Smaller deals: New trend in Dubai’s office market
* Demand has shifted towards smaller deals
* Q3 saw delivery of 51,000sq m of office Gross Leasable Area
* Total office stock in Dubai reached nearly 8.6m sq m in third quarter
* Additional 152,000sq m of GLA are scheduled to be delivered in Q4
Investors and businesses in Dubai are becoming more cautious in today’s testing economic times. New developments in the city’s real estate market supplement this view. Occupiers are moving from larger to smaller deals in the emirate’s office market in response to the changing market conditions.
Leading consultancy JLL’s latest report reveals that demand has shifted towards smaller deals and a number of office towers across Dubai are now catering to this trend.
“This reflects occupiers’ caution in the face of more challenging economic conditions in both Dubai and across the broader region,” says Craig Plumb, Head of Research, JLL MENA.
“While there remains strong demand for smaller units, it is taking far longer to negotiate larger deals as companies remain uncertain about their staffing and space requirements,” he adds.
For example, Plumb says, Index Tower, located in the DIFC, has divided four of its floors into smaller units, offering suites of 50, 150 and 300 square metres on a fully fitted, ready-to-lease basis.
“The exercise has proven to be successful, with most of these floors now leased,” he says.
Emirates NBD, which owns three floors in Burj Daman in the DIFC, has also followed a similar strategy, offering small units of between 250 and 300 square metres.
The third quarter saw the delivery of 51,000sq m of office Gross Leasable Area (GLA), 64 per cent being single-owned projects in TECOM, with the remaining 36 per cent being strata titled space in Business Bay, which has been the most active precinct for completions so far in 2016, according to JLL’s Q3 2016 Dubai Real Estate Market Overview report.
Total office stock in Dubai reached nearly 8.6m sq m during the period under review.
“Muted market conditions”
Disappointingly, Cityscape Global 2016, the Middle East’s biggest realty show held in September, was not of much help as it did not see many announcements of major new projects.
The JLL report says the realty show reflected the relatively “subdued nature of the current real estate market conditions in Dubai as well as the broader region.”
“We’ve seen a lot of projects being re-announced and fewer new projects being launched compared with previous years. While short-term sentiment remains soft, most developers and investors are expecting conditions to improve over the medium term, with an increase in activity anticipated in the lead up to Expo 2020,” says Plumb.
Nonetheless, an additional 152,000sq m of GLA are scheduled to be delivered in Q4, almost three times that delivered during Q3. Business Bay continues to be the focus for completions, with projects also expected to be completed in Silicon Oasis, the Greens and TECOM.