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News Release


Dubai’s Central Business District to lead office market recovery

according to JLL MENA’s latest MENA House View – September 2010

​JLL MENA, the world's leading real estate investment and advisory firm, predicts commercial real estate vacancies will decline most quickly in Dubai’s central business district and return to sustainable levels by 2013/2014.

Central Business Districts (CBDs) in emerging markets usually outperform other commercial areas and despite the current market situation, Dubai’s office sector can draw strong parallels with such markets. 

“The clear learning from overseas cities such as Shanghai, Singapore and Moscow is that office markets all go through periods of excess supply similar to those characterising Dubai at the present time. The experience of these cities is that vacancies do not remain at excessive levels for sustained periods and vacancies for CBD space typically fall to more sustainable and balanced levels within 2 to 4 years. We expect Dubai to follow this same pattern with vacancies for CBD space peaking in 2011/ 2012 and then declining again over the following 2 to 3 years” commented Graham Coutts, Head of Management Services, JLL MENA.

Dubai holds the fourth largest ratio of supply per capita of any major global city (behind only New York, Paris and London) with around 34 square feet of office space per person. This figure is expected to increase to around 36 square feet per capita as a result of the additional supply scheduled for completion before the end of 2010.

“Dubai currently has one of the highest levels of office space per person in the world. This reflects the regional and global role of Dubai but does suggest that the level of supply has increased ahead of the maturity of the market,” added Graham Coutts.

He continued “International experience suggests that measures to restrict supply will be critical to the recovery of the Dubai office market. Markets such as Shanghai and Singapore have seen long periods with little or no new space entering the market, which has provided a window of opportunity for the market to absorb excess levels of supply. Another feature of such markets has been adaptive re-use (the conversion of office buildings to other uses) as well as the ‘mothballing’ of partially completed projects. Both of these initiatives are required to allow for the excess supply currently available to be absorbed.”
The Dubai office market has experienced high absorption levels over the past few years in comparison to both established cities and emerging BRIC economies. Despite this strong demand, excessive levels of new supply have resulted in an oversupply of office stock. While the total level of occupied office space in Dubai increased by over 13 million square feet between December 2007 and June 2010, the same period shows supply expanding by twice this level, with around 28 million square feet of additional space completing.

“Dubai has experienced very strong take up over the past two and a half  years, with the total level of occupied office space increasing by more than 70%, since the end of 2007. During this period Dubai has been one of the fastest growing office markets worldwide, with positive net absorption being recorded even after the financial crises of 2008-09. While demand has remained positive, this has triggered an even stronger level of supply, increasing by around 140% (around twice the level of net absorption) over the past two and a half years. This has increased vacancies across the market and provided increased opportunities for tenants and occupiers due to increased choice and significantly reduced pricing” added Matthew Hammond, Head of Agency, JLL MENA.

Dubai’s office market will become increasingly ‘tenant-favourable’ over the next 18 to 24 months with vacancies rising further throughout the market. This will boost the competitiveness of Dubai and increase its attraction as the major business and financial hub of the MENA region. Similar to overseas markets, Dubai is also witnessing the emergence of a two-tier market where demand is currently focussed on the twin CBD locations of Financial CBD and TECOM areas. Outside these CBDs, vacancies are likely to remain at excessive levels for many years.
Matthew Hammond commented, “Tenants are expressing a preference for single ownership space in CBD locations and this segment of the market is currently experiencing vacancies less than one third of those in the overall market (12% compared to 38%).  This increasingly ‘two tier market’ is expected to continue.  While vacancies in the CBD are expected to decline from 2012 onwards, much of the space in peripheral locations will struggle to secure any tenants in the foreseeable future.”
“For the market to be sustainable, initiatives need to be put in place to restrict future supply and reduce existing stock in non-core office locations. Demand side initiatives are required but the most significant measures are needed on the supply side with more effective restrictions on future supply and the encouragement of adaptive re-use of existing office buildings. This has proven to be effective in bringing down vacancies in other global markets” concluded Matthew Hammond.
JLL MENA is the pre-eminent investment advisor in the global real estate industry with 180 offices worldwide, operating in 60 countries globally and 25 countries in the MENA region working on projects worth US$ 200 billion and on transactions in excess of US$ 1.2 billion. In the MENA region, JLL MENA​ employs over 110 internationally qualified real estate and hotels professionals of 30 nationalities with regional offices in Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo.