_ Prime, Grade A and citywide Dubai office rents decrease in the year to Q2 2020

Level of occupier requirements has increased, centred around consolidation of space or as a cost saving measure, or a combination of both.

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The Dubai Office Market Update for Q2 2020, shows that, over the latter stages of the last quarter, whilst the level of occupier requirements has increased, the vast majority of activity is centred around consolidation of space or as a cost saving measure, or a combination of both. Occupiers are also increasingly requesting rent reviews, with many landlords willing to accommodate just cases given the current market backdrop.

Economic Update

Data from the Dubai Statistics Centre shows that Dubai’s GDP grew by 2.2% in 2019, up from 2.1% in 2018. As a result of the COVID-19 pandemic and its impacts on global economic activity, Dubai’s GDP is expected to contract by 7.4% in 2020. According to forecasts from Oxford Economics, Dubai’s GDP is not expected to return to its 2019 level before 2022.

Employment in Dubai grew marginally by 0.6% in 2020 according to data from Oxford
Economics. Given the challenging economic backdrop, employment is set to contract by 9.1% in 2020. If Dubai’s economy recovers as expected, employment is set to register growth rates of 6.7% and 5.1% in 2021 and 2022 respectively, with employment returning to its pre-COVID level by 2022.

Taimur Khan, Associate Partner, commented: “The depth of the contraction and rate of recovery will be very much dependent on the rate at which the global economy and global mobility returns to some form of normality. These factors will underpin demand and activity in the hydrocarbon, travel and tourism and wholesale and retail trade sectors, which all have direct or indirect impacts on Dubai’s economy.”

Office Market Update

As at Q2 2020, average Prime rents across Dubai were recorded at AED 208/sq.ft., average Grade A rents at AED 131/sq.ft. and average citywide rents at AED 103/sq.ft.

In the year to Q2 2020, average rents in Dubai fell by 7.0%. Prime office rents
across Dubai fell 6.8% in the year to Q2 2020, whilst Grade A and Citywide rents fell by 5.9% and 7.8% respectively over the same period.

Market wide vacancy in Dubai’s office market registered at 18.7% as at Q2 2020, down marginally from 18.8% in Q4 2019.

Whilst currently vacancy in most Prime projects remains relatively low, over the course of the year as additional supply is delivered we are likely to witnesses the Prime vacancy rate increase.

Currently there are estimated to be 29 active projects within Dubai, with delivery dates up to 2024, which are either being executed or in the study or design phase. The total value of these projects currently is estimated at US$ 4.85bn.

Read the Dubai report here