Dubai office rents stabilise in Q2, inquiry rates improve

Commercial rents stabilised in Dubai in the second quarter with potential tenant inquiry rates improving in key locations, Cushman & Wakefield said on Tuesday. Across the city, rents have seen little change over the past three months with the exception of some softening in Sheikh Zayed Road, Dubai Investment Park (DIP) and Downtown Jebel Ali, the consultants said in a report. Business Bay, however, still showed the highest vacancy levels in the city at around 70 percent, the study added. The report, which monitors rents and trends across Dubai's office submarkets, revealed that although rents continued to fall year on year in many areas, Q2 produced very limited changes.It said this may indicate a levelling out in rental levels in some locations. DIFC remained the most expensive free zone closely followed by DAFZA although both have seen a reduction in rents this year.The new commercial districts of Jumeirah Lake Towers (JLT) and Business Bay still demonstrated rental declines and high vacancy levels over the year although improved infrastructure and access to the metro may have contributed to higher tenant inquiry levels for JLT, the report added. Michael Atwell, head of operations for Cushman & Wakefield in the Middle East, said: "With the stabilisation of office rents in the free zones and a return to higher occupancy level supports the view that Dubai is now firmly established as the preferred location in the region for international companies to run their Middle East operations. "That said, we cannot ignore the oversupply and limited demand for locations outside of these free zones which will still endure hard times for the foreseeable future." The report said Dubai was now "firmly on its path to recovery" but added that market conditions differed widely from one location to the next. Last week, CB Richard Ellis said commercial office rental rates in Dubai’s main financial areas fell 18 percent year-on-year in the second quarter of 2011. Occupancy rates have also continued to fall as oversupply continues to be a problem for landlords, its report said.“Real estate will remain under pressure with occupancy levels falling further as new supply completes,” the report said. While big financial names such as Barclays Capital, Citibank, Standard Bank and Goldman Sachs announced new leasing deals in the second quarter, CBRE said landlords would have to start offering better incentives in order to compete.