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Dubai commercial property market maturing as more companies move in

Some 12 million square foot of new office space is expected to have been delivered onto the market by the end of 2011 and overall vacancy levels in the commercial sector will edge closer to 50% as new office stock is brought to the market.

The Quarter Three Dubai Commercial Market report also shows that new supply in the DIFC is pulling businesses located in the surrounding area back into the freezone and lease terms are becoming more flexible across the board, as Dubai’s market shows signs of maturity.

 High levels of supply in new commercial areas is providing smaller businesses with a large amount of choice and competitive rents, however there still remains a limited choice of Grade A single ownership buildings suitable for regional and international headquarters, the report points out.

As more office buildings are completed vacancy rates continue to rise, forcing downward pressure on rents in certain areas of the city. Tenant demand is generally being driven by the increased affordability of rents, and the opportunity to move into new offices from older buildings.
Vacancy rates have risen in the DIFC over the past quarter, traditionally a highly sought after area, as a number of commercial buildings in freezone area have been brought to the market.
Cluttons is noticing increased activity as a number of larger businesses located on the periphery re-locate their satellite offices back into the core DIFC. Cluttons is also noticing a trend for occupiers to relocate to modern offices in the Central Business District from older districts such as Deira and Bur Dubai continues.

Lease terms offered by landlords are generally becoming more flexible and attractive to tenants, the report also says. The number of landlords willing to pay agency fees is also increasing as the liability can no longer be place upon the tenant; a practice that is common place in foreign markets.
Cluttons predicts that this movement will help drive Dubai’s property market to a higher level of maturity.