_Dubai commercial market trends

Location matters

Location remains one of the main drivers behind occupiers’ choice of office space with the DIFC and Sheikh Zayed Road (SZR) being the primary preferences, based on the number of enquiries in Q1 2017 (27% and 20% respectively). Commercial towers along SZR provide easy access and are serviced by metro stations, making them popular among local and international corporates.

Since its inception the DIFC has served as the ideal platform for international and local businesses and financial institutions looking to operate within a transparent regulatory and legislative framework. The DIFC also benefits from its offshore / free zone licensing status, in addition to boasting a variety of world-class amenities including restaurants and sports facilities.

Build-to-suit

The lack of availability in Grade A office buildings is pushing occupiers to seek build to suit opportunities. This evolving trend enables corporate occupiers to build according to their specifications. Key examples of this include the HSBC building & Standard Chartered building in Downtown. We expect this trend to continue as international organisations continue to build and develop their regional presence in Dubai.

Strong growth in enquiries from healthcare & pharmaceuticals

While office enquiries from the General Trading services remains the most active, 2016 saw growth in enquiries from the healthcare & pharmaceuticals industry. This comes as the emirate aims to achieve a world-class healthcare system and feature as a leading destination for medical tourism.

Medium size office space in demand

Under restrained market conditions, the majority of office demand in 2016 was confined to spaces between 1,000 – 5,000 square feet. It is our view that this reflects occupier caution in the face of challenging economic conditions. In turn, Q1 2017 saw an increase in enquiries for 1,000 – 5,000 sq ft of office space which confirms current sentiment.

Growth of commercial REITs

The growth of REITs as a commercial investment vehicle is expected to bring further liquidity to the real estate market in Dubai and is likely to attract global investors as it signals market maturity. Despite housing some international Grade A properties, Dubai’s commercial market remains under supplied in terms of quality investment grade products. REITs could therefore present an attractive opportunity for investors looking to diversify their portfolios and hedge their risk.

The launch of the UAE’s first REIT (Emirates REIT) with a seed portfolio of AED 418 million was a welcome step for the sector. Then earlier in March 2017, Emirates NBD Asset Management listed a REIT on Nasdaq Dubai which raised USD 105 million.

Prime locations remain in high demand

The DIFC is expected to maintain its strong appeal among corporate occupiers, particularly with the delivery of ICD Brookfield Place. The USD 1 billion development consists of 54 storeys of Grade A office and retail space. The top three floors of the tower are being built as Sky View suites with internal gardens and the project has been designed with a view to achieving LEED Gold certification.

In addition the DIFC is set to benefit from the biggest single infrastructure project it has launched since its inception. The Gate Avenue (previously known as The Spine) will link the main Gate and Village districts in the north of the DIFC to the other commercial and residential towers including Index Tower and Burj Daman. The Avenue will comprise 660,000 sq ft of builtup area including retail, leisure & dining, a mosque and social green spaces.

Expanding logistics landscape is set to support future demand for office space

As Dubai continues to push towards diversifying its economy and attracting talent, enquires for office space stemming from the industrial and logistics market is expected to increase. Demand is also likely to come from the Fast Moving Consumer Goods (FMCG) general trading sector 

Breaking new grounds

As mega projects such as the expansion of Al Maktoum International Airport and the planned Red Line metro extension (Route 2020) , demand for commercial office space in and around Dubai South is expected to gain traction.