Dubai office rents most expensive in Mena

dubai - City ranks fourth globally in annual office rental growth in Q2, according to JLL

Dubai is the top performer in the Middle East and North Africa (Mena) region in terms of annual office rent growth of 20 per cent in Q2 2016. This was driven by high prime office rents in its commercial business district of the Dubai International Financial Centre (DIFC).

The city also ranked fourth globally in JLL's Office Global Index which tracks the prime office building in each city. The Egyptian capital of Cairo witnessed a 16.7 per cent growth in annual office rents in Q2, ranking it fifth globally in the JLL index.

Dubai continues to see a two-tiered office market, with space in Grade A buildings remaining the preferred option while secondary locations see limited interest. Meanwhile, DIFC is benefiting from low vacancy levels, which, in turn, is driving growth in commercial rents.

The performance of the DIFC is, however, not representative of the wider Dubai market, which is characterised by relatively high vacancy rates and upcoming supply.

"Outside of the DIFC, the best-performing locations are Downtown and Tecom [Internet and Media City] where rents have increased by between seven and 10 per cent over the year to Q2. The preference among tenants is for single-ownership buildings in free zone locations offering sufficient parking and  good access to the Metro," Craig Plumb, head of research JLL Mena, told Khaleej Times.

Despite softening of revenues from the oil and gas sector, a diversified economy has helped keep Dubai in good stead compared to other countries in the region.

While the rate of economic growth has declined over the past six months (with GDP forecasts for 2016 being reduced from around 2.8 per cent to around 2.3 per cent), it remains positive and the economy is still growing.

"There remains interest from companies already located in Dubai to expand into new premises, often involving a consolidation of activity from two or more premises into a single location. The net absorption of office space also remains positive, although the take-up in 2016 is likely to be below the five-year average of around 150,000 sq m per annum," informed Plumb.

Meanwhile, in terms of sectors, the largest active requirements are from firms in financial or business services. The largest growth sector has been medical and healthcare, with a significant increase from this sector over the past 12 months, according to JLL.

- deepthi@khaleejtimes.com