JLL, the world’s leading real estate investment and advisory firm, has released its Q3 2016 Dubai Real Estate Market Overview report which reveals how demand has shifted towards smaller deals in the Dubai office market as occupiers respond to more challenging market conditions. At the same time, there were relatively few large transactions for office space agreed during Q3.
“This reflects occupiers’ caution in the face of more challenging economic conditions in both Dubai and across the broader region,” said Craig Plumb, Head of Research, JLL MENA. “While there remains strong demand for smaller units, it is taking far longer to negotiate larger deals as companies remain uncertain about their staffing and space requirements.”
A number of office towers across Dubai are now catering for this trend towards smaller units. Index Tower (located in the DIFC), for example, has divided four of its floors into smaller units, offering suits of 50, 150 and 300 sq m on a fully-fitted ready to lease basis.
“The exercise has proven to be successful, with most of these floors now leased,” said Mr. Plumb.
The quarterly report notes the “muted market conditions” that characterised Cityscape Global 2016. The overall sentiment at Cityscape Global 2016 in September reflected the relatively “subdued nature of the current real estate market conditions in Dubai as well as the broader region”, according to the report.
Dubai Expo 2020 was a dominant topic during the presentations at Cityscape Global, as was alternative real estate investments, including education, healthcare, infrastructure, logistics and student housing.
“What we’ve seen at Cityscape Global 2016 reflects the subdued condition of the real estate market right now,” said Mr. Plumb. “We’ve seen a lot of projects being re-announced and fewer new projects being launched compared with previous years”. While short term sentiment remains soft, most developers and investors are expecting conditions to improve over the medium term, with an increase in activity anticipated in the lead up to Expo 2020 Dubai “:
“Due to the changing economic climate in the region, investors are looking for ways to diversify their portfolio which have led them to look into alternative investment opportunities. This was one of the trending topics during Cityscape with the education sector leading the way.”
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One of the most notable projects to be re-launched during Q3 was Jumeirah Central, the master plan for which was announced by Dubai Holding on the eve of Cityscape Global. The mega scale project will include 11,000 residential units, with construction of phase one – which will include 13 residential buildings encompassing 3,000 units – starting in 2017.
SECTOR SUMMARY HIGHLIGHTS – DUBAI:
Office: The third quarter saw the delivery of 51,000 sq m of office GLA, 64% being single-owned projects in TECOM, with the remaining 36% being strata titled space in Business Bay, which has been the most active precinct for completions so far in 2016.
While the total office stock in Dubai has now risen to around 8.6 million sq m, Quarter 3 also witnessed a number of changes of office projects into alternative uses. For example, Le Presidium, Nova and Moon towers have been converted to residential or other uses.