Dubai is one of the most welcoming places in the world for start-up businesses, with a wide selection of free zones and onshore locations offering competitive rents, according to a report by Cushman & Wakefield Core UAE.
''With 350,000-plus companies under the small and medium enterprise [SME] category in the UAE, developers and landlords are increasingly addressing the demand from a growing SME segment, in addition to maintaining a portfolio suitable for corporates,'' says David Godchaux, CEO of Cushman & Wakefield Core UAE.
The creation of dedicated economic clusters has in turn created a positive supply chain with businesses deriving value from each other. These enterprising endeavours, coupled with exponential improvement in business and social rankings, have firmly cemented Dubai's position as a regional start-up hub, the report states.
This trend is gaining traction in secondary onshore locations and technology and commodity-themed free zones, with landlords subdividing floor plates and offering partially fitted out options for faster absorption of stock. These competitive locations continue to be the preferred choices for SMEs and start-ups looking to set up initial bases.
However, according to the report, there is still room for improvement with key issues over starting a business in the emirate. Maintaining low real estate and operating costs, while keeping the door open for expansion has been cited as one of the challenges faced by SMEs. The reality is that ''real estate costs dominate the fund allocation pie of any growing company'', the report says.
Controlling real estate costs through tailor-made solutions in tandem with the growth stages is critical for start-ups to control costs. Offering location analysis, the report says that real estate costs typically dominate the office space selection criteria, closely followed by flexibility in lease terms along with the ability to expand or contract. As the employee base rises, easy access to public transport and requisite social infrastructure also become imperative.
Start-ups miscalculating real estate requirements along development stages may be penalised through higher rentals, probable loss of talent, restricted connectivity and limited expansion and contraction opportunities, says the report.
In addition to base capital requirements, a lack of smaller yet scalable office options, public access for employees and supporting social infrastructure are among the major issues faced by sub-urban free zones located away from Shaikh Zayed Road.
The report says that flexibility in lease terms and the ability to expand or contract across multiple floors is a key issue faced by most corporate tenants. ''Dubai does offer shorter lease terms when compared globally, offering start-ups the freedom to graduate to larger offices, however, this may expose tenants to higher rental escalations in a strong market.''
Preferred locations
Analysing real estate costs across preferred free zones by benchmarking a typical small-scale start-up office unit of around 2,000 sq ft, the report suggests Dubai Multi Commodities Centre (DMCC) and Dubai Silicon Oasis (DSO) to be the most competitive free zones for a typical cost-conscious start-up.
While DSO is not connected to the Metro, smaller units are well within reach with prices ranging from Dh70-Dh80 per square foot per year.
Jumeirah Lakes Towers (JLT), the master community of DMCC free zone, enjoys connectivity with two Metro stations, along with a growing social infrastructure system. It has more competitive rents ranging from Dh60-Dh120 per square foot per year. Start-ups can also avail of DMCC's company licence options with either a flexi-desk (virtual space) or a 150-sq-ft serviced office, both of which provide up to three visas.
Dubai Media City, juxtaposed by Dubai Internet City and Knowledge Village, has been a preferred location for many web-based companies. ''Equipped with comparatively superior built, quality stock and good access to public transport, the cluster commands relatively higher headline rentals,'' the report states.
Dubai Design District (d3), located close to Business Bay, opened its first phase last year, and has been rated favourably. D3 is a purpose-built community housing residential, hospitality, retail and office properties providing both free zone and on-shore offerings.
For businesses with onshore office requirements, the report points to competitive office locations in the traditional Deira, Bur Dubai and Garhoud areas. Business Bay, meanwhile, is emerging as the preferred destination for start-ups because of its central location, accessibility and fast-developing infrastructure.
Real estate stages of a start-up
Depending on where they are in the business cycle, here's how the real estate requirements of a start-up evolve.
Stage 1: Shared spaces
Start-ups in their concept stages prefer to work out of co-working spaces, incubators and accelerators leveraging on lower costs, peer learning and shared, flexible resources. ''Business centres or serviced offices may be a preferred choice for start-ups or firms that have progressed from their concept stage but still need flexibility in operations without substantially adding on real estate cost,'' a Cushman & Wakefield Core UAE report states.
Stage 2: Secondary location
Once a start-up has graduated to a profitable business machine and is expanding its stream of operations and resources, the company may ideally look for relevant office options in secondary locations or existing free zones that offer flexibility to expand within the same premise.
Stage 3. Prime office
Once the business has been set, start-ups look for a shift to prime locations to enhance brand image, attract talent and provide just in-time service to key clients. ''Organisations at this stage may also deploy advanced workplace strategies to optimise resources,'' says the report.