CBRE said demand outstripped supply in some office locations despite a general decline across the market
Despite declines in Dubai’s residential market, demand is outstripping supply for office space in certain areas, according to consultancy firm CBRE.
Average office rentals declined 2 per cent on average during the first quarter but the company said the city continued to see strong demand for good quality and well located work space.
This was most noticeably in TECOM and Dubai International Financial Centre and has led to several new developments, including the mixed-use ICD Brookfield Place at DIFC.
Demand for freezone licences in Dubai Multi Commodities Centre was also up, according to the firm, driven by start-ups and SMEs.
“Overall, the availability of good quality single held offices remains tight, with a surge in pre-leasing activity over the last 24 months stripping a large portion of the recently delivered and upcoming office space from the market before completion,” said head of research Mat Green.
Around 800,00 square metres is expected to enter the market in the next thee years with 25 per cent located in Business Bay and 10 per cent in the Dubai Trade Centre District.
Average prime rentals in central business districts rose marginally during the first quarter to Dhs 1,961 per square metre.
In contrast, residential prices declined in virtually all locations during the quarter, reflecting the impact of new supply and slowing job growth on the market.
CBRE said residential prices decline 2 per cent quarter-on-quarter following a 4 per cent decline in Q4 2015.
Prime locations were the hardest hit, particularly Downtown Dubai. But other locations including affordable Al Barsha, Oud Metha and Bur Dubai and submarket International City also saw decreases.
“This broadly reflects current sentiment, with weaker investor demand, US dollar strength, and sustained economic challenges regionally and globally, combining to create an uncertain transactional market environment,” said Green.
In terms of sales Dubai Land Department saw 12,568 transactions during the quarter worth $15bn.
Dubai Marina was the most popular sub-market for sales, followed by Burj Khalifa and Business Bay. Dubai Marina, Business Bay and Muaisem 1 were the most popular locations for mortgage transactions.
CBRE said 15,000 new residential units could be completed this year, with 35 per cent in Dubailand, 20 per cent in Silicon Oasis, 8 per cent in Dubai Marina and 6 per cent in Jumeirah Village.
Ratings agency Standard & Poor’s said last week that UAE real estate prices were likely to continue declining this year due to factors including lower hiring, softening business activity and the strong dollar.
Read: Continued decline ‘likely’ for UAE real estate prices