I keep forgetting the boom in Gulf

Dubai office rents to drop off
by Safura Rahimi on Monday, 23 April 2007


A rise in office construction is expected to reverse the current supply-demand dynamics that characterise the Dubai market, according to Colliers International. (Ross Kinnaird/Getty Images)
Dubai's office tenants are set to see a fall in rents and more location choices as the emirate continues to see high levels of construction activity, according to a Colliers International report.

The emirate currently has over 27 million square feet of confirmed activity under construction.

"To put that in perspective, that's approximately the same amount of office space as Geneva, Rio de Janeiro, Beijing and Singapore. As a result, this influx of space is expected to reverse the current supply-demand dynamics that characterise the market," said Ian Albert, regional director of Colliers International.

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Dubai is ranked third in terms of global office real estate construction activity in the real estate consultants' 2007 Global Office Real Estate Review. Moscow and Shanghai take the top two spots.

"Despite strong latent demand for office space, the sheer volume under construction combined with the period of delivery will have a marked impact on the competition between landlords, with a concurrent softening of rental levels and a greater number of tenant incentives on offer," Mr. Albert added.

Colliers expects that the volume and timing of the impending supply will shift the market's favour from landlord to tenant.

"Much of the supply will enter the market within a one to three-year window, inevitably leading to a landlord - as opposed to tenant - competitive market. Attractive rental price and payment terms, increased rent-free periods and equitable lease conditions, together with improved finishing levels, are expected," explained Albert.

However, with the current high demand and low availability of stock, Colliers believe that rental levels being achieved in some of the established locations are being inflated as tenants bid for space.

At present, Dubai's prime commercial property rents are still on the rise, with rents in Dubai's Central Business District offices registering steady increases over the past nine months.

However, despite considerable rental increases, Dubai is still significantly less expensive than London, Hong Kong, Tokyo, Moscow, Paris, Dublin, New York and both Mumbai and Delhi, and ranks 13th in Colliers' Global Survey of the top 25 Office Occupancy Cost destinations