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February 16, 2016 | 15:00 | Dubai
Stability in office rents in most of Dubai’s main markets persisted throughout 2015, with 13 of our 22 submarkets witnessed no change in starting rents in the last 12 months, and 7 witnessed an increase, according to real estate consultancy Cluttons. Continued high demand has been a major factor in ensuring this stability, with notable deals to both major international and domestic occupiers taking place, Cluttons said. The highest rents rises were recorded in Dubai Design District (D3), where free-zone and non-free-zone rents rose by a meteoric 67% and 44% respectively, due to the special terms early occupiers were given when D3 was established. Only two submarkets saw lower limit rents decrease over the 12 months of 2015: JLT (-13%) and Sheikh Zayed Road (-13%).
However, in the face of a softening global economic backdrop, occupiers remain cost conscious and budget driven, with the key word for many being ‘prudence’. Landlords, by contrast, appear to be slow to react to the cooling market, with many reluctant to move on asking prices and others demonstrating a lack of flexibility for lease terms at renewal. The emerging gulf between market reality and landlords’ expectations is a concern, particularly for a market that is starting to show signs of maturity. This disconnect is further galvanising a trend of occupier drift to submarkets that are perceived to offer better value for money, such as Business Bay. International occupiers continue to be attracted by free-zone areas, with the Dubai Trade Centre District amongst the most active submarkets in Q4 2015.