Lease rates in Dubai vary dramatically
Landlords get increasingly creative in attracting tenants with options
By: Mohanad Al-Wadiya
Special Properties
Lease rates have finally stabilized based on the performance of the office property segment over the last four months. Having fallen dramatically since 2008, average office rental rates seem to have finally bottomed out.
While landlords have been under pressure to rent out available space with a reasonable return, business owners have been the big winners. Virtually every organization required some form of restructuring after the recent global financial crisis. For many, restructuring entailed in- depth cost reviews and significant downsizing, requiring relocation to premises offering reasonably priced space. The savings are significant, with as much as a 50% reduction in the rental cost for some companies. For some businesses, this is very important as space rental may have comprised up 35% of their fixed costs. This has tempted many firms to relocate simple because of the positive effects to the bottom line, much to the delight of those I the office design, fit- out and furniture industries.
Lease rates still vary dramatically depending on location, with top-of-the-range DIFC office averaging at DH240/ sqft, TECOM non-free zone A and B at Dh100/sqft, Business Bay at Dh70/sqft and JLT space available at Dh40/ sqft.
However, the reasons for moving offices may not be purely based upon cost per-square foot. Location, proximity to clients, building quality and peer proximity are also prime considerations. In addition, landlords are getting increasingly creative in attracting tenants with options, including favorable payment structures, reduced service charges, refurbishment cost assistance, extra parking allocation and exterior advertising.
As Dubai seeks to grow economically, the readily available and cost competitive office space makes it well-placed for business.
The writer is the Managing Director, Harbor Real Estate
Handy Hints
-Average office rental rates seem to have finally bottomed out
-Reasons for moving offices are no longer just based on price
-Location, proximity to clients and quality are deciding factors