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No rent discount, but Dubai landlords offer rent-free periods



Landlords of office space in Dubai are not willing to lower rents beyond a certain limit but are willing to offer rent-free periods to fit out contributions to attract tenants, Cluttons, a real estate consultancy, said.


"The general lack of rental growth is unlikely to change in the short-term. Across the market as a whole, we do not expect rents to fall much further, particularly as they are at a point where they are considered to be fair market value and landlords appear unwilling to lease below a certain level," it said on Tuesday in its second quarter Dubai office market bulletin.


The consultancy said that it does see landlords offering increased incentives, such as rent free periods and fit out contributions to attract tenants and as such, stating it expects a "period of minimal rental change for at least six to nine months before there are any signs of an uplift."


Rents remained stagnant in the second quarter of 2016, with declines recorded in six of the 22 submarkets such as Garhoud (18 per cent), Al Barsha (10 per cent) and Deira (5 per cent).


A few submarkets saw minor uplifts in upper limit rents, including the Dubai International Financial Centre (6 per cent) and the wider Tecom submarket (7 per cent). The consultancy said "these are the exception", as no movement was recorded in either lower or upper limit rents in 14 submarkets.


Flagship, prime, signature schemes such as Burjuman Business Tower commands rents of Dh12910 per square metre (psm) above the wider average of Dh120 psf in the Bur Dubai area. Emirates Towers in Sheikh Zayed Road also remains extremely popular with very low vacancy rates. Rentals range from Dh1,292 to Dh3,014 psm.


Prime, central areas of free-zones such as Dubai Internet City, Dubai Media City and Knowledge Village, DIFC and Dubai Design District have very low vacancy rates of around five per cent compared to submarkets such as Sheikh Zayed Road (Trade Centre), which has stock of mixed quality and age, and vacancy rates closer to 20 per cent, the consultancy revealed.


In its second quarter 2016 report, JLL, a real estate consultancy, said demand for central business district (CBD), the area from the World Trade Centre roundabout to Downtown, persists and this is evident given the relatively high rentals, currently averaging at around Dh1,922 per square metre and the low vacancy levels.


"Vacancy rates within the commercial office towers in the CBD are showing a declining trend, which suggests that there could be a lack of good quality office space and therefore there has been a number of build-to-suit projects and prelease agreements scheduled to be completed," the consultancy said.


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