Mubasher: The softening global economy continues to affect negatively the UAE’s office market as redundancies in the oil and gas, finance and banking sectors reduced demand for office space across the country, according to a statement by Cluttons.
Cluttons expected declines in office market close to 5% in Abu Dhabi and Dubai, and 10% fall in Sharjah by the end of the year, the consultancy’s 2016 UAE Property Market Report highlighted.
“Global economic headwinds in the form of the Chinese slowdown, the era of $40 per barrel oil, the ongoing sovereign debt issues in the EU and the global fall out now playing out as a result of Britain’s decision to leave the EU are amongst the most significant growth dampeners for the UAE,” according to Faisal Durrani, head of research at Cluttons.
“Despite the relatively diversified economy across the emirates, the non-oil economy is being subjected to a deterioration in sentiment and overall confidence,” said, adding that “this is undermining rents and capital values, which are, for the most part, weakening across the board as the office market across the UAE waits in anticipation to feel the Expo effect.”
In Abu Dhabi, office rents remained largely unchanged in Q2 after the AED 100 price per square meter (sqm) declines recorded by office rents in more secondary and tertiary locations in Q1. Similarly, rents of Grade A office buildings held steady in the emirate, after the slight falls in Q1.
“Rents are likely to remain under pressure as the year progresses and should there be a fresh wave of redundancies in the oil and gas sector, rents will be depressed further. Some landlords have begun to offer greater incentives in order to entice and retain occupiers, but we still expect weakness in rents to persist,” Edward Carnegy, head of Cluttons Abu Dhabi, said.
In Q2, office rents across most submarkets in Dubai saw no change, with the exception of Deira where upper and lower limit rents appear to be converging. Average office rents here range from AED 60 price per square foot (psf) to AED 105 psf.
“In our own experience, the market remains active, with a steady level of requirements, but these are undoubtedly lower than this time last year,” Murray Strang, head of Cluttons Dubai, noted.
Rents are starting to falter in Sharjah’s office market, with two of the city’s three major office markets registering declines of AED 5 psf, the statement said, highlighting that rents in the prime areas of Al Majaz (AED 70 psf) and the fringe areas of Al Majaz (AED 65 psf) weakened in the three months to the end of June. Al Soor (AED 60 psf) was the only submarket to remain steady as rents have remained unchanged so far this year.
“Our expectation is for further decreases in average office rents in the region of AED 5 psf before the year is out, taking the total decline during to 2016 to about AED 10 psf,” Suzanne Eveleigh, head of Cluttons Sharjah, said
