 408 and 403 transactions in H1-2022.
Jumeirah Lake Towers (JLT) and Business Bay continue to attract the majority of investors and businesses from locally and abroad. Both areas enjoyed 403 and 408 transactions, respectively, during H1 of 2022.
Apart from The Opus, the Oberoi Centre commanded one of the highest prices per square foot in Business Bay ‘because of the paucity of excellent Grade A buildings in the area’, added Al Msaddi. “Bay Square, another prominent development, recorded 27 sales over the same time period at around Dh1,041 per square foot, 13 per cent more than the median price in Business Bay.”
Outside of Business Bay and JLT, One World Central continues its reign as one of the addresses to be for corporates, as is ICD Brookfield Place in DIFC. The other trending locations for offices are Dubai design District (d3) and the Dubai Hills Business Park, where the telecom company du recently moved its headquarters.
* The new decree for property investment funds;
* Fuel surcharges for electricity and water are being reduced for all district cooling companies; and
* Fixing rents for 3 years and replacing cheques with online payments.
Drop in vacancies
The demand burst - from blue-chips to tech giants, from fintechs to tax audit firms - has been such that vacancy rates for offices, especially within Dubai’s Central Business District, has dropped to 14 per cent from 17 per cent in the second quarter, according to CBRE.
Opportunity for investors
“Prices for offices are still significantly lower than the period from late 2014-16,” said Al Msaddi. “We have matched the entire 2016 performance and have so far surpassed the prior year with five months remaining in 2022.”
Office tenants are also pushing their landlords for longer leases, with many of them homing in on a three-year contract as ideal in the current environment. Many would like to extend that to even longer.
“With the market strengthening, businesses are looking more long-term and want to be able to predict their future expenses whilst controlling costs,” said Better Homes in its recent market update on Dubai commercial real estate. “H1-2022 has continued on an upward trajectory, as we are genuinely over the uncertainty Covid brought.” (In this period, the consultancy’s commercial real estate division saw a 15 per cent increase in tenants making four-cheque payments and a 6 per cent decline in one-cheque payoffs.)