Office supply in Dubai will grow by 7% in 2016, according to research conducted by Cushman & Wakefield Core.
The Dubai Office Market Q1 2016 report revealed that much of this growth is likely to occur in Dubai’s Business Bay area.
“The growth in [office] supply is likely to be most significant in Business Bay over the next few years as the area seeks to establish itself as one of Dubai’s premier business districts,” the report noted.
“Given the rapid growth in supply, office sector sales prices in this area remain under slight downward pressure, at least for the moment,” the paper’s authors added.
By the end of 2015, Dubai’s office market supply had reached an estimated 8.4-million sqm. 2.4-million sqm (28%) of this office space was located in the ‘prime’ areas of Dubai International Financial Centre (DIFC), Downtown Dubai, Sheikh Zayed Road (Trade Centre to First Interchange), Dubai Internet City, and Dubai Media City. At 4.2-million sqm (51%), the majority of this supply was located in ‘secondary’ office locations, including Business Bay, Deira, Bur Dubai, Dubai Healthcare City, Tecom C, and Jumeirah Lake Towers (JLT).
Despite the global economic downturn, Cushman & Wakefield Core UAE said that prime and secondary stock growth was “extremely rapid” in the five years until 2011. However, it moderated to 7%, 3%, and 5% in 2012, 2013, and 2014, respectively.
Prime and secondary supply growth fell further in 2015 to around 5%, with notable additions in Deira, DIFC, and Tecom. Business Bay saw the bulk of secondary office space completions last year with approximately 318,000 sqm of new stock.
Commenting on the findings, David Godchaux, CEO of Cushman & Wakefield Core UAE, said: “2015 was an interesting transition year where, on the back of overall softening demand for office space in the UAE, prime properties significantly outperformed the average market in terms of rental rates and occupancy levels.
“We expect this trend to continue over the next few years with relatively strong underlying demand for quality office space that is currently not being fully met. “This has resulted in a widening gap on rate and occupancies between prime and [secondary] offices,” he concluded.