Muscat: While the level of office market activity remained mixed throughout Dubai, Cluttons’ Spring Office Market Bulletin has indicated a growing, maturing, and a healthy outlook for the sector.
As occupants continue to ‘right-size’ to suit their business needs, against a backdrop of rising inflation and global economic factors, office rents have continued to be moderate, according to leading international real estate consultancy, Cluttons.
The report showed that headline rents in the city’s top tier free zones have remained largely steady, barring one or two low-quality buildings. Away from prime Grade A buildings, which remain in high demand, landlords are demonstrating greater flexibility and are largely receptive to rent reductions at renewal.
“Global economic factors continue to have a direct impact on the real estate market in the UAE. In the office market, upper limit headline rents have been affected, with occupants either sitting tight, re-gearing leases, or continuing to consolidate operations,” Faisal Durrani, head of research, Cluttons, said.
“In fact, five of our 24 sub-markets registered minor downward adjustments during the final quarter of last year, with the weakness persisting into 2018. It is our view that this will continue for the remainder of the year with rents set to fall. Core free zones, however, are likely to buck this trend, with rents holding steady,” he added.
Cluttons’ latest report also indicated that while overall conditions may seem flat, landlords are not yet at a stage where large discounts and extensive incentives need to be offered.
“So far, the introduction of VAT has not had any real impact on landlord behaviour but we are monitoring this closely. While absorbing the five per cent VAT costs does not appear to have been considered yet, this may well emerge as an option, should rental weakness linger into 2019,” Paula Walshe, director of International Corporate Client Services at Cluttons, said.
Cluttons is also monitoring the rise of co-working and serviced office providers. The evolving definition of an office, along with the a rise in remote working, is fuelling this trend globally.
“Landlords in Dubai can perhaps learn from this trend in order to generate more interest in vacant stock, although with work visa quotas still linked to the amount of space let, organisations operating with an ‘agile working’ policy may still need to let more space than they need,” Walshe added.