Daily News Portal

In UAE, offices emerge as next big deal, with Aldar making Dh4.3b statement

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.

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.

Firas Al Msaddi of fam Properties said: “A significant contribution to the demand for offices was the UAE government’s economic support programmes, including 100% foreign ownership, the 10-year Golden Visa, and the new residency permits for remote workers.”

“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.

Ben Bargh, Director at CRC
“The setting up of global offices by tech giants is evident of the trust Dubai holds among all kinds of businesses including IT, fintech, ecommerce, and crypto,” said Bargh.

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.

Driving Dubai’s office demand

* The new law to regulate the grant of Musataha rights on commercial land;

* 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.”

Extending leases

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.)

The most preferred office size during H1-2022 according to Better Homes was between 1,500 square feet to 3,000, ‘with a very high preference for fitted office spaces, which continues to be in small supply in superior built and centrally located office stock, i.e. JLT, Business Bay, Dubai Media City and Barsha Heights (Tecom).

Read Nore:In UAE, offices emerge as next big deal, with Aldar making Dh4.3b statement