Dubai: Dubai’s office occupancy levels are providing a silver lining in a rather clouded readjustment period for the overall property market, with net absorption averaging 112,000 square metres in the four years up to first quarter of 2015. During the same period, the annual increase in new supply totalled 109,000 square metres, according to estimates by the consultancy JLL.
What it shows is that Dubai’s developers have taken the right stance by not going in for a massive addition in new office property launches during this period, allowing whatever new stock coming through to be absorbed without upsetting the market dynamic. The concerns of a supply overhang has shifted to the high-end residential property space. There is more good tidings anticipated — “Discussions with international corporates reveal they are currently forecasting a headcount growth of between 5—20 per cent per annum in the UAE over the next three to five years,” according to the JLL report, which tapped corporate occupier sentiment.
Dubai is expected to consolidate its position as the favoured location for corporate occupiers in the region over the next three years. It’s success at diversifying its economy, supported by a strong private sector, has acted as a buffer against recent falls in oil prices, and allowed Dubai to achieve stronger economic growth than the rest of the UAE in 2014-2015.
Much of it would also depend on what happens on June 30, when the first step is to be taken on the lifting of Iran sanctions. Nothing to date has emerged that suggests this deadline would be missed. Already, there have been informal sounding outs of businesses looking to base their operations here as they seek an exposure in Iran. But, market sources say, these are still early days yet, and post-summer would be when these negotiations begin in earnest.
June 30 is also the deadline for another key milestone — of Greece’s promise to meet all of its due payments for this month.
At the local level, certain micro factors too are contributing to a relatively upbeat note struck by Dubai’s commercial offerings. “Banks have been active in lending for offices over the last one year and that has increased the proportion of small to medium companies buying properties for their own use,” said Chandrakant Whabi, CEO of Acrohouse Properties. Current rental income from commercial investment is still above 7 per cent net, quite a comfortable level.
“In the last three months, the most active commercial buildings are Bay Square in Business Bay. It’s a complex of 12 buildings handed over a few months ago. It is widely expected to be one of the most sought after business complexes in Dubai once it is fully occupied.”
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