Lower Rents and Incentives Offered Makes Dubai Attractive to Businesses

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According to Savills, a global real estate services provider, in their latest research report on Dubai office rental market revealed that businesses are taking advantage of lower rents in Dubai.

The report pointed out that there is the greatest demand for space from knowledge-based industries – mirrors planned growth as set out by UAE Vision 2021

Highlights of the report:

  • Current favourable conditions for office occupiers, as landlords offer generous incentives
  • Media/tech enterprises and co-working spaces are the key drivers seeking expansion of office space
  • Preference for small and medium-sized offices as businesses streamline space
  • DIFC delivers highest average rental prices

Businesses are benefitting from Dubai’s lower rental costs and generous location incentives, according to the latest research by leading real estate provider, Savills. The Dubai Office Market report has highlighted that the current market dynamics are favouring occupiers and that landlords are offering a range of benefits to entice organisations and entrepreneurs.

Paula Walshe is the Director for International Corporate Services for Savills:

“Dubai is already an attractive hub for global corporations and while office market activity has softened in the first quarter of the year, the city offers an increasingly beneficial operating environment for businesses. With lower rents, a range of quality developments available and landlords taking a more flexible approach to leasing, both domestic and international organisations are well-placed to take advantage of Dubai’s business-friendly rental environment.”

Dubai office rents Q1 2019. Source-Savills.

The Dubai Office Market research from Savills also indicates new providers entering the serviced office sector, with improved legislation allowing these providers to operate in the region more freely. There is also an increasing trend towards co-working spaces catered towards start-ups and tech entrepreneurship, where open desk spaces offer more cost-effective solutions for fledgling companies.

“There is a culture for entrepreneurship in the UAE, as the economy diversifies away from oil-based industries and moves towards technology and knowledge-based start-ups as set out in the UAE Vision 2021. It is clear that such trends are affecting the Dubai office market and that landlords must keep pace with the changing business demands in order to stay profitable and ensure continued occupancy of their office spaces,” said Walshe.

Demand for small and medium sized offices has outstripped the demand for larger office spaces, as businesses choose to streamline their operations. To incentivise occupiers, landlords have become more flexible, with approaches such as rent-free periods, offering extended car parking facilities, shorter lease terms and even upgrading shell and core spaces to Category A fit-outs (CAT A) to secure agreements. Savills predicts that supply will continue to outpace demand through 2019, meaning developers and landlords will continue to offer such benefits to tenants. The most stable sub-sector is good quality prime buildings, with demand remaining more consistent and therefore holding more stable rental values.

Average rents in DIFC were the highest at approximately AED 200/sq. ft./annum, with DAFZA and Downtown Dubai at AED 135 – 170 / sq. ft. / annum, Media City and Internet City at AED 160 / sq. ft. / annum and Sheikh Zayed Road averages at AED 140/ sq. ft. / annum.

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