One of the worlds leading real estate consultants Knight Frank has revealed that conditions in the UAE’s commercial market will remain ‘challenging’ over the coming years with retailers, in particular, facing ‘extreme pressure’.
As part of the consultancy firms 2019 edition of their ‘UAE Market Review and Forecast’, Knight Frank analysed the commercial office market sector of Dubai & Abu Dhabi to gather data on the economic hardships faced across the commercial market.
The office market in Abu Dhabi saw a relatively strong start to the year but witnessed a significant downturn throughout Q2 & Q3 2018 with a ‘notable slowdown’ in demand.
Prime office rents in Q3 came in at AED 1,720 on average (sq m/p.a.) – down 11.5% from Q3 2017; meanwhile Grade A rents during the same period saw even steeper declines falling 15.8%.
Throughout 2018, Dubai’s office market remained ‘tenant favourable’, resulting in a limited take-up by new occupiers with new licence issuances falling 9% year-on-year according to data Dubai Statistics Centre.
During 2018 the majority of activity in Dubai’s office market was from corporations looking to downsize their portfolio; however, despite the lack of take-up, Knight Frank notes that these market conditions provide an opportunity for occupiers looking to enter the market.
As a result of the subdued market, the average rent has softened across the board with a 5.8% year-on-year fall, while prime office and citywide office rents also fell 4.9% during Q3 2018.
Grade A rents saw the steepest decline during Q3, falling 8.9% and now stand at an average of AED 145 (sq ft/p.a.)