Dubai – Mubasher: The ongoing mixed performance of Dubai office market activity indicates growing maturing and a healthy outlook for the sector, a report from consultants Cluttons showed on Wednesday.
The leading international real estate consultancy said that office rents have remained moderate as occupiers continue ‘rightsize’ to keep pace with their business needs, against the backdrop of growing inflation and global economic factors.
Higher inflation resulted in rising costs, which affected by weaker US dollar and the UAE’s value-added tax (VAT) introduction as of January 2018, according to Cluttons' report entitled “Mixed level of activity in Dubai office market indicates healthy outlook for sector”.
“While absorbing the 5% VAT costs does not appear to have been considered by landlords yet, this may well emerge as an option should the weakness linger into 2019,” the report founded.
By the end of January, the UAE’s inflation increased to 2.7%, touching the highest since April 2016, up from 1.5% in December 2017.
The report highlighted that around 5 out of 24 submarkets registered minor downward adjustments in the fourth quarter of 2017.
“It is our view that this will continue for the remainder of the year with rents set to fall AED 5 psf to AED 20 psf. However, core free zones are likely to buck this trend, with rents holding steady,” according to the report.
Putting VAT into effect in the GCC has not had any real impact on landlord behaviour, director of international corporate client services at Cluttons Paula Walshe said.
"While absorbing the 5% VAT costs does not appear to have been considered yet, this may well emerge as an option should rental weakness linger into 2019," he added.
