Average office rents in Dubai fell by seven percent in the second quarter of the year as owners looked to consolidate space and save money in light of the economic crisis caused by the Covid-19 pandemic.
According to the Dubai Office Market Update for Q2 2020, released by Knight Frank Middle East, prime office rents across Dubai fell 6.8 percent in the year to Q2 2020, whilst Grade A and citywide rents fell by 5.9 percent and 7.8 percent respectively over the same period.
Average prime rents across Dubai were recorded at AED 208/sq.ft., average Grade A rents at AED 131/sq.ft. and average citywide rents at AED 103/sq.ft.
The report said that over the latter stages of the last quarter, while the level of occupier requirements has increased, the majority of activity was centred on consolidation of space or as a cost saving measure, or a combination of both.
It was also revealed that, in some cases, landlords were willing to consider rent reviews.
Market wide vacancy in Dubai’s office market registered at 18.7 percent as at Q2 2020, down marginally from 18.8 percent in Q4 2019.
The report said: “Whilst currently vacancy in most prime projects remains relatively low, over the course of the year as additional supply is delivered we are likely to witnesses the prime vacancy rate increase.”
Currently there are estimated to be 29 active projects within Dubai, estimated to be worth $4.85 billion, with delivery dates up to 2024, which are either being executed or in the study or design phase.
According to data from the Dubai Statistics Centre the emirate’s GDP grew by 2.2 percent in 2019, up from 2.1 percent in 2018. However, as a result of the Covid-19 pandemic on global economic activity, Dubai’s GDP is expected to contract by as much as 7.4 percent in 2020.
While forecasts from Oxford Economics suggest Dubai’s GDP is not expected to return to its 2019 level before 2022.
Taimur Khan, associate partner, Knight Frank Middle East, said: “The depth of the contraction and rate of recovery will be dependent on the rate at which the global economy and global mobility returns to some form of normality.
“These factors will underpin demand and activity in the hydrocarbon, travel and tourism and wholesale and retail trade sectors, which all have direct or indirect impacts on Dubai’s economy.”