The weaker performance in 2016 triggered by the volatility in oil prices and global economic uncertainties caused many corporates to minimise capital expenditure, consolidate operations or renew leases rather than expand and as such landlords offered greater incentives and flexibility in lease terms.
In terms of performance, TECOM Free zone and DIFC maintained high rental levels as occupancy remained strong; The Free zone status and quality of space continue to work in their favour.
Current Market Trends
· Location remains a key driver with Sheikh Zayed Road and DIFC being primary preferences.
· The lack of Grade A buildings is pushing occupiers to seek build-to-suit opportunities, enabling corporates to build according to their own specifications.
· 2016 saw growth in enquiries from the healthcare & pharmaceuticals industry. This comes as the emirate aims to achieve a world-class healthcare system and leading destination for medical tourism.
· The majority of office demand in 2016 was confined to spaces between 1,000 –5,000 square feet, reflecting occupier caution.
2017 is expected to hold many possibilities for tenants, but is likely to be a challenging year for landlords. Occupier sentiment has improved and companies are starting to resume office searches capitalising on greater landlord motivation.
Future Market Trends
· The growth of REITs as a commercial investment vehicle is expected to bring further liquidity and is likely to attract global investors as it signals market maturity.
· Prime locations remain in high demand and the DIFC is expected to maintain its strong appeal amongst corporate occupiers, particularly with the delivery of ICD Brookfield Place, Gate Village 11 and The Gate Avenue.
· With the recent announcement that the DIFC will now facilitate dual licencing for DIFC registered firms, we expect significant interest from existing occupiers looking to consolidate their onshore operations. In light of this, we expect occupiers in locations such as Emaar Square, Boulevard Plaza and other prime onshore locations to consider this option for their future business operations.
· Expanding logistics landscape is set to support future demand for office space with demand being likely from the FMCG sector.
· Demand for commercial office space in and around Dubai South is expected to gain traction with the expansion of Al Maktoum International Airport and the planned Red Line metro.
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Notes to Editors
Knight Frank has a strong presence in the Middle East with offices in Abu Dhabi, Dubai, and Saudi Arabia. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants.
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London,Knight Frank and together with its New York-based global alliance partner, Newmark Grubb Knight Frank, operate from over 413 offices, in 60 countries, across six continents and has over 14,000 employees. For further information about the Company, please visit www.knightfrank.ae