Knight Frank estimates suggest that there are 25 active projects within Dubai, with delivery dates up to 2024
Weaker market conditions may prompt occupiers in Dubai's office buildings to upgrade occupational space while keeping an eye on increases in total spend, global real estate consultancy firm Knight Frank said in a report. The report also noted that landlords are expected to remain flexible to retain and attract occupiers through several incentives.
As of Q3 2020, average prime rents across Dubai's office market were recorded at AED 205/sq. ft, average Grade A rents at AED 130/sq. ft and average citywide rents at AED 100/sq.ft, the property consultant said.
By the end of Q3 2020, average rents in Dubai were down 6.5 percent. Prime office rents in Dubai fell 4.7 percent across the same period, whilst Grade A and Citywide rents fell by 6.1 percent and 7.7 percent, respectively.
Knight Frank estimates suggest that there 25 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 $ 7,618 million.
Data from the Dubai Statistics Centre shows that 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 percent in 2020.
Given the challenging economic backdrop, employment is set to contract by 9.1 percent in 2020 If Dubai’s economy recovers as expected, employment is set to register growth rates of 6.7 percent and 5.1 percent in 2021 and 2022 respectively.
The transport, storage and IT and the consumer services sectors are expected to see the most significant declines in employment, where in 2020 employment in these two sectors is expected to decrease by 14 percent and 12 percent respectively.
Taimur Khan, Associate Partner at Knight Frank commented: “Given the current level of economic uncertainty, it is not surprising that we have seen limited levels of additional take-up in Dubai’s commercial market, with many firms suspending any expansion plans or adopting a wait-and-see approach. Despite this weaker backdrop, many firms, where tenancy contracts allow, are taking the opportunity to take advantage of weaker market conditions to upgrade their occupational space.”
“Given recent changes in dual licencing regulations, Prime and Grade A offices in Free Zones are most likely to benefit from this flight to quality,” he added.
Knight Frank says that it is likely that Dubai’s Prime vacancy, which is relatively low at present, will increase over the course of the year with the delivery of additional supply.
The Grade A vacancy rate is also expected to see a marked increase over the coming year as the vast majority of supply scheduled to be delivered in 2021 is of Grade A quality, it said.